However the latest phase in Greece’s financial crisis plays out, the euro zone and its institutions will have to share Greece’s pain, and that does not bode well for the value of the euro.
“If you owe the bank $100, that’s your problem. If you owe the bank $100 million, that’s the bank’s problem,” US industrialist J. Paul Getty once said.
How about if it is 240 billion euros that cannot be repaid?
That is what Greece has received in two bailouts from the European Union (EU) and the International Monetary Fund (IMF) since 2010 of which the vast majority is owed to the country’s EU partners, in one guise or another.
Yet, according to an IMF Debt Sustainability Analysis published on July 2, even before Greeks rejected yet more austerity in July 5’s referendum, Greece’s public finances cannot be sustained without substantial debt relief, relief which might have to include write-offs of EU-provided taxpayer-guaranteed loans.
Those loans include 52.9 billion euros in bilateral loans, provided by euro zone governments, under the first bailout agreed in 2010, and 141.8 billion euros dispensed under the terms of 2012’s second bailout, sourced from the euro zone’s financial rescue fund.