In recent weeks, the long simmering Greek debt crisis narrative, long forgotten by most investors, has resurfaced. This week, Greece will enter a new stage of potential uncertainty as her creditors will decide whether or not still more time and accommodation is needed in order for Greece to receive the next tranche of aid.
The IMF and ECB will decide whether or not the steps taken by the Greek government and Prime Minister Tsipras have been sufficient to warrant further aid. The IMF’s “aid” in this case amounts to roughly 4 billion dollars. Though that figure may seem insignificant, in global terms it is meaningful to Greece. In the event the IMF and ECB decide that Greece needs to further tighten its fiscal belt in order to receive further aid and given that the Prime Minister has made it clear that his government will not tighten any further, we may once again find ourselves in the midst of a standoff.
Though posturing is an enormous part of this narrative by both the IMF/ECB and Prime Minister Tsipras, the reality is that as a result of a fail at this weeks talks we could once again see a call for a new government in Greece. That would of course resurrect a litany of concerns for the EU, ECB, IMF and global markets. It is not insignificant that just as these talks resume that the British will be preparing to vote on their status in the EU in coming weeks. In many respects, the Greek crisis highlights one of the pivotal concerns that the British have in fully embracing the EU. Simply put, do the British feel as though the benefits of formalizing their EU status out weigh the drawbacks of the peripheral drag and risk that Greece represents?