Wednesday, October 19, 2011

Is a Greek default inevitable?

Will Greece default?

Greece is widely expected to default on its debt. The question is how messy a default will be, what kind it could be and when it will happen.

The country is waiting for an €8 billion ($11 billion) tranche of money to be delivered from its international creditors -- the International Monetary Fund and its eurozone peers -- but markets expect the money will simply delay a default.

Disbursement of the funds has been flagged but still needs final approval from the Eurogroup, the European Central Bank and the IMF. It is expected to be handed over in early November.

The money has come from the country's original €110 billion ($150 billion) bailout which was agreed May last year, and effectively heralded the start of the eurozone crisis. Greece has since negotiated a second package of aid, which includes forcing investors to take cuts in the value of their Greek bonds, or "haircuts."

Greece has been implementing harsh austerity measures to try and balance its books, but is facing revolt on the streets and finances which are worse than expected. Its economy is expected to contract more than 5% this year, and it cannot raise money with investors due to the high premiums they demand -- leaving it dependent on the bailout funds. more