A step away from default

The almost inevitable refusal of Greece in time to pay the IMF is fraught with unpredictable consequences

Greece will have to pay 1.5 billion euros on June 30 on the current service of their debt to the International Monetary Fund. On the same day, the term of the three -year financial assistance to the country by the European Union, the European Central Bank and the IMF expires. The failure of recent negotiations on the extension of the program deprived Greece of the chances of receiving the last part of the previously agreed loans - 7.2 billion euros. And although in general, the IMF accounts for only about 7 percent of the total 316 billion euros accumulated by Greece, the first delay in the next payment for it gives the right to other creditors to demand an immediate return to them.

The payment falling on June 30 is 1.55 billion euros and is the next repayment of the loan provided by the Greece IMF back in 2010. On the one hand, the amount is not so large. For comparison: admission to the Greek treasury in the form of taxes in April and May amounted to about 4 billion euros per month.

In addition, the Greece government during June carried out two placements of state -owned bonds - within the framework of the limit determined by the European Central Bank - by 1.6 and 1.3 billion euros, respectively. Finally, after its restructuring in 2012, the country regularly served the accumulated public debt - both before interstate and in front of private creditors.

On the other hand, on Friday, Greece appealed to the countries of the European Union with a request to give it the opportunity to use the IMF for the next payment of the money that she had already paid the European Central Bank (ECB) in the form of interest due to her bonds bought earlier. Interests accumulated by about 1.9 billion euros. Lenders refused. And a few hours later, the Prime Minister of Greece announced the national referendum .

The European Union has not yet passed through such tests, so fears are so great

An increasingly likely refusal of Athens to pay the International Monetary Fund is fraught with unpredictable consequences, since such a step is unprecedented for Eurozone countries. In anticipation of this, on Monday, investors got rid of corporate shares, indices on American stock exchanges fell by more than two percent. About why investors react so painfully to the Greek crisis and whether it can shake the international financial system, says the professor of college "Citadel" in South Carolina, economist Richard Ebeling :

-The reason for the shocks in financial markets on Monday was universal concern due to the fact that the default, coupled with the referendum results on the attitude of the Greeks to the conditions for obtaining loans promised by the European Union and other creditors, can lead to a forced refusal of Greece from the euro and the country's departure from the European Union. The calls of the Greek government to the population to reject the conditions of Western creditors are especially alarming. The European Union has not yet passed through such tests, so fears are so great.

In the long run, I believe, this will affect the euro beneficial

But, I think, this is mainly a purely psychological phenomenon, because, objectively speaking, it is difficult to imagine how the exclusion of Greece from the eurozone or even the country's default for its external obligations can undermine the international financial system. Such a turn of events is not a surprise, foreign banks and corporations have practically got rid of Greek securities, the European Central Bank took the necessary measures in order to prevent the Greek financial storm with splashing outside the country or greatly reduce its consequences.

- It is curious that these fears on Monday did not significantly affect the Euro exchange rate, which only slightly fell in relation to the dollar. How can the Greek default and potential departure of the country from the eurozone affect the euro?

- In the long run, I believe, this will affect the euro beneficial. This, it would seem, contradicts the idea that the exclusion of one country from the system of a single currency opens the way to other "weak" countries. But, in my opinion, if the European Central Bank and the European Union are persistent in their fundamental requirements for Greece, they will not give in to the requirements of the Greek government and at the same time will be able to provide, if necessary, the process of excluding Greece from the eurozone, which is painless for the European financial system, this will become an incentive for those countries that are in a difficult financial situation, to take on the reform in order not to follow the path of Greece.

- Why did President Obama repeatedly persistently pushed the European Union and Greece to find a compromise, because, as it is believed, the Greek default will be practically not noticed by the United States and American corporations?

- Because, it seems to me, the Obama administration signed up under the idea that the Greek crisis could be contagious to the entire Eurozone. What if these shocks cannot be kept within the boundaries of Greece and the stability of the European Union will be in question? How will this affect the political and economic situation in Europe, including the unity of European countries as part of the NATO Union, opposing Russia?

- How do you assess the role of Moscow in this situation, which tried to pretend that it is ready to act as a financial cartridge of Greece, so to speak? Can she play such a role?

Everyone perfectly understands that Moscow has no possibilities to buy Greece, so to speak

- Russians lead their own Greek game. They obviously highly value the doubts publicly expressed by the Greek leadership in the need for sanctions against the Kremlin and, most likely, try to encourage the Greeks to more decisive steps. They are probably extremely interested in strategically get closer to Greece-the NATO member country, which occupies a strategic situation in the Mediterranean region. But everyone perfectly understands that Moscow has no possibilities to, so to speak, redeem Greece or at least even partially replace the role that the European Union plays for it. Nevertheless, Russia continues its attempts to achieve any benefits arising from the weak position of Athens. Judging by their statements, the Greeks are well aware of all this and, for their part, are trying to get some benefits from cooperation with Moscow in the event that they have to leave the Eurozone.

- How would they answer those who predict that the refusal to help Greece can lead to very serious social and political upheavals in the country, fraught with unpleasant consequences for the whole continent?

Athens themselves must realize that they lived for too long within the framework of the system that is not viable

- The idea that Greece, figuratively speaking, will explode is not related to reality. The Greeks most likely will have to go through the painful process of restoring drachma or other currency, which will somehow be associated with the euro. This step will be followed by default for numerous external obligations outside the debts of the IMF, which will mean a collision with a reality that will force to go to very painful reforms sooner or later. Athens will understand that they cannot preserve the burdensome pension system, that they cannot maintain an economic system that barely function due to monopoly and non-competitiveness. Athens must themselves realize that they lived for too long within the framework of the system that is not viable, ”says Richard Ebeling.

Greece has not agreed with international creditors - the European Union, the IMF and the European Central Bank - on the conditions for the extension of the financial assistance program for this country, which is in a protracted debt crisis.

On Monday, Reuters interviewed more than 70 economists and participants in the financial market, and on average they now estimated the probability of Greece delay of the next IMF payment of 90 percent.

The debtor’s recognition is that he is not able to regularly serve the accumulated debt, and is called default for debt obligations. However, from the point of view of the international rating agency Standard & Poor's, the delay of Greece payment, if it will not be considered such, explained in an interview with radio freedom the credit analyst of the agency Frank Gill :

The delay of the next payment to the IMF will be interpreted precisely as default

- Our ratings apply only to commercial debts. The Standard & Poor's agency began with the ratings of bonds of private railway companies in the United States, when a railway network was formed in the country. These bonds could buy both private individuals and banks. The rating allowed them to evaluate how great the risk is that this or that company suddenly could not serve its duty. So today-we still rating commercial debts.

In the present case, Greece is not yet talking about the country's default for its debt obligations to private creditors. Nevertheless, the delay of the next payment to the IMF will be interpreted precisely both the default of Greece - both other interstate creditors and commercial ones. But again, according to our methodology, ratings are assigned only to commercial debts. That is, to those bonds that are freely traded in the debt market.

-According to the rules of the IMF, the debtor country, in case of delay in the next payment, can get the right to a 30-day preferential period, during which this delay will not be considered one yet. However, the IMF said two weeks ago that Greece would not be provided. In this case, according to the same rules, a country that has not paid the next money on the duty of the IMF automatically enters the category of “debtors”, which deprives it of the opportunity to receive any new funds from the fund until the expired payment is repaid. But how is this essentially different from the default?

- There is really no particular difference. If Greece on June 30 does not pay the IMF lamenting 1.5 billion euros, it automatically finds himself in the position of the debtor in front of the fund. And until the country can again or use the financial resources of the IMF, or attract money from other sources to pay off this debt, it will actually be in a state of default - in the understanding of both the IMF itself and most economists.

- Greece delay of at least one payment on duty to the International Monetary Fund is fraught with the fact that formally the IMF receives the right to demand from the country the immediate return of the loans that it has already received from it. Moreover, the same right arises in other interstate creditors of Greece. Similar situations are called in the financial world of cross-defolt. How great is their probability in the present case with Greece, if the country does not transfer 1.55 billion euros on June 30 on the expense of its debt of the IMF?

They, of course, can demand, only there will be little economic meaning in such requirements

- In the European Union in 2012, a special anti -crisis fund was created - as a structure of joint financial guarantees of the countries of the region. This fund has already provided Greece for loans for 131 billion euros, for comparison: this is 75 percent of the total economy of the country. Under the terms of these loans, really any delay in Greece of its payments - the same IMF, for example, formally gives the right to the anti -crisis fund to demand an immediate return and all the debt that he provided Greece.

But real-even if he requires, it is unlikely that he can get something, given the situation that has developed in Greece. In the same way, other creditors of the country of this category. In other words, they, of course, can demand something, only there will be few economic meanings in such requirements, ”says Frank Gill.

Let us explain that the European anti -crisis fund is the main creditor of Greece for today. It accounts for almost 45 percent of the total amount of public debt accumulated by the country.

Already on Monday, on Monday, Standard & Poor's, announced that it reduces another step in a sovereign rating of Greece - now it is just a few steps from the “default” on the S&P scale. The agency explained that it evaluates the current probability of Greece to leave the eurozone about 50 percent. Moreover, if the situation does not improve noticeably, Greece over the next six months may allow default for its debt obligations and to private creditors, they do not exclude S&P in S&P.

The solvency of Greek banks still depends only on the decisions of the ECB

On Sunday, the European Central Bank retained at the same level the limit of emergency lending to Greek banks by the Central Bank of the country - about 89 billion euros - established only on Friday. Although, judging by reports, Greece requested its increase by 6 billion euros at once. Having received a refusal, the Greek authorities announced the closure of the country's banks for a week, as well as the introduction of a tough limit to remove money with depositors through ATMs - no more than 60 euros per day.

However, on the evening of Monday, the Greece government announced plans to open 850 bank branches throughout the country on Thursday to make current payments to pensioners, Reuters reported from Athens. This will also require support for the European Central Bank. As in order to soon increase the current reverence for cash through ATMs.

However, this support is not endless. The European Bank is ready to provide it with Greece banks as long as they remain solvent, and the deposit of the country's central bank, which has a certain value, is repeatedly, said the President of the ECB Mario Draga . The solvency of Greek banks still depends only on the decisions of the ECB, otherwise they would not have to be urgently closed on Monday.

The key to the very emergency loans of the Central Bank of Greece, the limit of which is determined by the ECB, are today mainly Greek consultations. And if the country does not make another payment in its debts (this time - the IMF), the already low value of such a collateral will decrease even more. So, the second condition for maintaining the support of the European Central Bank will cease to be fulfilled.

Moreover, Greece is soon awaiting the next payments on its debts and the most European Central Bank: July 20 - 3.45 billion euros and August 20 - 3.2 billion (and on July 13, by the way, another 454 million euros - IMF). If we assume that they suddenly do not take place, the ECB will lose the last argument in favor of maintaining the financial support of Greek banks.