Greece and Loans

There is a kerfuffle going on just now among Greece, the IMF, Germany—mostly between Germany and the IMF.  The IMF wants to freeze interest rates on Greece’s loans for the next 30-40 years—so that Greece can pay up.  Germany is demurring from this, saying that’s not paying, that’s just delaying things.  Of course, the IMF is saying this about other nations’ loans; the IMF isn’t a current participant in them.

But there’s a misunderstanding at the center of the kerfuffle, and it has nothing to do with fixed interest rates or their duration.

[German Chancellor Angela Merkel] and many of her lawmakers believe that, without the IMF, the eurozone wouldn’t be able to enforce rigorous fiscal and economic overhauls in Greece in return for loans.

That might be difficult with the present round.  However, Germany, nor any of its fellow eurozone participants are obligated to loan to Greece, especially if the latter defaults on the current round.  The example of not lending further would be a valuable object lesson.

Of course, that also would take less timidity than Merkel, et al., are showing presently with their demand for IMF cover: on a default, Greece might leave the eurozone, and Europe is very much afraid of that.

One thought on “Greece and Loans

  1. The bigger item, IMO, is that the IMF wants to delay repayment – making the low and frozen interest rates even more risky.

    I agree to cutting off further loans when the restructuring required as part of the current batch is not met.

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