The Greek financial drama is playing out on the world stage once again, but this time European nations are looking for IMF involvement.
The problem is that suddenly IMF officials have alligator arms and can’t reach their wallets.
And it’s no wonder: After all, Greece is now positioning for its fourth bailout.
You read that right: Fourth bailout!
What’s different this time is that eurozone nations like Germany will only participate in a bailout if the IMF does. But the IMF views Greece’s debt situation as “highly unsustainable” and they’re trying to maintain their credibility.
That means IMF officials will only participate if a fourth bailout looks like it’ll work. And from where I sit, that’s not at all a done deal.
A European Problem?
Even the Trump administration wants the IMF to stand firm on refusing to bail out Greece, saying it’s a European problem.
In fact, according to my colleague John Isaacson, after three prior bailouts Greece’s finances remain a disaster. Consider …
- Aggressive private-sector bank withdrawals in the last two months, with that metric plunging to its lowest level since November 2011.
- Greek non-performing loans represent 70% of total bank assets, leaving local banks dependent on borrowing from the Bank of Greece and the European Central Bank (ECB).
- Borrowing costs still too high, with 2-Year bond yields at 7.99%.
Certainly, Greece recognizes how bad they need a capital infusion, and its leaders made significant concessions in recent negotiations. They’ve committed to additional austerity measures, pension cuts and labor reforms.
Greece has also crossed over one of their previous red lines by agreeing to legislate structural reforms that will lower the threshold of tax-free income.
But the fact is it’s still not enough: Creditors are asking for more austerity measures.
Plus, the ECB wants Greece to address sustainability of current debts before Greek bonds can become eligible for asset purchases.
This is critical because very few investors are rushing out to buy Greek debt.
To get the ECB to include Greek bonds in their asset purchase program, officials need to complete the latest bailout review and other European nations must commit to more substantial debt-relief measures.
A delay in the ECB’s purchases of Greek debt will make it even more difficult for the nation to tap international markets for funding.
It also puts Greece’s economic growth prospects in jeopardy, making it harder for them to reach previous bailout objectives.
I’m watching the Greek debt debacle closely – because the eurozone experiment is unraveling right in line with my cycle forecasts. It’s just the latest in the growing sovereign debt crisis. And it means now, more than ever, it’s imperative that you protect your wealth and seek out only the best money-making opportunities.