It may seem all gloom and doom for Greece these days so I thought of lightening the mood up a bit by putting a twist on the Greek debt timeline. And since I’ve been binge-watching “Friends” episodes on Netflix these days, I came up with these titles for the key dates you need to remember in case euro pairs go hysterical across the forex charts then. Mark your calendars, fellas!
If you aren’t feeling up to speed with what went on in the debt drama and its multiple plot twists, make sure you check out my Primer on the Greek Debt Crisis.
So no one told you life was gonna be this way…
June 11: The One with the Walk Out
As though the tension between the Greek government and its creditors hasn’t been thick enough, the drama was kicked into high gear earlier this month when the IMF contingent decided to walk out of the room in the middle of negotiations with the Greek panel. Tables were flipped, shots were fired, and I finished a whole bag of Cheetos.
Just kidding… about the tables and shots. At the core of their arguments was Greece’s state pension system, as the country spends roughly 17.5% of its GDP on generous retirement packages. The IMF wants to trim that to just 1% of Greece’s GDP and has even provided the technical details on how this can be done while still supporting the country’s poorest pensioners. Greece goes “Nope. No deal.” since two-thirds of its retired population have pensions below or close to the European poverty line. And with Greece’s 27% overall unemployment rate and 60% youth unemployment rate, most of these pensions actually support an entire family.
June 18: The One Where the Euro Is in Denial
This week’s Eurogroup meeting was seen by most forex market watchers as the last chance for Greece to agree to a debt reform plan and unlock the rest of the bailout funds, but the talks broke down once more and the possibility of a Grexit became all too real. Economists have already whipped out their calculators and started to crunch the numbers to figure out how much damage this could cause Greece and the rest of the euro zone.
While the picture ain’t looking pretty, the euro has continued to advance against most of its forex rivals, as traders are probably keeping their fingers crossed that an eleventh-hour deal will be reached. After all, an emergency meeting has been scheduled for early next week.
June 22: The One Where the Adults Are in the Room
In this emergency meeting, the head honchos of the IMF, Greece, and EU are all expected to be in attendance. In particular, German Chancellor Angela Merkel and Greek Prime Minister Alex Tsipras will be together in the room to discuss the Greece’s VERY last chance to agree to a debt reform plan and unlock the rest of the bailout funds.
June 25-26: The One with All the Verys
If the discussions still fizzle during next week’s emergency meeting, EU leaders still have another chance to talk it out during the EU summit towards the end of the week. This would be their very, very, VERY last chance for Greece to agree to a debt reform plan and unlock the rest of the bailout funds. Time to grab another bag of Cheetos.
June 30: The One with the D-Day
D is for deadline. Recall that Greece lumped all its debt obligations due this month for a 1.6 billion EUR payment to the IMF. If they don’t make it, then D is for doomsday.
I wouldn’t be too worried at this point though, since the IMF still has the option to grant a 30-day grace period for this repayment. Of course this could depend on how the Greek negotiation team behaves and how frustrated IMF officials feel by then. Cliffhanger much?
July 1: The One with the Uncharted Territory
The ball’s in the ECB‘s hands by now, as a Greek default on IMF’s loans would force Super Mario and his men to rethink their emergency loans to the country. If the ECB decides that the Emergency Liquidity Assistance (ELA) should be extended, they would enter what Draghi calls “uncharted territory” of capital controls on the Greek government and a potential banking crash in the country. This could spark massive outrage against the Syriza leadership, which failed to deliver on its promises.
July 20: The One Where They Take a Break
By this time, Greece has to cough up 4.2 billion EUR in loan repayments to the ECB and it would be an impossible feat without any access to additional bailout funds. For some, this is the real deadliest deadline for Greece and given how things are going, it might be the day they finally call it quits with the euro zone. Watch out for words like “We were on a break!” or “Just so you know, it’s not that common, it doesn’t happen to every guy, and it is a big deal!”
Of course plot twists could still emerge along the way and allow the drama to end much earlier than expected, but the odds of seeing a happy ending are getting slimmer and slimmer by the day. On a slightly upbeat note, it looks like forex market participants are starting to warm up to the idea of a Greek default or a potential Grexit, thanks to this long drawn-out process. Once that happens, the euro might not have such a violent reaction.