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Greece is now in arrears

Jul 01, 2015

It is almost laughable to see how men create legalisms in order to avoid dealing with reality. If you run into “reality,” just call it something else so you don’t have to deal with it.

We all know that yesterday Greece defaulted on its loan payment. In fact, they defaulted a month ago, but the IMF decided to “bundle” the June payments together so that the default would not be due until June 30.

But Greece still did not repay that loan, nor did they repay the other loans that were bundled with it. For all the harsh rhetoric, one would think that Greece would now be in default, right?

Wrong. Greece has now fallen “into arrears.” By avoiding the “D” word, they are again buying time and kicking the can down the road.


With its failure to repay the roughly 1.6 billion euros ($1.8 billion) to the International Monetary Fund, Greece became the first developed country to fall into arrears on payments to the fund. The last country to do so was Zimbabwe in 2001….

With its economy teetering on the brink, Greece suffered its second sovereign downgrade in as many days Tuesday when the Fitch ratings agency lowered it further into junk status, to just one notch above the level where it considers default inevitable.

The agency said the breakdown of negotiations "has significantly increased the risk that Greece will not be able to honor its debt obligations in the coming months, including bonds held by the private sector."

Fitch said it now considered a default on privately-held debt "probable."

So default is now “probable” and "inevitable." It didn’t really happen on June 30, even though that is what they had been advertising all along.

Well, no wonder no one was willing to back down before June 30. No wonder Greece could hold a referendum on July 5. Everyone knew that June 30 was not a real deadline after all. Nothing they say is believable.

I am reminded of my early childhood, when we would threaten someone with: “I am going to give you to the count of three. One—two—two and a half—two and three quarters,” etc.

The more they put this off, the more I wonder if this financial situation might fit in with our next “barley” watch dates of July 9-15. A month ago this did not seem probable, seeing that Greece was going to default in early June—and then on June 30. But now it seems they are using legalisms to postpone this. They may postpone this indefinitely, of course, but July 9-15 is our next time to watch.

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Category: Financial
Blog Author: Dr. Stephen Jones