Monday, April 6, 2015

Greece’s Worst Option: IMF Default

by Mohamed A. El-Erian


April 6, 2015

Finance Minister Yanis Varoufakis's surprise decision to meet with International Monetary Fund Managing Director Christine Lagarde in Washington on Sunday added to the suspense over whether Greece would make its April 9 debt payment to the fund.

This is a consequential question because defaults on loans from the IMF, one of the world’s few “preferred creditors,” are extremely rare. When they have occurred, the debtors have tended to be fragile or failed states in the developing world and not advanced countries, let alone members of the euro zone, one of the world’s elite economic groups.

The very fact that the 450 million euros (almost $500 million) payment is in doubt reflects the extreme economic, financial and socio-political circumstances facing Greece. It is hard to imagine any outcome to this predicament that would improve Greece's lot.


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