Greece Narrowly Avoids Defaulting on Debts, Faces New Challenges in Financial Crisis

Greece avoided a default in the first week of April 2015 when it successfully paid 450 million euros to the IMF. However, the coming weeks see several more loan repayments, each costing hundreds of millions of euros. This leaves other nations concerned that Greece may begin defaulting on its loans, and has led other members of the Eurozone to call for the cash-strapped nation’s withdrawal from the group.

Greece avoided a default in the first week of April 2015 when it successfully paid 450 million euros to the IMF. However, the coming weeks see several more loan repayments, each costing hundreds of millions of euros. This leaves other nations concerned that Greece may begin defaulting on its loans, and has led other members of the Eurozone to call for the cash-strapped nation’s withdrawal from the group.

The International Monetary Fund (IMF) has begun voicing concerns about Greece’s ability to remain compliant with the repayment terms of its multiple loans. As a result, it has delayed granting additional bailout funds. Meanwhile, Greece has grown desperate for those same funds and has acknowledged that it may default on its debts if the IMF withholds further bailout funds.

In response, President Obama indicated his support for Greece, and called upon Eurozone nations to reach a quick and equitable solution to the country’s debt problems. “You cannot keep on squeezing countries that are in the midst of depression,” President Obama remarked. The US President is meeting with Greek finance minister Yanis Varoufakis to discuss the current crisis and in a bid by Greece to seek support from other, powerful nations around the world.

To secure further IMF bailout funds, the IMF is expecting Greece to show progress on financial reform legislation designed to help it climb out of its current predicament. However, the reforms the IMF demands are difficult, if not impossible, for the nation to pass before the IMF’s April 20 deadline.

Should Greece default on its loans (an increasing possibility), the repercussions could cascade throughout Europe, shaking confidence in the Eurozone itself. According to a report by The Telegraph, the IMF’s chief economist, Olivier Blanchard, warned that ejecting Greece from the Eurozone would be very costly, adding: “It will be extremely painful. But if it were to happen, the best way to reassure markets is to go further and make progress creating a fiscal union.”

Many economists fear the Greek economy may experience contraction in 2015 due to continued uncertainty about the nation’s solvency and the effect this has had on investor confidence and tax revenues. Should Greece default, the resulting financial loss to its creditors could reach almost 3 billion Euros by June. The damage would grow as interest and penalties accumulate, making complete repayment and financial reconciliation virtually impossible at that point.