Greece faces a partial default

Greece is threatened by a partial default. This warning came today from the International Monetary Fund (IMF) and, for the first time, Greek Prime Minister Georgios Papandreou did not rule out such a development. According to him, the next few days will be “particularly crucial” because if the financial assistance from the EU and the IMF does not come soon, the economic reforms in the highly indebted country would fail. “The present atmosphere is not helping us recover from the crisis. This uncertainty scares investors. If we do not get a decision on a second bailout package soon that would allow Greece to undertake far-reaching reforms, the programme itself will fail,” warned the Greek Prime Minister.

The ‘partial default’ scenario was discussed at the meeting of the Eurogroup at the beginning of this week as a way to prevent the spreading of the debt crisis to Spain and Italy.

According to the German proposal for a solution to the problem, the maturity of government bonds should be postponed and a more flexible rescue fund for Greece and the other indebted countries should be established. The European Central Bank, however, still opposes this idea.

The IMF is of the same opinion. According to the financial institution, the participation of private creditors in the new financial aid package for Greece would be considered a "partial bankruptcy".

“Controlled bankruptcy, not a real bankruptcy” is the opinion of the credit rating agencies, said Greece’s Finance Minister Evangelos Venizelos during an extraordinary press conference, after the meeting of the Finance Ministers from the Eurozone,” posted GRReporter.

Ever since the spring, credit agencies have said they would assign the "controlled bankruptcy" assessment if Europe and Greece seek the "voluntary" participation of private investors in the rescheduling of the foreign debt payments.

Venizelos pointed out that this option remains open for negotiations and Brussels was considering 36 different scenarios as to how to include the postponement of the payments on a part of the Greek government bonds over the next three to five years.

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