Four Options for Greece

Greece’s financial minister Yanis Varoufakis  visited many EU capitals this past week in search of debt relief and a new deal for the Greek economy.   No agreements were made. Greece and its European creditors only have a few days left to decide how the country can get through the next four months.   This article outlines four short term funding options for Mr. Varoufakis to consider.

1. The first would be the extension of the current bailout program.  “This would be the easiest.” Unfortunately this is unlikely because the new party in power Syriza won the election on the premise of not extending this program.

2. Mr Varoufakis could demand that the ECB release interest payments and profits from purchases of Greek government bonds during the crisis. These funds are currently on hold. With this, Mr Varoufakis will also need the European finance ministers to agree to lift the ceiling of treasury bills that the Greek government can issue.

3. The third option would be to find money elsewhere.  With not many available resources, Russia has been one of the few countries willing to help out.  Unfortunately accepting money from the Russian government would come at high political costs.

4. The fourth option is the most extreme. It would be to issue a parallel currency, “redeemable only domestically, to fund government spending — essentially an IOU.” This would be the most extreme option, but it would take care of the funding problem. This could easily be interpreted as preliminary step to a departure from the euro (Grexit).

-Timmy

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