Greece Default and Drachma By Month End?

1,000 Greek Drachma Note

The Financial Times, citing unsourced “people briefed on the radical leftist government’s thinking” has made the claim that the Tsipras government in Athens has “has decided to withhold E2.5 billion of payments due to the International Monetary Fund in May and June if no agreement is struck”.

The Greek government was quick to deny the claim. “Greece … is not preparing for any debt default and the same goes for its lenders. Negotiations are proceeding swiftly towards a mutually beneficial solution,” read a statement from the Prime Minister’s office.

The Greek government is rapidly exhausting its funding to pay salaries and pensions with no funding from its lenders having been released since July. Another “end of the road” deadline looms – this time the Eurogroup meeting on April 24th.

This meeting may truly be the “end of the road” because it is expected that the Greek government will have finally depleted its reserves and will be wholly dependent on its creditors by the end of this month.

Negotiations have been going around in circles since the election of the anti-austerity Syriza government in January and appear no closer to resolution. It became apparent in late February that neither side was prepared to compromise – each having too much to lose from deviating from their central positions. There has been adequate time, since then, for preparations to be made for an orderly “Grexit”.

Indeed, it may be that the two sides have agreed to disagree and are waiting for a politically expedient time for Greece to leave the euro. Media coverage of the crisis in both Germany and Greece is catalysing public opinion towards this end.