Cash Crunch, the Greek nuke against the EU

As Athens finally admitted it won’t pay the IMF in June 2015, it’s unclear whether it is because Athens really can’t or don’t want to. The words of Greek Interior Minister Nikos Voutsis on Greece’s MegaTV last Sunday, saying “the four installments for the IMF in June 2015 are $1.8 billion (…) this money will not be given and is not there to be given,” has greatly added to widespread confusion. On the other hand, analysts have assessed that indeed Athens has not the means to pay the IMF. “Our government cannot – and will notaccept a cure (austerity) that has proven itself over 5 long years to be worse than the disease,” wrote Finance Minister Yanis Varoufakis. As a result, Athens might have opted for a risky strategy of asserting it doesn’t want to pay while it would actually know that it already can’t pay at all, this way using the “cash crunch” as extreme final pressure on its euro area’s partners in an ultimate bet that says “stop austerity, otherwise you won’t get your money back.”

In the end, both the euro area and the European Union (EU) are suffering a lot from such high uncertainty, mainly viewed by the public opinion as “incompetence”. Meanwhile, former French Economy Minister and now EU Economics Commissioner Pierre Moscovici saw new progress in talks with Greece but didn’t rule out a Grexit. “There has been progress made in the last few weeks, there is no plan B,” Moscovici told reporters. In fact, the plan B does exist and his name is Grexit. Beyond the likely negative fallout of unknown extent it might have on the euro area and on the EU as a whole, the Grexit may also result in a high political toll since most of the governments and EU officials have repeated since 2011 that a Grexit was out of the question, hence the spending of hundreds of billions euros paid by the EU peoples to save Greece’s economy. The issue is that after spending so much, not only it seems nothing has positively changed but the situation has worsened. The electoral success of Podemos in Spain is an example of what the political price might be for such a baffling setback. Greece’s cash crunch is like a nuke placed in Brussels and just minutes away from blowing the EU up.