Can Greece still prevent a financial default?

The default of Greece is unavoidable. One could even think it has been planned. This is the consensus that has shaped through the analysis by our team of a vast amount of data. If an agreement between Greece and the Troika can be reached in extremis, this will only allow a temporary postponement of the default since Greece’s economic circumstances shouldn’t experience any significant improvement in the meantime. Moreover, the solution of European solidarity would turn out to be inopportune since the European banks aren’t any longer Greece’s main creditors.

With a debt that represents 200% of its GDP, a 25% unemployment rate and a national GDP that shrank 1/3 since 2008, Greece is not out of the woods. The situation today is worse than what it was during the 2011 sovereign debt crisis before Greece benefited from $240 billion in international aid. The debt level is so high that any agreement, even temporary, would just finance the repayment of creditors instead of the country’s economic development that is however indispensable for its repayment capacity in the long term.

The downward cycle in which Greece lives in seems to prevent any other option but default, except if European partners made a game-changing financial contribution. Such a hypothesis is rather science-fiction given that most of the European countries are also working hard, quite unsuccessfully, to limit their own debts. As a default of Greece doesn’t necessarily mean an exit of Greece from the euro area – the “Grexit” – the Troika appears that it wants to save time with a view to setting up the default under the best possible conditions rather than in some kind of haste that would be substantially more detrimental to the euro area.