Take Two a Day and Come Back and See Us in Three Weeks

…so was the prescription from the world’s richest nations to the EU and the IMF.

Following on from last week’s blogpost, the baton to beat up the Europeans begging for money at last weekend’s G20 Finance summit was passed to Brazil. More emotional than the Asian cultures, the Brazilians were quite open with the EU/IMF in both (i) delaying any decision until the outcome of the Greek debt swap is known and (ii) seeking more control over IMF policy in exchange for money.

March 23 is the day to watch. This is the next informal G20 get together and falls after the March 20 Greek bond maturity that many creditor nations have a stake in (foreign reserve managers typically buy one to three year maturity bonds). This neatly puts the pressure on the EU and the IMF when it comes time to consider the outcome of the debt exchange. If the Greek’s in consultation with the EU/IMF enforce their retrospectively inserted CAC clause, then they will be forcing the haircut on the same nations from which they are seeking money. That would hardly be an act of friendship (in some periods of history it would be an act of war!), and would likely cut off future contributions to the European bailout bucket for many, many years.

If Greece avoids enforcing the CAC, then the patient may well survive.