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Staggering Ineptitude Led to Greece's Crisis

Greece's embattled Finance Minister George Papaconstantinou is confident that his European peers will cough up to rescue his country from a debt default. The question is why?

All indications are that the Germans remain very nervous about handing any money at all. Indeed, Chancellor Angela Merkel and her team have fought such a development every step of the way.

The level of political ineptitude has been staggering. Very few of those involved in resolving the situation in Greece seem to have grasped the magnitude of the situation. This has turned a problem into a crisis.

Now, once again, we have mixed messages out of Berlin and once again it will be the markets that force the pace. The IMF understands this and while the fund has faced many criticisms in the past, at least it gets the fact that this is not the time for political maneuvering.

It will be the IMF that comes up with money for Greece first while the EU dithers.

The price the IMF will demand though will be steep. Greece must come up with a plan to turn a primary deficit into a primary surplus. It has plenty of fat to cut but, as we all know, diets are hard to stick to. And while year one might be easy further down the road the temptation will be to go back on the promises made.

Consequently, there needs to be as part of any plan that is being put together clear road markers that creditors can understand and assess.

There is a chance that Greece will bounce back from this low point strongly. But even if the numbers do improve, it will be a long while before investors are able to give Athens any credibility. And the cost of capital for Greece will remain elevated for a considerable period.