Just when you thought things couldn't get worse with Greece's debt crisis, they do. According to the influential German magazine, Der Spiegel, international inspectors are set to report that the country has missed all its fiscal targets, a key condition for receiving the fifth tranche of a 110 billion Euro bailout. Greece's finance minister and the IMF are denying the report.
Greece's public debt stands at around 330 billion Euros and its debt-to-GDP ratio is 150 percent, a level considered unsustainable by analysts. EU officials who had been hoping that Greece could buy some time by "reprofiling", essentially extending maturities on its debt, have been told by credit ratings agencies and ECB officials the move would amount to a "default-like credit event", according to Reuters. That makes re-profiling less likely.
The country is hoping to avert disaster by reviving a 50 billion Euro privatization plan, but European politicians want Greece's government to sell more state assets, raise taxes and cut expenditure. Greece's opposition has rejected the new measures and trade unions have called another 24 hour strike in June, putting another escape route into jeopardy.
Two-year Greek bonds are now paying a yield of 25 percent and are trading at just 71 cents on the dollar. Some investors are clearly betting that Greece will eventually default and force bondholders to take a big haircut. Others are betting the EU will do everything in its power to avoid such an event. Whoever's correct, stands to make a lot of money.
So tell us what you think.