The Greek bailout crisis is top of mind for the International Monetary Fund, which descended on Washington this week for its spring meetings.
Greece’s financial turmoil needs an “urgent” response, according to European Central Bank President Mario Draghi, who was present in Washington on Saturday for the meetings.
“We all want Greece to succeed,” Draghi told reporters on Saturday before reminding the media that “the answer is in the hands of the Greek government.”
The far-left government of Prime Minister Alexis Tsipras has been caught in a months’ long battle with international creditors about restructuring Athens’ massive €240 billion bailout program. The Syriza party claims it is fighting “cruel austerity,” despite backtracking on some of its campaign promises.
Government officials have threatened to reintroduce Greece’s national currency, the drachma, should negotiations over new bailout terms fail. The government has repeatedly locked horns with Germany, its chief paymaster, having only recently requested €279 billion in World War II reparations from Berlin.
Greece must submit another list of specific reforms to the EU on Friday to unlock the next bailout tranche, valued at around $8 billion.
The IMF’s refusal to support Greece’s demand for debt relief threatens to further diminish the lending agency’s international standing. A Greece exit from the Eurozone (the so-called “Grexit” or “Grexident” scenario) makes the IMF an accomplice to the contagion that could spread throughout the politically fragile Eurozone.
The IMF is a key member of the Troika of international lenders. The ECB and EU are the other two bodies involved in financing Athens.
While the Greek bailout crisis was expected to be only one talking point on the IMF’s agenda this week, it has overshadowed other pressing negotiations regarding new sources of economic instability and growing geopolitical uncertainties, such as the Middle East and Ukraine.
The euro rebounded against the dollar last week, as the greenback weakened across the board amid surging energy prices. The EURUSD closed at 1.0805 on Friday, up nearly 2 percent on the week. While the technical picture is showing signs of bullishness for the EURUSD, the pair is subject to Greece-EU volatility. The long-range forecasts continue to point to an eventual 1:1 for the EURUSD.