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We’ve been here before. So many times.

The International Monetary Fund’s (IMF) board meets today to discuss whether it will continue to participate in the Greek bailout program. This is the third bailout program for Greece in seven years.

The issues are familiar from the last time round in this crisis. The IMF says that the program isn’t sustainable. Greek debt is now 180% of GDP and rising. Projections say it will equal 270% of GDP by 2060. More austerity will just lead to further contraction of the Greek economy while imposing crushing burdens on Greeks. At some point, the IMF contends, a Greek government would have no choice but to suspend the program and cease paying creditors. Before that happens, the IMF holds, Greece’s creditors, which at this point in the crisis are the European Central Bank and various central banks in countries in the European Union, should write down Greek debt in an orderly fashion so that the country actually has some chance of emerging from its debt-induced misery. The Greek economy is 25% smaller–that’s Depression territory–than it was at the beginning of this crisis.

EU creditors, and especially Germany, have been adamant in their opposition to any write down of Greek debt. At the same time German Finance Minister Wolfgang Schaeuble has said that if the IMF decides not to participate, the bailout program is over. Without the release of new bailout funds, Greece is projected to be unable to pay its creditors by sometime this summer.

If a Greek default isn’t projected until this summer, why all the boo-ha-ha now? This long-running crisis has, after all, been noted for putting off action until the last minute–and beyond.


The Dutch hold elections in March and the French begin their winding road to picking a new president in April. In both countries anti-euro, anti-immigrant parties have seen their popularity surge. European leaders currently in power would love to see this immediate crisis resolved before it can become a political issue. The best chance of that would be at the February 20 meeting of European finance ministers set to review the bailout program.

Complicating the negotiations is the rock bottom popularity of the current Greek government. Prime Minister Alexis Tsipras, who ran for office pledging to end Greece’s pain by standing up to the country’s creditors, has accepted austerity demand on top of austerity demand. Now he has very little room to compromise–any further cuts in budgets or pensions will probably lead to the fall of his government.

In the long-term the reality is that Greece can’t meet its obligations and eventually it will have to either default and drop out of the EuroZone, or its creditors will have to take a haircut on the value of their debt holdings. But I don’t expect this reality to have much sway at the politically charged talks this month. Elections are too close for that.