Europe and the IMF put together a broad aid plan to help the Greek government meet its financial obligations.
That plan will eventually need to be replaced with a new plan, seeing as how the Greek government won't be borrowing in private markets anytime soon. Europe hasn't been able to agree a new plan, largely because they can't figure out how to get private creditors to take a haircut without sending Greece into default. The IMF, however, doesn't like making loan payments to borrowers without a longer-term financing plan in place. Because there was no new plan, the IMF threatened to withhold its contribution to the next payment, and fears developed that Greece might be driven to a chaotic default.Having seen that Germany and the ECB really aren't close to agreement on restructuring, the IMF seems to have backed down. The European Union's top economic official strongly hinted this morning that an understanding with the IMF is likely to be reached over the weekend, such that IMF payments can continue. Hooray.
But there are two big concerns. One is that Germany and the ECB will continue to disagree over how to arrive at a new aid package, such that this whole process will be replayed again in a month or two. Pressure will probably ramp up again in July ahead of the next meeting of euro-zone finance ministers. If it doesn't, however, the issue will almost certainly come to a head by September, when another aid payment to Greece is due.
Economist
