Tuesday, Sept. 13, 2011, 5:13 PM – European Crisis Update

Here’s the timetable on a Greek default, which as I have been saying is just a matter of time.

Later this month the IMF is due to make the sixth installment of an 8 billion euro loan to Greece. However, Greece has not met the austerity requirements and if the payment is withheld that may signal that the IMF is no longer on board to keep bailing out Greece. Talks between the EU and IMF are currently underway.

The Greek finance minister recently seemed to imply in response to a question about jobs that the government has only enough cash to last through October. That’s 7 weeks.

In December, Greece has debt coming due that needs to be refinanced. This is the big date. Currently two-year Greek bonds are selling at 55 cents on the dollar, giving a yield of 200%, about what Argentine bonds yielded before they defaulted a number of years ago. To refinance at that rate is just impossible.

Meanwhile, Italian bonds are nearly trading at the 6% yield that triggered buying of Italian bonds by the European Central Bank a while back. Rising yields signal market increased discomfort with repayment risk. The latest auction also had significantly less demand than the previous auction. Spanish bonds are also moving up in yield.

Meanwhile, the price tag for restructuring Grecian debt and recapitalizing the French banks that would become insolvent with a Greek default is estimated at about 600 billion euros, or $840 billion, about the size of the failed US stimulus program in January 2009. German and French leaders seem strongly committed to keeping Greece in the Eurozone. The question is whether they can get that approved by all 17 Eurozone countries. Even in Germany there is strong and growing opposition to more bailouts.

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