Greece desperately needs the next €31.5bn tranche of its March bailout package. The country will run out of money by the end of the month if it does not receive this disbursement defaulting on its debts and unleashing quite the market panic.
The problem with releasing the funds is that the IMF is insisting that Greek debt be at a “sustainable” level of 120% of GDP by 2020. The IMF is prohibited by its charter from extending aid to a country that will not achieve a “sustainable” level of debt.” 120% is not sustainable, but it was the number that the troika settled upon for the latest bailout.
With Greece in the midst of an economic depression sporting an unemployment rate greater than 25%, it is not in a position to achieve sustainability and will not be for the foreseeable future. However, the IMF is forcing the eurozone and the ECB to forgive enough debt to allow the can to be kicked down the road just a little further.
Since a Greek default would lead to a financial cataclysm, the troika will somehow agree on enough window dressing by November 26 to release the next tranche. In the meantime, the ECB will indirectly loan Greece the money to roll over the €5bn worth of T-Bills maturing on November 16.
In August, Greece sold T-bills to its own banks who pledged the them to the ECB in exchange for the cash to pay for the bills under the ELA program. Draghi does not wish to be responsible for a Greek default, so the ECB will rehash this exercise.
Greece will be saved— again. The game will begin anew whenever the next tranche is due to be paid.