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The euro dived low as markets worried by reports that IMF will hold Greek aid

The euro dived low against the Swiss Franc as market worried by reports that Greece may not get its next piece of aid from the IMF. The International Monetary Fund is likely to withhold the next piece of aid to Greece which is due to the next piece of aid to Greece which is due to the next month of June. It was Jean-Claude Junker, the head of euro Zone finance ministers who said that the IMF may withhold the next slice of aid to Greece which is due for next month. According to the IMF’S chief economist, there is still a chance for Greece to avoid restructuring its 327 billion euro debt which is equal to 150 percent of its economic output. It is true to believe that a debt restructuring scenario involves high risks. With this type of situation, it could lead to an immediate maturing of all loans, resulting in Greek solvency. According to three ratings agencies, adjusting debt maturities would be taken as default. This could then trigger a chain reaction of consequences for Greece’s credit rating, Greek commercial banks and companies, including other euro zone sovereigns.

Greece’s finance minister states that if the next 12 billion euro payment is not likely to come in, then in that case the country would be unable to meet the required obligations and will end up in a default situation. However Dutch prime minister, Mark Rutte said that IMF will only approve more aid if Greek has the capacity to fulfill promises. He further said that Greek should be able to repay and bring their state finance under control. Rutte added that the IMF will lend money in the future only if they are convinced that Greek will return their money back. Based on the fresh doubts over Greece financial aid package, investors moved towards the safe haven of German bonds. IMF spokeswomen from Washington stated that the fund could not be given to Greece until there is a refinancing guarantee for the next 12 months from EU partners for Athens. Caroline Atkinson, spokeswomen told an official meeting that if there is no assurance of repayment then in that case there will be no finance. This step is taken in order to safeguard member’s money.

Based on May 2010 EU/IMF bailout program, Athens was supposed to return to Capital markets by next year. It would raise 24 billion euros towards its funding needs. But due to escalating crisis in Greece, it had to face revenue short fall scenario. Thus, the goal of tapping the markets by next year cannot be fulfilled. This present situation has pressurized EU to be cautious about the agreement towards the second bailout package for Greece.

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The euro dived low as markets worried by reports that IMF will hold Greek aid

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