For Greece, All Bets Are Off

Bookmaker stops accepting bets, bonds yields rise
April 16, 2015 Updated: April 17, 2015

It was only Wednesday that German Finance Minister Wolfgang Schäuble came to New York to assure markets that for Greece debt was not a problem. A day later, the chances of the country leaving the euro because of the debt are higher than ever.

“No one is interested in backing Greece to stay in the Eurozone until the end of the year, so we decided to pull the plug on the markets until either the decision to leave is taken, or the crisis point passes,” said Graham Sharpe of British bookmaker William Hill.

If nobody is willing to bet on Greece staying in the euro, there is no market to make for William Hill.

Another market is still taking bets on Greece and the odds there also aren’t pretty. Three-year Greek bond yields rose to 25 percent on April 16, after trading below 5 percent for the better part of 2014.

The problem is precisely the debt Greece owes to international institutions such as the International Monetary Fund (IMF). According to the Financial Times, Greece has informally approached the IMF to postpone payments to the fund, including $1.05 billion, which is due in May.

The IMF is the most senior of lenders and almost always gets paid on time. Only very underdeveloped or rogue countries like Sudan or North Korea have ever defaulted on IMF payments. And IMF officials insist they will only talk about delaying payments in the framework of a larger restructuring program—the second in only three years.                       

If Greece indeed exits the eurozone, experts warn the consequences could be catastrophic for the country itself, if not for the world economy.

Again Schäuble thinks that negative effects for world markets or the economy would be limited. “You can’t see any contagion in the markets. Greece is not a major part of the economy of the eurozone as a whole,” he said. “Markets have already priced in whatever can happen. Nothing will happen.”

His counterpart at the U.S. Treasury Jack Lew would rather play it safe: “It would not be a good thing in a world economy just recovering from a deep recession to have that kind of uncertainty introduced,” he said on Wednesday in Washington.