It makes perfect sense for Greece. Why go to bond markets to borrow the money where the yields suggest that Greece would have to offer a coupon rate north of 8% to attract investors when Greece can go to the EU/IMF and get money at 5%? Greek bonds yields have fallen back dramatically today from near 9% to just above 8%, and are still falling. Click the 1D (one day) graph here.
The next development will be when Greece has exhausted the €45 billion currently on offer in aid. If markets are reluctant to lend now who is to say they will be less reluctant in six months time. Will the EU/IMF dig deeper and offer further emergency loans to Greece? Will a default become a more likely scenario? I think the probability of default is increasing.
With Greece being only 2% of the eurozone, it does not pose a threat to the euro, but if Ireland and Portugal (in that order!) end up in a similar position this could change. A similar concern is raised here along with a list of the ten most recent sovereign debt defaults.Tweet