Greece has been in constant negotiations with other European countries and institutions over Greece’s debt load, which if not resolved, can lead to another financial crisis. The European Central Bank and the International Monetary Fund are both creditors to Greece, and Greece is expected to repay the IMF nearly 750 million Euros on Tuesday, but the remainder of the debt repayments total nearly 12 billion Euros for the rest of the year. While Athens has authorized its treasury to make the loan payment to the IMF, Greece will continue having trouble making the upcoming payments unless the creditors agree to give more aid as a part of the 240 billion euro bailout program.

Both institutions could theoretically ease the current crisis by agreeing to delay the repayment or forgiving the Greek debt, and some sovereign debt specialists agree with the case as the IMF and the European Central Bank both backed the policies that deflated the Greek economy due to the strict austerity measures. Both institutions have shown strong inclinations to not forgive the debt, or yielding the payment schedule; as both consider themselves as lenders of last resort and should not write off the money that is lent. The Greek finance minister, Yanis Varoufakis, contends that Greece has a strong case for defaulting on the debt owed to the Central Bank and the monetary fund. The argument being that Greece has been stuck on a cycle of having to borrow more money to pay its maturing debts, and each time the money is borrowed, it must accept further economic austerity measures.

Greece is scheduled to repay nearly 7 Billion euros to the Central Bank for the Greek government bonds that are currently being held. If the Greek banks are unable to repay the central bank loans, the losses would be passed down to other Eurozone counties, and the Central Bank’s credibility could be damaged. The Central bank would be wary how hard it pressed Greece due to the wariness of starting a chain in the Greek banking sector that could lead Greece to quit the Eurozone.

If Greece does leave the Eurozone, there exists a very real possibility of a currency devaluation and a surge in inflation, as the government would have to impose a freeze on withdrawals to keep money from leaving the country. However, in the long run, Greece would benefit from having a more competitive exchange.  For the business would be impacted on both the legal and financial sides if Greece was to leave the Eurozone. Some legal contracts that are governed by Greek law would be converted to a new currency, while others would remain in the original currency; however many would end up being disputed whether they should be converted. Greek companies who owe debts to foreign lenders, but main revenue source are converted to a devalued non-euro currency would be unable to pay their debts, and many business would be left insolvent with the debts being worth more than the value of everything owned. For the Eurozone, businesses afraid for the future may cut investment, spending could decrease, and the devaluation of the euro in the currency markets could cause imports to become more expensive.

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