Indeed, at the beginning of February, there was a wide perception the European Union would not let Greece default on its government bonds and financial help would be provided without any constrains. Yet, just a few weeks later, EU members are more divided than ever and politics as usual is taking the center stage. In one hand, lawmakers in countries like Germany, the Netherlands and Finland are considering seriously the International Monetary Fund as a source of financing for Greece because they don't want to cause anger on voters ahead of general elections. On the other hand, many European countries see help from outside unacceptable. For instance, French president Nicolas Sarkozy strongly opposes any IMF involvement. Not because he cares about Greece, but because he fears to be overshadowed by the organization's Managing Director Dominique Strauss-Kahn, which is likely to run in the next presidential election.
Meanwhile, time for Greece is running out and the Greek Prime Minister announced recently that the European summit at the end of this week is the deadline for Europe to come up with help. In fact, by the third week of April the country has to refinance 8.2bn euros of maturing five-year bonds and pay off 1.92 billion euros of 13-week T-bills. Also, on May 19, 8.5 billion euros of 10-year fixed-coupon is maturing. So, despite the austerity measures recently introduced by the Greek government, without any financial assurance, it has been very difficult for Greece to convince investors about the safety of their money. Eventually, all this indecision, may drive yields even higher for Greece, thus making debt re-financing extremely difficult.