Risk Of Greek Default Remains High

Last week, Greece repaid a €750m loan to the International Monetary Fund (IMF), ending weeks of uncertainty over whether it would become the first developed economy to default on a loan from the IMF.

The unconventional mechanism Greece used to finance the repayment testifies to the increasingly desperate state of the nation's finances. Greece took the highly unusual step of using its deposit with the IMF, the so-called Special Drawing Right, to make its repayment to the Fund.

Greece avoided a default, but it faces a huge challenge in making far larger debt repayments over the coming months.

Perhaps surprisingly, the problem is not Greece's deficit. Years of austerity have dramatically reduced Greece's budget deficit. The IMF forecasts that the Greek government will register a surplus in 2016, the strongest position of any euro area economy.