Friday, April 3, 2015

Greece: A Six Week Checkup

It’s been nice not to have to think about Greece for a while. Time’s up!

Remember when they signed that deal back in February that there were other deadlines to worry about?

Greece no longer has enough money to pay the IMF €458m on April 9 and also to cover payments for salaries and social security on April 14, unless the eurozone agrees to disburse the next tranche of its interim bail-out deal in time.

To the Greek government, it’s still all about … themselves:

The view in Athens is that the EU creditor powers have yet to grasp that the political landscape has changed dramatically since the election of Syriza in January and that they will have to make real concessions if they wish to prevent a disastrous rupture of monetary union, an outcome they have ruled out repeatedly as unthinkable. [emphasis is original]

“They want to put us through the ritual of humiliation and force us into sequestration. They are trying to put us in a position where we either have to default to our own people or sign up to a deal that is politically toxic for us. If that is their objective, they will have to do it without us,” the source said.

You gotta’ wonder when they use a word like sequestration. Just about no one knows what that means who speaks English. But they’re using it here like it’s a swear word.

Oh, and remember that no one defaults on IMF loans:

Going into arrears at the IMF – even for a few days – is an extremely risky strategy.No developed country has ever defaulted to the Bretton Woods institutions. While there would be a grace period of six weeks before the IMF board declared Greece to be in technical default … [emphasis is original]

Perhaps the problem is the people around the world who choose to label Greece as a developed country. It isn’t. Instead, it is a less-developed country that belongs to a club with other developed countries. I don’t want to offend anyone, but perhaps when the rich kids ask a token poor kid to party with them they shouldn’t expect them to be able to make it work financially.

Here’s the rumor:

“We will shut down the banks and nationalise them, and then issue IOUs if we have to, and we all know what this means. What we will not do is become a protectorate of the EU,” said one source.

As usual, there are enablers:

Eurozone creditors may be willing to release enough funds to cover Greece’s government costs on April 14, but only if Syriza pays the IMF first.

We’re back to listening to the client warnings coming out of financial institutions that have to handle international transactions:

Bank of America warned that a “critical sequence of events could unfold” once Greece misses a payment to the IMF. It would trigger a parallel default to the eurozone bail-out fund (EFSF) under the legal master agreement, and might force the EFSF to cancel its loan packages and demand immediate repayment. This in turn would trigger a default on Greek government bonds issued under the bail-out accord.

The situation is now critical. Even if Greece manages to cobble together enough money to cover the April deadline, it owes the IMF a further €200m on May 1 and €763m on May 12. A Greek official told EMU counterparts at a teleconference on Wednesday that the country has run out of money. "There is no way we can go beyond April 9," the official reportedly said.

The drama comes after the creditors refused to rubber stamp Athens' latest bid to unlock funds, raising objections over Syriza plans to boost union powers in collective bargaining and boost pensions for lower income groups.

Brussels continues to insist on more concrete pledges, despite receiving a 26-page list of reforms on Wednesday.

Former European Commission head Jose Manuel Barroso warned Greece that they have a moral obligation to other states, describing the demands for more time and money as "completely unacceptable".

“We should remember that there are poorer countries that are lending money to Greece, so to propose a cut to their debt would be certain to receive a no from their partners," he said.

You can read the whole thing, entitled “Greece draws up drachma plans, prepares to miss IMF payment” in The Telegraph. There’s a useful timeline at the bottom of the article (although, gee whiz, you’d thikn they’d include the other 2 IMF deadlines from a few paragraphs up).

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