The Verdict on Greece

Last week I wrote that Greece had been given a three day deadline to reassure Europe and the International Monetary Fund that it could deliver on conditions attached to its international bailout in order to receive the next tranche of aid.

Unsurprisingly, post deadline, the EU and IMF have given Greece a less than ringing endorsement noting that the outlook for Greece's bailout programme remains uncertain.

Reuters quotes the Troika:

"While important progress continues to be made, policy implementation is behind in some areas.

The authorities have committed to take corrective actions to ensure deliver of the fiscal targets for 2013-14 and achieve primary balance this year.

The mission and the authorities agreed that the macroeconomic outlook remains broadly in line with programme projections, with prospects for a gradual return to growth in 2014. The outlook remains uncertain, however."

As I warned last week, those with money in Greek bank accounts would be advised to withdraw it now before the jackals pounce. 

Troika Demands More From Cyprus

Much like a loan shark adding more to the bill of his hapless borrower, the Troika now claim that conditions have worsened and as such have increased the amount of money they want from Cyprus from Euro5.8BN to Euro6.7BN.

Meanwhile in Cyprus, it seems that the despised and rejected bank levy is now back on the table!

Troika Postpone Greek Decision

The Troika have left Athens without signing off on the next tranche of bailout loans for the country. They will return in April.

It seems that despite Greece making "significant progress", there remain "technical issues" that need to be resolved before Greece receives the next Euro2.8BN of bailout funds.

The sticking point appears to be whether Greece is making progress on substantially reducing (25,000 job losses by 2014) the size of its civil service.

The Troika's Stark Choice

Despite Greece's doom laden warnings that it would run out of cash by 16 November,  as at the time of writing this article it hasn't.

In other unsurprising news Eurozone finance ministers, the IMF and the ECB (aka the Troika) have failed, for the second week running, to reach an agreement as to how/whether to bail Greece out again.

The bottom line is that Greece's debt is unsustainable.

The Troika face a stark choice, either the debt is written off or Greece is written off.

Greece Needs Another Euro32BN

The Troika draft report on Greece states that Greece needs another Euro15BN to get it through to 2014.

For good measure the report goes on to say that Greece may need extra Euro17.6BN in 2015/16.

Whilst the powers that be ponder where that money is going to come from, of more pressing need to Greece is this Friday's bond maturity deadline; yet still no sign of the next tranche of bailout money!

Troika Greece Talks Breakdown

The Troika have walked out of talks with Greek Labour Minister Yiannis Vroutsis this afternoon, after reaching deadlock for the second time today.

Greece Being Destroyed By The Eurozone

Despite the fact that the Greek economy will contract by 6.1% this year and 3.8% next year, and that youth unemployment in Greece in August was 55.4%, the Troika are demanding the imposition of even tougher austerity measures above and beyond Antonio Samara’s Euro13.5BN package of cuts.

The Troika wants Greece to make deeper cuts to the minimum wage and pensions, while imposing longer working hours.

Until an "agreement" is reached, or imposed, the next tranche of bailout money will not be released and Greece will be starved of liquidity.

As I noted on Monday, the people of Greece, if they have any sense, should flee the Eurozone as fast as their legs will carry them.

Greece's Euro30BN Blackhole

In February I noted that the Troika had have discovered that Greece needed an extra Euro15BN on top of the Euro130BN second bailout that it had yet to receive. In August I noted that the Troika's assessment was that there is a Euro14BN hole in Greece's finances for 2013/14.

A grand total of around Euro29BN in blackholes!

Now Süddeutsche reports that according to senior EU officials, Greece will require an additional two years and additional funding of Euro30BN in order to meet the conditions of its second bailout package. It is not clear as to whether this blackhole is the combination of the two blackholes I wrote about in February and August, or a new blackhole over and above those already highlighted.

Either way it is now unclear if/when Greece will receive its next tranche from the package. Seemingly any decision is being delayed until after the results of the US Presidential election, lest a financially destabilising event propels Romney into office.

Greek Brinkmanship

As the game of brinkmanship between Greece and the Eurozone continues, it s not surprising to see Greece play its "we need a third bailout" card.

Thanos Catsambas, who represent Greece at meetings with the Troika, told the Troika that Greece will require additional financing, which may take the form either of official-sector involvement or of additional loans, hopefully on more favourable terms.

To try to add some "credibility" to his request for more money, he noted that the previous coalition government estimated that "only 22% of the commitments under the troika-supported program were implemented" in 2011.

That admission, from the Troika's perspective, hardly adds credibility to Greece's commitment to implement change.

Brinkmanship aside, the Greek economy is collapsing as yesterday's figures for unemployment show; they rose to 23.6% (they were at 16.3% this time last year).

Schaeuble's Line In The Sand

The EC is refusing to deny or confirm the story that the Troika will ask private Greek companies to introduce a six day working week.

Meanwhile Wolfgang Schaeuble, the German finance minister, has ruled out a third Greek bailout package:

"The costs for Greece are already very high and therefore we cannot have a new programme for Greece."

Whether this is a sop for the domestic audience, to keep it docile, or a genuine line in the sand is not yet clear.

Greeks Pressed Into Servitude

The media are awash with rumours that the Troika have requested that private companies in Greece introduce a six day working week.

Let's see how well that "suggestion" goes down with the Greek people.

Greece's Bottomless Pit

The Greek Prime Minister, Antonis Samaras, will meet with various Eurozone leaders during the coming week in order to beg for more time (an extension of two years) for Greece to try to enact its austerity programme.

His renegotiation mission comes on the eve of next month's Troika report into Greece's economic progress (or lack of it).

Der Spiegel has reported that the Troika's initial assessment is that there is a Euro14BN hole in Greec's finances for 2013/14. This hole being Euro3.5BN larger than the previously identified hole of Euro11BN.

The abundance of black holes is rather alarming, given that the Troika found a Euro15BN in Greece's finances in February 2012.

Therefore will Greece be given more time and more money?

The German Finance Minister, Wolfgang Schaeuble, as per the BBC sums up the situation perfectly:

"I have always said that we can help the Greeks, but we cannot responsibly throw money into a bottomless pit."

The question is, at what stage do those funding Greece realise that the Greek economy is a "bottomless pit"?

IMF Puts Greek Visit on Hold

The IMF has stated that it will not visit Greece, to review its financial situation, until after the next round of elections on 17th June. This means that the IMF will not be putting up anymore funding for Greece, if at all, until after it has completed its review.

The IMF, for good measure, then kicked the ball back to the ECB stating that the ECB has room for further aiding Greece.

In the meantime Greece may or may not run out of money.

Greeks To Have Their Cake and Eat It?

It seems that, according to The Slog, despite all public statement to the contrary Berlin (ie Chancellor Merkel) has drawn up a plan to keep Greece in the Eurozone at all costs:

"Merkel has decided to go all out for her Fiskal Pakt and keep France on board by bribing Greece to vote yes to the Eurozone and the Troika."

In other words the Greeks will have their cake and eat it.

We shall see!

Troika Cancels Greek Inspection

The Troika has cancelled its Greek inspection visit planned for mid May.

It has not made any new appointments, and is awaiting political developments in Greece (ie the next election which will determine whether Greece leaves or stays in the Euro).

Troika Visit Ireland

"Lucky" Ireland is on the receiving end of the sixth visit of Troika inspectors.

Officials from the International Monetary Fund, the EU Commission and the European Central Bank have begun their 10 day long inspection to see how Ireland is performing under the bailout programmes

The Irish Times reports that promissory notes would be a central focus, as the issue of restructuring of the Euro30BN promissory note issued primarily to Anglo Irish Bank and Irish Nationwide has yet to be resolved.

Greece's 38 Steps

Here, courtesy of the FT, is a link to the Troika evaluation of the 38 items that needed to be completed by Greece (prior to the second bailout being handed over), and given to Athens two weeks ago:

- The 38 Steps

Boom! - Greek Bailout Consigned To The Flames

It seems that, in the interests of their Eurozone overlords, the Greek government is going to postpone the April elections.

Apparently implementing the austerity measures required by the Eurozone is taking up so much time, that the "annoying" and time consuming matter of "democracy" has to be placed on the backburner.

Let me be perfectly clear, irrespective of whether the austerity programme had a cat's chance in hell of succeeding (which it didn't), by stifling the democratic process the unelected technocrat Prime Minister has now guaranteed that the social unrest caused by this foolish decision will consign the bailout and Greece to the flames.

Greek Problem Sorted - LOL!

Some of the media are happily pumping the Eurozone line that the Greek problem is sorted, and that now the second bailout of Euro130BN has been agreed (after a marathon 13 hour session of finance ministers) we can all move on.

Not quite, aside from the fact that the Greek economy is sunk and that borrowing money to pay off debt will not resolve this problem; the private bondholders (sans ECB, which protected itself by sleight of hand last week) will have to take a NPV haircut of 74%.

Institute for International Finance (IIF) crisis resolution official Jean Lemierre was only told of the size of the haircut this morning.

The "party line" is that the creditors will voluntarily accept his haircut. The reality is that there will be a few who refuse to have their "assets" further written down, as such Greece will have to enforce the Collective Action Clauses (CAC) and force the recalcitrant bondholders to accept the 74% haircut (this of course is a default event).

Aside form that, all Greece has to do is to reduce its debt from 160%to 120.5% of GDP in 2020.

"Easy"!!!!

LOL!

This is not over, by any stretch of the imagination.

Here is the Sustainability Analysis by the Troika dated 15 February (as you can see, this will not work).

Greek Sustainability Proposal

Zen Like Calm

A mood of "Zen like calm" appears to have settled upon the Greek bailout crisis. Ahead of Monday's Eurozone vote on the second bailout, the media reports that finance ministers apparently will approve the deal.

This despite the fact that Greece's public debt will fall to 129% of GDP The target set by the Troika being 120%).

As to whether this mood of calm continues to pervade during the weekend and on Monday; we shall see, this may just be the calm before the storm.