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. 

Greece's Day of The Jackal Looms

Reuters reports that Greece has been given three days to reassure Europe and the International Monetary Fund it can deliver on conditions attached to its international bailout in order to receive the next tranche of aid.

Europe and the IMF are unhappy with the progress that Greece has made towards reforming its public sector and improving its tax collection.

In the event that Greece misses the deadline or its promises fail to assuage its "bankers", then as sure as eggs are eggs the "solution" that was foisted upon Cyprus (ie a raid on bank accounts) will be foisted upon Greece.

Those with money in Greek bank accounts would be advised to withdraw it now, before the jackals pounce. 

Greece Stares Into the Abyss Again

The International Monetary Fund (IMF) is preparing to suspend aid payments to Greece by the end of next month unless eurozone leaders plug a €3bn-€4bn shortfall that has opened up in Greece’s €172bn rescue programme, according to a report in the FT.

The shortfall has arisen as a result of a decision by  eurozone central banks not to roll over Greek bonds they hold, and comes amid signs that even the scaled-back privatisation plan Athens agreed to last year is falling behind schedule.

There is still a chance for Greece to receive the next tranche of aid if it manages to reach a deal with the troika before the end of June. However, the coalition government in Greece is on the verge of collapse as a result of its failure to internally agree on how to resolve the crisis caused by the decision to close the state broadcaster.

As ever with bailouts, they are not solutions but merely vehicles for kicking the can down the round and buying time for the incumbent government to resolve the original crisis. In Greece's case there may well soon be no government to hold talks or resolve the crisis.

The Bungled Bailout

The IMF has issued a report that concludes that the bailout of Greece was bungled, because it was an attempt to save the single currency rather than Greece itself.

Very true indeed.

Unsurprisingly the Gnomes of Brussels flatly reject the report.

Well they would, wouldn't they?

That being said, given that the IMF thinks that the bailout was bungled, why did the IMF agree to participate in bailing Greece out twice?

Judgement Day For Lagarde

Christine Lagarde, head of the IMF, will find out today if she will be put under formal investigation for her role in a payout made to Bernard Tapie when she was finance minister.

Tapie, a supporter of the former President Nicolas Sarkozy, was awarded 400M euros in 2007, in a dispute with the bank Credit Lyonnais.

Lagarde protests her innocence and, according to the BBC, claims that the payout was the best solution at the time.

Suffice to say, given the economic malaise within Europe this issue could not have come at a worse time for Lagarde, the IMF and the global economy.

Cyprus Parliament Votes

Today the Cyprus parliament will be finally given an opportunity to vote on the bailout plan imposed on it by the IMF/EU.

Pundits expect that the bill will pass.

However, if it doesn't, the EU/IMF will simply delay the bailout until the parliament votes in favour of it.

"Democracy" in action, the EU way!

Eurozone Pressing For Extreme Measures For Cyprus

Eurozone finance ministers are now pressing for measures that would shrink Cyprus's banking system, these measures were "ironically" rejected last week as being too extreme.

Bloomberg reports that finance ministers want to close the two biggest banks in Cyprus and freeze the assets of uninsured depositors.

Cyprus Popular Bank (CPB) and the Bank of Cyprus Plc would be split to create a bad bank.

Insured deposits (below the European Union ceiling of 100,000 euros) would go into the good bank, whilst uninsured deposits would go into the bad bank and be frozen until assets could be sold.

It is estimated (though as with all estimates this may well be wildly off the mark) that losses could be 40%.

Let's see how that goes down with the good people of Cyprus!

State Sponsored Theft

In an action that can only be described as "state sponsored theft", depositors in Cypriot banks will be hit with a one off tax on their savings, as part of the €10 billion bailout for Cyprus from the euro zone and the International Monetary Fund.

Accounts with more than €100,000 will be taxed at 9.9%, those with less at 6.75%. The money will be taken on Tuesday (Monday being a bank holiday).

It is clear that the governments of the Eurozone will do anything to keep the failed Euro experiment alive, resorting to state sponsored theft as and when required.

Clearly those with money deposited in Eurozone accounts cannot trust the governments of the Eurozone. Anyone with any commonsense will withdraw their money immediately, and place it outwith the Eurozone.

Oh and by the way, the fact that the money will not be taken until Tuesday gives people three days to empty their accounts via ATMs.

Rest assured this insane idea will cause a run on the banks in Cyprus, and will cause catastrophe in the financial markets on Monday.

Wheels Fall Off Greek Bailout Plan

Unsurprisingly the wheels have fallen off the Greek bailout plan.

For why?

Eurozone banks do not want to take the losses that will arise from the Greek bond buyback plan.

The IMF will not release the next tranche of bailout money until the Eurozone delivers on the bond buyback plan.

See the problem?

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.

Lagarde and Greece Wait For The Fat Lady

Christine Lagarde (CEO of the IMF) is quoted by the Telegraph wrt a possible deal being brokered for Greece next week:

"You know, it's not over until the fat lady sings, as the saying goes.

It's a question of working hard, putting our mind to it, making sure that we focus on the same objective, which is that... Greece can operate on a sustainable basis, can recover, can get back on its feet, can re-access markets as early as possible.

That is what is driving the IMF's determination."

In the meantime, hoping to delay the arrival of the fat lady, Antonis Samaras Greece's PM is to go on a tour of the Middle East, China and Russia to try to attract investment.

However, whilst the trip to Qatar is definitely going ahead the other ports of call have yet to be confirmed; not everyone likes people turning up on their doorstep begging for money.

IMF Loses Patience With Eurozone

The IMF has warned that the Eurozone still poses the greatest threat to global financial stability, and has urged the Eurozone to "do whatever it takes" to protect the Euro.

All very nice, maybe, but experience has shown that the politicians and bureaucrats of the Eurozone are not capable of decisive action. Hence the fact that the IMF in the report issued the warning that the lack of decisive action by European governments and institutions risked tearing the Eurozone apart:

"Incremental policy making has been insufficient to fully allay market tensions, despite the recent market rally since end July.

Merely muddling through imposes increasingly higher costs, as the unchecked forces of fragmentation continue to gather speed and undermine the very foundations of the union – a common monetary policy, and economic and financial integration....

The existing strains in the markets require a leap to better policies if the euro area is to stabilise funding markets and reduce spreads, arrest capital flight, and begin to reintegrate financially."

The advice is sound, and the warning valid. However, the leaders and bureaucrats of the Eurozone are simply not up to the job; as the millions who are unemployed and living in poverty in the Eurozone can attest to.

IMF Cuts Greece Adrift

Ahead of this week's visit to Greece by the Troika, the IMF has signalled that it will stop paying further rescue aid to Greece; ie they want Greece to leave the Euro, and have given the Europeans the opportunity to push Greece out if it does not go of its own accord.

Greece is due to make a Euro3.1BN bond payment in August, it is not clear how this can occur though.

Spanish Bank Auditors Go On Summer Holidays

The Wall Street Journal reports that the deadline for auditors from Deloitte, KPMG, PwC and Ernst & Young to present full reports on the capital needs of Spain's financial sector has been delayed from July 31 to September.

For why?

Officially the reason being presented is the need for more time to complete the evaluation, and the fact that most of Spain (especially the government) is on holiday during the summer.

Amazingly enough the auditors, and those organisations that have commissioned the auditors to do the work (ie Spain's government, the International Monetary Fund and the European Central Bank), have agreed to a delay in order to allow people to go on holiday.

There are two possible conclusions to be drawn from this absurd excuse for a delay:

1 There is in fact no urgent need for any reform or further funding of the financial sector or, more likely,

2 There is something that has yet to emerge that people want hidden for the time being.


Draw your own conclusions.

Doubtless the "crisis" will not get any worse during the summer recess!

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.

Greece Stares Into The Abyss

As the Greek election on the 6th of May approaches, the voters of Greece have been afforded an opportunity to see their future and stare into the abyss (courtesy of the IMF).

Whoever is elected, on the assumption that Greece remains within the Eurozone, the soul destroying austerity that Greece is experiencing is set to be ratcheted up:

- There will be more cuts in social benefits and healthcare.

- There will be cuts in the public sector.

- Wages and pensions will be reduced by 15%.

According to The Slog, the EU are even trying to influence the result of the elections by placing their preferred candidate in pole position to become Prime Minister.

Greece is staring into the abyss, if it chooses to remain in the Eurozone it will be pushed into the abyss. The choice that the Greek people need to make is whether they wish to be pushed into the abyss, or leave the Eurozone of their own accord.

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.

Kicking The Can Down The Road

In a clear sign that the financial crisis is far from over, Joerg Asmussen, a member of the executive board at the ECB, has backed calls from the IMF to consider targeted debt relief for homeowners in financial trouble.

The IMF report, published earlier this week, outlined evidence from a number of countries where mechanisms have been put in place to cut household debt levels; thereby boosting personal spending and helping economic growth.

Quote:

"Bold household debt restructuring programmes can significantly reduce the number of mortgage defaults and foreclosures and substantially reduce debt repayment burdens."

That is all very well as a short term palliative to keep us afloat. However, at some stage we will have to significantly boost our earnings (from hard real productive value adding work, not by printing money) if we are to ever get ourselves out of this mess!

Germany Trying To Sabotage Greek Bailout

I noted last week that "the IMF regards the EFSF as a busted flush, and has no intention of throwing any more money into the doomed project".

Unsurprisingly, the G20 have now stated categorically in their end of summit communique that no money will be forthcoming until the Eurozone puts more of its own money in, and that it is "essential" that the Eurozone boosts its own firewall first.

Meanwhile, as if deliberately trying to further humiliate and antagonise the Greeks, the German Finance Ministry has announced that more than 160 German tax collectors have volunteered for possible assignments in Greece.

Anyone would think that the Germans were deliberately trying to sabotage the bailout, and force the Greeks to walk away from it!

Given that German Finance Minister Wolfgang Schaeuble doesn't believe that the bailout will succeed, it is in Germany's interests that time and money are not wasted on it.

 

Wheels Start To Come Off Greek Bailout

Unsurprisingly, less than 24 hours after the announcement that the bailout had been agreed and that the Greek crisis had been "solved", the wheels are now coming off the agreement.

There will be a G20 summit in Mexico on 25-26 February, where the EU will beg the IMF to increase its contributions to prop up its firewall.

Unfortunately, the IMF regards the EFSF as a busted flush, and has no intention of throwing any more money into the doomed project. In fact, according to the Telegraph, the IMF will threaten to pull the plug on its contribution to the Euro130BN bailout unless the Eurozone creates a Euro750BN fund.

The small problem with this idea is that Germany has no intention of creating such a fund, because it would increase Germany's exposure to default.

Olli Rehn, the EU's economic and monetary affairs commissioner, wants to merge the European Financial Stability Facility (EFSF) with a new European Stability Mechanism (ESM) which has yet to be created.

The fantasy value of this yet to be created ESM is Euro500BN.

However, as with the ludicrous "values" placed on the busted flush of the EFSF, it is safe to assume that the ESM will never reach that level.

As with all matters pertaining to the Eurozone firewall and the bailout, the "leaders" of the Eurozone are building castles in the air.