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?

Greece - The Never Ending Story

Despite Eurozone hyperbole that the Greek crisis has been "solved", via a debt write down, bond buyback and probable gifting of the next tranche of bailout money, it appears that this is not the end of the story.

German Finance Minister Wolfgang Schaeuble has in fact warned that Greece may need additional help.

As per ekathimerini.com, Euro-area governments may provide additional funding through the European Union structural fund and further interest payment reduction as long as Greece meets all its obligations under the agreement.

In other words there is an open ended commitment to prop Greece up.

D Day For Greece?

Another day, and other summit to "resolve" the Greek crisis. In theory Eurozone finance ministers will meet in Brussels today to discuss Greece's debt problems. However, it is possible that given there is no likelihood of any tangible outcome that the meeting will be delayed until December.

Despite the certainty of failure, the Eurorcrats continue to spout the "party line" that a solution needs to be/will be found. ECB vice president Vitor Constancio says that he expects a deal on Greece to be reached today.

However, EU Commissioner Olli Rehn is a little more "Delphic" and according to the Telegraph has stated that a decision must be taken on the next tranche of aid to "get rid of uncertainty hanging over Greece".

That of course is true, but uncertainty can be ended in two ways:

1 Give Greece more money, or

2 Cut Greece off and force it to default and exit the Eurozone.

Either way the uncertainty is ended!

Of Mice and Men - Samaras Cancels Begging Bowl Qatar Trip

Lats Friday I wrote of  a begging bowl trip by Greek PM to Qatar (and possibly Asia Pacific and Russia) that was "definitely" going ahead:

"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."

Less than a week later and it seems that the "definite" trip has been cancelled.

As per Zerohedge:

"Greek Premier Cancels Planned Visit to Qatar on Nov. 26: Office. So much for that bailout plan."

As I noted last Friday, not everyone likes people turning up on their doorstep begging for money.

The Eurozone Tinderbox

The growing backlash against the economic dogma of Eurozone austerity has found physical form today, as unions stage a series of demonstrations and "general strikes" across the European Union.

By way of an example, Greece continues to suffer. The Hellenic Statistical Authority has released data that shows that the Greek economy shrank by 7.2% on an annual basis in the three months to the end of September.

Driving economies and people into the ground for the sake of an economic doctrine imposed by unelected bureaucrats will backfire on those who pursue this misguided policy.

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!

Greece Riskier Than Syria

The Washington Post reports that an annual survey of finance directors by BDO has found that Greece is considered a riskier place to invest and set up business in than Syria.

Only Iran and Iraq are considered more risky than Greece.

Greece Fails To Meet Targets

Unsurprisingly Greece is failing to meet its debt targets.

Reuters reports:

"Greek debt will be above the target of 120 percent of GDP in 2020, a preliminary report by the IMF showed on Thursday, and Athens will need more reforms before emergency credit from international lenders can start flowing again."

What now then?

Exit or political fudge?

Greece Runs Out of Cash

Greek Prime Minister Samaras has warned that Greece will run out of cash on November 16 unless it receives additional funds before then.

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.

Frau Merkel Goes To Athens

German Chancellor Angela Merkel has arrived in Athens, this is her first visit there since the Eurozone crisis began.

Samaras Likens Greece To Weimer Republic

In February I wrote the following:

"Let us be clear that the 50 page "agreement" (written in English) that the Greek political establishment has to agree, in order to receive Euro 130BN, will (if it is accepted) have the same consequences for Greece as the Treaty of Versailles did for the Weimer Republic."

Today, Greek Prime Minister Antonis Samaras told Handelsblatt:

"The cohesion of Greek society was the "endangered rising unemployment, as towards the end of the Weimar Republic in Germany was".

Evidently he has been reading this site!

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.

Merkel's Bleeding Heart

Doubtless the people of Greece who are facing destitution, courtesy of their country's ill fated and suicidal dalliance with the Eurozone, will be heartened to learn that Chancellor Angela Merkel's "heart bleeds" for the Greeks who are facing hardship.

Does this mean that she will lighten up on the Eurozone's austerity package?

No.

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).

Merkel's Grexit U-Turn?

Chancellor Angela Merkel has, apparently, made a U-turn wrt her policy on Greece.

Faced with the political fallout from a Greek exit before German national elections in 2013, she now wants to stop Athens from leaving the euro zone at all costs (even if it means massaging the figures in the upcoming troika report).

That at least is the theory according to Der Spiegel.

However, I remain unconvinced. The elections are not new or a surprise, and Merkel would have been well aware of the potential political fallout from a Grexit. Indeed, if anything, a Grexit may enhance her standing more than if she were to be seen to prop up Greece at the cost of German financial stability.

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.

Time Is Not a Healer For Greece

Wolfgang Schaeuble, Germany's finance minister, has told SWR that time (in Greece's case anyway) is not a healer.

In his view granting Greece more time to implement spending cuts would not solve its problems, the Telegraph quotes him:

"More time is not a solution to the problems."

Why draw such a line in the sand?

Schaeuble is no fool, he knows that with Greece it is never just a matter of "time" but also money. He knows that, at some stage, Greece will come back and ask for more money.

As I have already noted it is highly likely that Greece will ask for more money, given the Euro3.5BN black hole in Greece's finances.

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"?