Eurogroup Gives Greece 10 Day Ultimatum: Apply For Bailout Or Grexit
Eurogroup To Meet On Feb 11; S&P Downgrades Greek Ratings
Finance ministers from the euro area will hold an extraordinary meeting on February 11 to discuss the situation in Greece, Dutch Finance Minister Jeroen Dijsselbloem said on twitter late Friday.
Ministers will exchange their views on the future course of action on the Greek bailout, which is set to expire on February 28. On the following day, EU leaders including Greek Prime Minister Alexis Tsipras will meet in Brussels.
Tsipras is set to deliver a speech to the Greek parliament on Sunday, unveiling his plans to revive the economy.
Greece is seeking a bridge loan from Europe rather than an extension of the bailout program. But several EU states have reportedly dismissed such an option.
Greece's sovereign ratings were downgraded by Standard & Poor's Ratings Services on Friday as its liquidity constraints narrowed the time frame for the new anti-austerity government to reach an agreement with its external creditors.
The risk of a Greek default and exit from the Eurozone has risen in the past week, Jennifer McKeown an economist at Capital Economics said. "While we are still not explicitly forecasting an exit, we think that markets are underestimating the probability of such an event," the economist said.
Finance Minister Yanis Varoufakis last week suggested issuing an extra GBP 10 billion of bills to fund the government spending. But the European Central Bank voiced its resistance.
S&P lowered the sovereign ratings of Greece to 'B-' from 'B'. The ratings on Greece remain on CreditWatch with negative implications.
"Although the newly elected Greek government has been in power for less than two weeks, we believe its limited cash buffers and approaching debt redemptions to official preferred creditors constrain its negotiating flexibility," S&P said.
After the suspension of Greek bond collateral eligibility by the European Central Bank, the rating agency expects it to curtail the liquidity provision to the Greek banking system if the two-month technical extension of the European Financial Stability Facility programme is not extended beyond its current expiration date in February.
Further, S&P sees uncertainties connected to the provision of liquidity to Greek banks as potentially exacerbating deposit outflows, depressing investment, and weakening tax compliance, which are already deteriorating economic and fiscal profile of Greece.
The rating agency aims to update or resolve the CreditWatch status of the rating by the next scheduled publication date for Greece, which is on March 13.
Which one will be the next to leave EU?
Which one will be the next to leave EU?
GB is already scheduled
As of Euro zone : Spain or Italy
Tsipras Outlines Plans to Break Free From Bailout Program
Prime Minister Alexis Tsipras will outline his plans to keep Greece financially afloat while breaking free from its bailout program when he addresses the nation’s parliament on Sunday.
“It is very unlikely that the euro zone will give new money to Greece for months, as the Greek positions are uncertain and significant negotiation is necessary,” Nicholas Economides, professor of economics at New York University’s Stern School of Business, said by e-mail. “This puts cash-strapped Greece in a very dire position.”
Jeroen Dijsselbloem, head of the group of 19 euro-area finance ministers, on Friday rejected a short-term financing agreement while Greece negotiates a successor program to its current bailout provided by the European Union and International Monetary Fund. The prime minister will need to address doubts about Greece’s ability to pay its bills, possibly as early as the end of the month.
Tsipras will set out measures for the government to take from now until the end of June, corresponding to the bridge program it has requested from country’s creditors, a government official said after a cabinet meeting Saturday. The prime minister will also set out policies for the next 3 1/2 years, said the official, who commented by e-mail and asked not to be identified in line with policy. The speech is scheduled to start at 7 p.m. local time.
Negotiations Necessary
Tsipras, 40, will be addressing lawmakers exactly two weeks after his Syriza party swept into power with a promise to reject EU demands for more budget austerity. Among the measures the prime minister will announce Sunday are increases to some pensions, a property tax overhaul and a crackdown on tax evasion, newspaper Proto Thema reported.
Greece’s public debt stands at more than 320 billion euros ($362 billion), or about 175 percent of gross domestic product. That makes Greece Europe’s most-indebted country when measured against output.
“Faced with financial reality, the new Greek government will have to reverse or severely pare down its pre-election program,” Economides said. “Already, in a major U-turn, the government has abandoned the position that Greece will not fully pay its debt.”
The next showdown with Greece’s EU partners is scheduled for Feb. 11 in Brussels, when Finance Minister Yanis Varoufakis faces his 18 euro-area counterparts in an emergency meeting.
Standard & Poor’s lowered Greece’s long-term credit rating one level to B- and kept the ratings on CreditWatch negative.
The rating downgrade to B- pushes Greece’s debt six levels into non-investment grade, or junk status. S&P said it plans to “update or resolve” the CreditWatch status by next month.
“We could lower our ratings on Greece if we perceive that the likelihood of a distressed exchange of Greece’s commercial debt has increased further because official funding has been curtailed, government borrowing requirements have deteriorated beyond our expectations, or Greece’s external financing has come under greater stress,” S&P said in a statement on Friday.
Euro Will Collapse if 'Grexit' Becomes a Reality: Varoufakis
Greece's exit of the euro zone would provide an incentive for other countries to follow, eventually leading to a collapse of the currency bloc, according to Greek Finance Minister Yanis Varoufakis.
"The euro is fragile, it's like building a castle of cards, if you take out the Greek card the others will collapse," Varoufakis said.
The new leftist government in Greece led by Alexis Tsipras is sticking to plans to roll back austerity and rejecting an international bailout extension.
"I would warn anyone who is considering strategically amputating Greece from Europe because this is very dangerous. Who will be next after us? Portugal? What will happen when Italy discovers it is impossible to remain inside the straitjacket of austerity?", he added.
Last week Varoufakis and Premier Tsipras visited Italy amid speculation the new government is trying to construct a "Mediterranean coalition" against Germany and the European north.
However, Italian leaders showed no support for debt re-negotiation as conceived by their Greek counterparts. According to Varoufakis they were more open to the Greek proposals when talking in private.
"Italian officials, I can't tell you from which big institution, approached me to tell me they backed us but they can't tell the truth because Italy also risks bankruptcy and they are afraid of the reaction from Germany," he said.
Varoufakis also added the new government would propose a "new deal" for Europe, similar to the one introduced in the United States in the 1930s. This would involve the European Investment Bank investing ten times as much as it has so far, the finance minister said.
This could be a serious loss in terms of the Euro. Welcome back to the days of 20 more currencies in the world. At least forex will become much more interesting again.
EUR/USD presents the calm before the storm as Greek pressure mounts
Euro/dollar continues trading in the well known range and even sticks a narrower one. The all important and extraordinary Eurogroup meeting about Greece is just a day away and the sides seem to be digging into their positions.
Will we start hearing different statements already today? If not, these narrow trading ranges could explode once news comes out.
Pressure on Greece mounts from Moody’s, which downgraded 5 Greek banks to just above a default level with a warning to further cut the credit rating. Here’s what the credit rating agency had to say: “A possible deadlock in the government’s negotiations with official creditors could place at risk its own liquidity and funding needs, limiting its ability to support the banks in case of need”
Pressure on Germany came from US President Barack Obama that met German Chancellor in the White House, but did not seem able to change her mind, at least not in public and / or not now.
Contrary to worries about Greece, we are actually hearing good economic news from the euro-zone. France reported a rise of 1.5% in industrial production for the month of December, 3 times the early expectations. Output dropped 0.2% in November.
In the US, FOMC member Jeffery Lacker is set to speak and the JOLTS job openings is expected to garner attention: a rise to above 5 million is expected in the Fed’s favorite jobs indicator.
EUR/USD is confined to the 1.1290 to 1.1373 range and is practically trading only between 1.1320 to 1.1350.
Below 1.1290, we find the round number of 1.12 as further support. Above, 1.1460 looms.
Fury in Brussels: 'Greeks Are Digging Own Graves'
The European Union officials were 'infuriated' by what they see as wildly misleading claims coming from Athens, MNI, a media subsidiary of Deutsche Bourse Group, reported on Tuesday, citing anonymous sources and illustrating the widening crack in relations between Athens and Brussels.
According to the story, policymakers in Brussels were enraged by claims from Athens according to which the US Treasury supports a plan by the Syriza-led government to alleviate Greece’s debt, and that European Commission President Jean-Claude Juncker either backed the plan or had his own alternative.
“The Greeks are digging their own graves,” an EU official told MNI under conditions of anonymity.
Speaking further, he described the situation as “berserk” and said “there is no plan.”
Widening rift
He added that both the European Commission and the US Treasury were perturbed at the way rumors had been put into media circulation by Greek officials.
The comments came after rumors emerged on late Monday that Greek Finance Minister Yanis Varoufakis will, at Wednesday's Eurogroup meeting, propose to his peers a bridge financing framework that would lead to a “new deal” with creditors from September onward.
According to reports, his plan would consist of four main pillars: 30% of the existing memorandum with the Troika will be canceled and replaced with 10 new reforms agreed with the OECD; Greece’s primary surplus target would be cut from 3% of GDP this year to 1.49%; Greek debt would be reduced via an already-announced swap plan; and the “humanitarian crisis” would be alleviated via policies announced by Prime Minister Alexis Tsipras on Sunday.
However, the official said such a proposal had no chance for success, and described the whole plan as “hopeless”.
“How can you have a plan when you make no payment obligation till the autumn and then you probably scrap that,” he added.
Greek crisis: Hamburg elections part of Germany’s hard line – compromise on Monday?
Some say that all politics are internal ones, and that that influences external decisions. This may be the case in the current intensive negotiations between Greece and its European creditors led by Germany.
German finance minister Wolfgang Schäuble is leading the tough stance, basically rejecting in public any proposal that is different from the terms agreed upon in the bailout agreements. Is it the fear of contagion to other countries such as Portugal, Spain or Italy? The answer could lie closer to home.
Hamburg – Merkel’s weak spot
Hamburg is Germany’s second largest city and one of its richest. The northern port city resides in its own federal state, and this state is holding elections on February 15th.
The center right CDU party led by German chancellor Angela Merkel has suffered a devastating defeat in previous elections there held in 2011. Not only did the Christian Democrats lose to the Socialists (SPD), but the latter obtained an absolute majority in the local parliament, a rare feat in German politics.
The majority of CDU supporters oppose any concessions to Greece. Merkel has a past full of swings towards popular demand: her chameleon politics resulted in a 180 degrees shift against nuclear energy after the Fukishima disaster, an agreement to the left wing policy of adopting a minimum wage for Germany after opposing it and quite a few other changes.
You can praise it as direct democracy in Europe’s largest country and economy or criticize the lack of a backbone. It doesn’t really matter.
Timing for a resolution
For those following the crisis and its impact on the euro, it’s only important to understand that there is a good chance that Merkel and Schäuble will continue playing tough with Greece until polls close in Hamburg on Sunday evening.
Afterwards, she could understand that risking a Grexit (or Alexit if you wish) is not in the best interest of her country and her voters, thus paving the way for a significant compromise on the following day.
There is a planned Eurogroup meeting on Monday, February 16th, and this is the one where a compromise could be reached.
Interesting on what will happen!
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Update: And now this: "Moody's places Greece's Caa1 government bond rating on review for downgrade"
Surely Greece must be delighted to be part of the European "Union" at this point.
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Europe has an unpleasant habit of dropping tape bombs at the most inopportune of times, like at 3pm or later a Friday. And while on Wednesday it was the ECB yanking repoable Greek collateral for local banks, today it was first S&P, which downgraded Greece 5 months after upgrading it, and moments ago it was none other than the Cyprus bail-in man himself, the Eurogroup's Dijsselbloem, aka Diesel "Blueprint" BOOM, who just have Greece a 10 day ultimatum to fall into place or risk a terminal bank run and capital controls (both hinted at earlier by the post-DOJ settlement political "rating agency')
This means that Greece now has 10 days, or until the Monday after next to decide whether it will stay in the Eurozone or Grexit. More from Reuters:
* * *
Participants said no progress was made at a preparatory meeting of senior finance officials in Brussels on Thursday because Greece and its euro zone partners were so far apart.
Almost sounds like a reverse veto out of the European "Union".
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