What the ECB's Move on Greek Government Debt Is Really All About - page 4
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Greece May Miss ECB Payment As Germany Says Bailout Timeline Is Unrealistic
Greek PM Alexis Tsipras won a hard fought victory over party rivals on Thursday when Syriza’s central committee voted to postpone an emergency congress until after formal discussions on the country’s third bailout program are complete.
Syriza has been grappling with bitter infighting since more than 30 MPs in Tsipras’ parliamentary coalition defected during a vote on the first set of bailout prior actions, forcing the PM to rely on opposition votes to clear the way for formal discussions with creditors. The party dispute was exacerbated by reports that ex-Energy Minister and incorrigible Grexit proponent Panayiotis Lafazanis (along with several Left Platform co-conspirators) planned to storm the Greek mint and seize the country’s currency reserves.
Fed up, Tsipras told 200 members of Syriza’s central committee on Thursday that essentially, they could either hold a party referendum on the bailout on Sunday or wait until September to sort things out, leading us to note that "were Syriza to vote on whether or not Greece should follow through on the agreement with creditors, the market could be in for an event that is far more dramatic and important than the original referendum."
Lafazanis refused to go along with the idea. "How many referenda are we going to hold? We’ve already done one and we won with 62 per cent of the vote", he said. Ultimately, the party approved a September congress. This gives Tsipras some "breathing space," FT notes, "but Thursday’s highly charged debate signalled that the Left Platform, which supports an end to austerity and a 'Grexit' from the euro, would continue to oppose a fresh bailout."
And the party’s radical leftists aren’t alone in their opposition to the third program for Athens. On Thursday, FT reported that according to "strictly confidential" minutes from the IMF’s Wednesday board meeting, the Fund will not support the new bailout until the debt relief issue is decided and until it’s clear that Greece "has the institutional and political capacity to implement economic reforms."
Somehow, all of this must be worked out in the next three weeks. Greece must make a €3.2 billion payment to the ECB on August 20 and if the bailout isn’t in place by then, it's either tap the remainder of the funds in the EFSM (which would require still more discussions with the UK and other decidedly unwilling non-euro states) or risk losing ELA which would trigger the complete collapse of not only the Greek economy but the banking sector and then, in short order, the government. The question is whether Germany can be reasonably expected to take it on faith that i) the Greek political situation will not eventually result in Athens walking back its austerity promises, and ii) that the IMF will eventually hold up its end of the deal once Berlin approves some manner of debt re-profiling for the Greeks.
Now, according to Focus magazine, there are questions as to whether the timetable for cementing the bailout agreement is realistic. German lawmakers may now have to postpone a Bundestag vote and Athens has already discussed the possibility of taking a second bridge loan from the EFSM, Focus says. Here’s more (Google translated):
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Greece may seek up to 24 billion euros in first new aid tranche: paper
Greece may seek 24 billion euros in a first tranche of bailout aid from international lenders in August to prop up its banks and repay debts falling due at the ECB, a pro-government Greek newspaper said in its early Sunday editions.
Athens is now in talks with the European Commission and the International Monetary Fund to secure up to 86 billion euros ($94.48 billion) in bailout aid. It will be its third bailout since 2010.
Avgi newspaper, which is close to the leftist Syriza government, said Greek authorities expected to conclude talks with lenders by mid-August.
The first tranche of 24.36 billion would be used to channel 10 billion euros as an initial recapitalization to Greek banks, 7.16 billion euros to repay an emergency bridge loan, 3.2 billion euros toward Greek bonds held by the European Central Bank and other payments, Avgi said.
It has been estimated that Greek banks may require up to 25 billion euros to be recapitalized, a shortfall exacerbated by an outflow of deposits when a stalemate with lenders threatened Athens' place in the euro zone.
The flood of money leaving the country culminated in authorities imposing capital controls on June 29 to prevent a financial meltdown.
In exchange for funding Greece has accepted reforms including making significant pension adjustments, increasing value added taxes, overhauling its collective bargaining system, and measures to liberalize its economy and limit public spending.
If the talks are not completed in time, European authorities may have to provide further temporary financing as they did with a July bridge loan, though Avgi said that possibility had not been discussed with lenders.
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Greek banks see deposit inflows since re-opening on July 20
Comments just out on Bloomberg to the relief of many I'm sure
Greek central bank official who asked to remain anonymous with the comments, and a reminder that bailout talks are on-going while this summer lull continues
Don't hold your breath
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Greek banks stocks value fell more than 65% this week (in 3 days). Now the same banks that threw the debt to Greek banks can come and buy those banks with the money they pulled out of Greece long time ago and which, nominally, Greece still owes and will have to repay to those same banks that will buy Greek banks. Talking about perfect crime : it is happening right in front of our eyes
Greek banks stocks value fell more than 65% this week (in 3 days). Now the same banks that threw the debt to Greek banks can come and buy those banks with the money they pulled out of Greece long time ago and which, nominally, Greece still owes and will have to repay to those same banks that will buy Greek banks. Talking about perfect crime : it is happening right in front of our eyes
Wait till we start seeing fairy tales of prosperity brought there by omniclever banksters to those that manage to survive there on bread an water (or cookies ad Yellen told)
And it should be taught in schools as an example why politicians should never be allowed to decide about some country economics
Let's Buy Greek Debt!: RBS, Credit Suisse
As Greece's two year borrowing costs have more than halved from their unbelievable 58% peak at the beginning of this month, some banks already see an opportunity for their clients.
The Royal bank of Scotland (RBS) now recommends buying five-year Greek bonds as it is expecting the European Central Bank (ECB) to start purchasing Greek bonds under the terms of its ongoing quantitative easing (QE) program.
"Greek sovereign debt inclusion in QE would be a major boost for the market and likely lead to aggressive tightening, at least in the short term," RBS strategist Michael Michaelides said about the prospects.
RBS calculates that ECB bond purchases of €1.2 billion a month would significantly expand last year's average monthly trading volumes of €800 million.
Credit Suisse also suggests that investors should consider buying Greek bonds if prices decline, pointing to policies of solidarity within the euro area.
"If the price falls significantly, then we would buy Greek bonds because ultimately when the stress is really high every player is then incentivised again to produce a solution that prevents the worst possible outcome," Credit Suisse strategist Christian Schwarz told Reuters.
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How Did Greece Grow Faster Than The U.S.?
Greece's ability to surprise investors seems to know no bounds. On Thursday it surprised the market by reporting that in Q2, the economy expanded by 0.8%. The consensus was for a 0.5% contraction.
How did this beleaguered country grow faster than the the United States and Germany? Should we doubt the validity of the report the way doubts are cast on China's claim of 7% growth?
In explaining why they were wrong, economists cited growth in consumer spending and tourism. However, there appear to be a more important factor: Prices. In essence, prices fell faster than output. Greece is experiencing deflation. On a year-over-year basis, CPI fell on average about 1.4% in Q2. In nominal terms, Greece's GDP actually contracted by 0.7%.
This is essentially the same thing that happened in Q1 14 and Q3 14. The economy expanded, we were told, by 0.9% and 0.8% respectively. Many observers blamed Syriza for sinking the economy again. Yet the truth is that the growth is a function of the relative speed of two forces -- deflation and economic contraction. Many investors and economists are struggling to adjust their thinking for a falling price environment.
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IMF's Lagarde firmly believes Greek debt unsustainable
IMF's Lagarde with a statement on Greece:
"I remain firmly of the view that Greece's debt has become unsustainable and that Greece cannot restore debt sustainability solely through actions on its own," she says.
"Thus, it is equally critical for medium and long-term debt sustainability that Greece's European partners make concrete commitments in the context of the first review of the ESM program to provide significant debt relief, well beyond what has been considered so far."
There's no sitting on the fence there. Europe will have a hard time getting the IMF on board for another Greek bailout. And this is the IMF saying they never should have gotten involved in the first place (or the second).
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IMF wants debt cut
Germany wants IMF (US) to take part. Isn't that ridiculous. US wants that Germany (and EU gets less back) - and Germans, as good slaves, are calling US to decide. There is no EU and there never will be