Eurogroup Gives Greece 10 Day Ultimatum: Apply For Bailout Or Grexit - page 10
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Greek Banks Get More Funds as ECB Weighs Tougher Collateral Rule
The European Central Bank raised the amount of emergency liquidity available to Greek banks after signaling that access to the funds may become more difficult as talks remain deadlocked.
The Governing Council lifted the cap on Emergency Liquidity Assistance by 1.4 billion euros ($1.5 billion) to 76.9 billion euros in a telephone conference on Wednesday, people familiar with the decision said. That follows an increase of about 1.5 billion euros last week. An ECB spokesman declined to comment.
With no speedy deal between Greece and its creditors in sight, the ECB is studying measures to rein in ELA funding to reduce the risks should political talks falter. Staff have proposed increasing the discounts imposed on the securities banks post as collateral when borrowing, and the Governing Council may discuss the issue at its May 6 meeting.
Intended to counter deposit outflows, ELA is provided by the Greek central bank at its own risk, and against lower-quality collateral than the ECB accepts.
Time is running out for Greek Prime Minister Alexis Tsipras as pensions and salaries loom at the end of the month and the International Monetary Fund awaits payment of almost 1 billion euros in the first half of May. After euro-area finance ministers failed to reach a deal at an April 24 meeting in Riga, Tsipras signaled that he may ask voters to approve an agreement with creditors that may not be in line with his campaign pledge to end austerity.
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What do they think : who are they fooling?
This moronic ECB-EU-Greece circus made to make us believe that they are doing something is lasting for 3 months already - just top divert us from real problems (like Ukraine). This became a very odd world
What do they think : who are they fooling? This moronic ECB-EU-Greece circus made to make us believe that they are doing something is lasting for 3 months already - just top divert us from real problems (like Ukraine). This became a very odd world
They don't care - the story is just to make any kind of story. The rest (if someone believes it or not) they do not care
They don't care - the story is just to make any kind of story. The rest (if someone believes it or not) they do not care
We shall see this Sunday if they have any intention to make a deal
IMF takes hard line on aid as Greek surplus turns to deficit
Brussels-based talks that resumed on Monday, is due to come from the IMF. Without the funds, Greece is expected to run out of cash this month.
Eurozone creditors, who hold the vast bulk of Greek debt, are adamantly opposed to debt relief. But IMF support is crucial both for its funds and to sustain political backing for the Greece bailout, particularly in Germany.
According to two officials present at a contentious meeting of eurozone finance ministers in Riga last month, Mr Thomsen said initial data the IMF had received from Greek authorities showed Athens was on track to run a primary budget deficit of as much as 1.5 per cent of gross domestic product this year.
Under existing bailout targets, Athens was supposed to run a primary surplus — government receipts net of spending, excluding interest payments on sovereign debt — of 3 per cent of GDP in 2015.
With the large surplus now turning into a sizeable deficit, Greece’s debt levels would begin to spike again. This would force either Athens to take drastic austerity measures or eurozone bailout lenders to agree to debt write-offs to get Athens’ debt back on a sustainable path, the IMF believes. Officials said Mr Thomsen specifically mentioned the need for debt relief during the three-hour meeting.
“The IMF thinks the gap between the two realities is very large right now,” said one senior official involved in the talks. He noted that both Athens, which was resisting new economic reforms, and eurozone creditors would probably fight the IMF on the issue.
A stand-off between the IMF and eurozone creditors over Greece is not unprecedented. Three years ago, the IMF refused to disburse its portion of the aid tranche because of similar fears Greek debt was not falling fast enough.
A stand-off between the IMF and eurozone creditors over Greece is not unprecedented. Three years ago, the IMF refused to disburse its portion of the aid tranche because of similar fears Greek debt was not falling fast enough.
The IMF only signed off after eurozone ministers agreed to consider, but never implemented, writing down their bailout loans to reduce Greece’s debt to “substantially lower” than 110 per cent of GDP by 2022. It currently stands at 176 per cent.
The forecast of a rising Greek deficit after achieving a 1.7 per cent surplus last year — and overly optimistic projections of similar surpluses into the future — would also increase the size of a third Greek bailout, which most officials believe is necessary once the €7.2bn left in the current programme is paid out. Senior officials have initially projected a new programme at €30bn-€50bn, but rising deficits could change that calculation.
Deep differences between Greece and its creditors remain on nearly all substantive issues, but officials said the current talks were now more productive than they had been before during the three-month stand-off.
Although most officials believe a deal is unlikely at Monday’s meeting of eurozone finance ministers, several negotiators are pushing for enough progress so ministers can buy more time.
Some EU officials hope to agree a statement that would allow the European Central Bank to relax the cap it has imposed on Greek sales of short-term debt. If Athens was able to sell additional treasury bills, it would temporarily relieve its mounting cash crunch.
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EU Demands Concessions as Greece Hurtles Toward Deadlines
Euro-area finance chiefs urged Greece to bow to their terms for releasing aid within days to avert a cash crunch.
With Greek officials fanning out across the continent to plead their case, Portuguese Finance Minister Maria Luis Albuquerque warned Tuesday that the currency bloc won’t make contingency plans to prepare for a possible breakdown in talks and encouraged Greek Prime Minister Alexis Tsipras to take the offer on the table.
“It has been difficult but we still hope it will be possible to have a good outcome of this discussion,” Albuquerque said in a television interview in London.
European officials are concerned that Greece may struggle to meet its obligations this month unless Tsipras drops his opposition to cutting pensions and making it easier to fire workers. His government faces about 1 billion euros ($1.1 billion) in payments to the International Monetary Fund coming due on top of public workers’ salaries and pensions.
The euro fell for a third day on Tuesday as the time left to release aid ahead Greece’s payment deadlines ran down. The currency lost 0.2 percent at 11:47 a.m. London time to $1.1119 and Greek stocks fell 3.3 percent.
Germany’s Wolfgang Schaeuble said he’s “skeptical” that the euro-area finance ministers will be able to reach a deal at their next meeting on May 11. Spanish finance chief Luis de Guindos held out the prospect of some flexibility on the conditions for releasing aid at a committee hearing in the parliament in Madrid, even as he highlighted Greece’s perilous financial position.
“We are confident that there will be some steps ahead in the coming days,” de Guindos said. “It’s important that that happens because Greece’s liquidity situation is getting increasingly complicated.”
Diplomatic Push
As negotiations aimed at easing Greece’s liquidity crisis continue, Greek Finance Minister Yanis Varoufakis held a “useful” meeting with his French counterpart Michel Sapin in Paris, according to an e-mailed statement from the government in Athens.
Varoufakis will also meet European Economic Affairs Commissioner Pierre Moscovici later in Brussels and Deputy Prime Minister Yannis Dragasakis will meet European Central Bank President Mario Draghi at 5:30 p.m. in Frankfurt.
Tsipras has also spoken with International Monetary Fund Managing Director Christine Lagarde about the state of the negotiations, the IMF said late Monday.
The European Commission explained Tuesday how the impasse over Greece’s fiscal crisis is strangling the economy, making it harder to meet the targets set out in the bailout program. goals as talks to ease its liquidity squeeze drag on. In its spring forecasts, published in Brussels, the commission sees the Greek economy growing just 0.5 percent this year, down from 2.5 percent in February.
“The conditions to support growth are in place but uncertainty and tighter financing conditions are holding back the recovery and weighing on public finances,” the commission said. Even though the economy grew for the first time since 2007 last year, positive momentum has been “hurt by uncertainty since the announcement of snap elections in December,” it said.
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Schaeuble Says Not Ready for Greek Aid Deal by Deadline
Greece may not be able complete the preparatory work needed for an agreement on financial aid before euro-area finance ministers meet in Brussels next week, German Finance Minister Wolfgang Schaeuble said.
With about 1 billion euros ($1.1 billion) of payments due to the International Monetary Fund by May 12, Schaeuble welcomed the newly “constructive” approach of Greek officials to the negotiations, even as he warned that it may come too late to release aid at the May 11 gathering.
“The Eurogroup will take up these matters only on the basis of the comprehensive report by the institutions,” Schaeuble said at a press conference in Berlin Tuesday, referring to the European Commission, the European Central Bank and the IMF. “I’m rather skeptical that we can get there by Monday, but I’m not ruling it out.”
Euro-area finance chiefs are urging Greece to bow to their terms for releasing aid within days to avert a potential cash crunch with payments to the IMF due on May 6 and May 12. European officials are concerned that Greece may struggle to meet its obligations this month unless Tsipras drops his opposition to cutting pensions and making it easier to fire workers.
The euro fell for a third day on Tuesday as the time left to release aid ahead Greece’s payment deadlines ran down. The currency lost 0.2 percent at 12:49 p.m. London time to $1.1128 and Greek stocks fell 3.8 percent.
EU Pressure
With Greek officials fanning out across the continent to plead their case, Portuguese Finance Minister Maria Luis Albuquerque said the currency bloc won’t make contingency plans to prepare for a possible breakdown in talks and encouraged Greek Prime Minister Alexis Tsipras to take the offer on the table.
“It has been difficult but we still hope it will be possible to have a good outcome of this discussion,” Albuquerque said in a television interview in London.
Spanish finance chief Luis de Guindos held out the prospect of some flexibility on the conditions for releasing aid at a committee hearing in the parliament in Madrid, even as he highlighted Greece’s perilous financial position.
“We are confident that there will be some steps ahead in the coming days,” de Guindos said. “It’s important that that happens because Greece’s liquidity situation is getting increasingly complicated.”
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Greek deadline day
Two events are dominating the outlook for today. The first is Greece; the second is the impending UK election. With regards to Greece, repayment of EUR 200 mln loan to the IMF is due today and the ECB is due to decide on the provision of emergency liquidity assistance to Greek banks, who are suffering on the back of the deposit outflows. It’s fair to say that the situation is a car crash waiting to happen, it’s just not clear when it will happen and how many causalities there will be. The single currency has started the session firmer, holding above the 1.12 level, but is likely to be sensitive to some of the headlines today.
With regards to the UK election, voting takes place tomorrow, with the results filtering through on Friday. The polls are still too close to call, so the volatility for sterling is likely to be seen through Friday, the same day as the US employment report. Looking beyond these factors, the stand-out in recent session has been the rise in bond yields, especially in Germany, given the move from below 0.10% to above 0.50% on the 10 year yield. These longer dated yields matter less for the currency, but it has still been a factor in offering some support to the single currency. Note that final services PMI data for the Eurozone is seen today, with the US focusing on the release of ADP employment data to give a lead (or otherwise) to Friday’s numbers.
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Varoufakis calls for 'bad bank' in Greece
Varoufakis says negotiations are at an 'impasse' calls for a 'bad bank'.
Greek Finance Minister Yanis Varoufakis has been relieved of his duties as the day-to-day negotiator with the IMF/EU. That's given him time to write a post at Project Syndicate about creating a 'development bank' and 'bad bank' to restore credit and confidence in the banking system in Greece.
"Imagine further that the "bad bank" helps the financial sector, which was recapitalized generously by strained Greek taxpayers in the midst of the crisis, to shed their legacy of non-performing loans and unclog their financial plumbing. In concert with the development bank's virtuous impact, credit and investment flows would flood the Greek economy's hitherto arid realms, eventually helping the bad bank turn a profit and become "good."
Finally, imagine the effect of all of this on Greece's financial, fiscal, and social-security ecosystem: With bank shares skyrocketing, our state's losses from their recapitalization would be extinguished as its equity in them appreciates... One can easily imagine Greece recovering strongly as a result of this strategy."
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Greece defies euro zone on pension, labor reform
Greece defied its international creditors on Thursday by sticking to "red lines" on pension and labor market reforms and urging lenders to give ground, dimming prospects of progress next week toward securing desperately needed financial aid.
Despite efforts by European Commission President Jean-Claude Juncker to coax leftist Prime Minister Alexis Tsipras into moving on two key conditions for releasing EU/IMF bailout funds, the Greek government spokesman said lenders could not expect Athens to make all the concessions for a deal.
"There should not be an expectation on the part of institutions ... that the government will back down on everything," Gabriel Sakellaridis told a news conference. "When you negotiate, there should be mutual concessions.
"We won't go beyond the limits of our red lines," he said. "It's clear that we cannot cut pensions."
Athens is running out of cash but has yet to reach a deal on reforms with its lenders, who have ruled out an agreement by next Monday's meeting of euro zone finance ministers.
Sakellaridis spelled out Greek hopes that the Eurogroup ministers will recognize progress toward an agreement in a joint statement, giving the European Central Bank leeway to let Athens sell more short-term debt to Greek banks.
That would ease the immediate funding crunch, helping the government make a 750 million euro payment to the International Monetary Fund on May 12 and pay wages and pensions later.
However, sources familiar with the deliberations said the ECB was highly unlikely to make such a move unless the euro zone ministers set out a very strong prospect of releasing the frozen bailout funds.
"We're nowhere near that as things stand today," said an official close to the negotiations between Greece and European Commission, ECB and IMF.
The central bank on Wednesday raised the amount of emergency liquidity assistance Greek banks can tap to counter deposit outflows and held off from tightening conditions for collateral they must present. But without a political deal, the ECB could toughen its stance in the next two weeks, the sources said.
Confidence between Athens and its euro zone partners is at a low ebb after three months of radical rhetoric, obstruction of EU and IMF officials, contradictory policy statements and obdurate negotiations.
FRENETIC DIPLOMACY
In frenetic diplomacy ahead of Monday's meeting, Juncker said he discussed Greece with ECB President Mario Draghi by telephone on Thursday and would be speaking to Tsipras again later in the day, just 24 hours after their previous call.
Asked about the risk of a Greek default and exit from the currency area, the EU chief executive said: "If I were to say that "Grexit" was an option, what do you think would happen then on the financial markets?"
A Commission spokesman said the so-called Brussels Group negotiations would continue over the weekend.
French Finance Minister Michel Sapin, who has been trying to mediate between Athens and Germany, the EU's main paymaster, said he did not expect a deal on Monday but in the following days. Tsipras was totally engaged in seeking a solution to keep Greece in the euro zone, he said.
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