Eurogroup Gives Greece 10 Day Ultimatum: Apply For Bailout Or Grexit - page 16
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Saturday's Eurogroup Meeting Decisive for Greek Deal: Merkel
A euro zone finance ministers' meeting scheduled for Saturday will be decisive for Greece and its ongoing debt crisis, German Chancellor Angela Merkel said on Friday morning, following a day and night of frantic negotiations between Athens and its international lenders.
Speaking at a news conference after the first day of an EU leaders summit, German Chancellor Angela Merkel said that they encouraged the sides to reach a rapid conclusion. A special Eurogroup meeting aimed at bridging the outstanding differences between Greece and its creditors will be held on Saturday.
"We are saying, not without careful thought, that this Eurogroup is of decisive importance, taking into account that time is very short and that a result must be worked on," she said early on Friday.
Asked whether she was ready to offer Greece debt relief as the Alexis Tsipras government was seeking, the chancellor said that at this stage it was not possible to offer any new money for Greece beyond the remaining funds left in its second bailout program.
She refused to speculate about any Plan B for the possible fallout of a potential Greek default if there was no deal on Saturday. I won't engage in speculation and want a successful agreement, Merkel said.
With negotiations set to resume on Saturday, the Greek parliament would have to approve a deal by Sunday. As there will be hardly any time left for the German Bundestag to approve the deal, EU officials suggested the upcoming bundled payment of €1.6 billion to the International Monetary Fund Greece on Tuesday could be facilitated by profits made on Greek bonds by the European Central Bank.
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Five-Month Bailout Extension: Creditors' Offer to Greece
Greece's international lenders offered on Friday a five-month, €12 billion extension of its existing bailout program in order to close a deal on Saturday to avoid defaulting on its debt next week.
Five-Month Bailout Extension: Creditors' Offer to Greece
According to EU officials familiar with the proceedings, a two-page paper from Greece's creditors -- the European Commission (EC), the European central bank (ECB) and the International Monetary fund (IMF) was distributed to euro zone finance ministers on Thursday to give them some time to study the proposal for a special Eurogroup meeting at 2 pm on Saturday.
The creditors' proposal presents €15.5 billion in bailout funds in a five-month extension (till the end of November) with €8.7 billion from the euro zone bailout fund, €3.3 billion in ECB bond profits due to Greece and €3.5 billion from the IMF.
German Chancellor Angela Merkel and French President François Hollande have urged Greek Prime Minister Alexis Tsipras to accept the "accept the extraordinarily generous offer from the institutions," Merkel said at a news briefing after the three leaders met for a short session on the sidelines of an EU summit on Friday.
Greek reaction
However, the news has not been welcomed in Greece. Postponing the whole process and kicking the can down the road will not only fail to end the political uncertainty plaguing the country, but could further negatively impact the fragile economy.
"It will be a major defeat for the government which has pushed for a comprehensive deal that could alleviate, once and for all, the negative consequences of this ongoing nightmare. Now we have another case of 'extend and pretend' which has been at the root of the saga for the last five years. It is like a bad soap opera," prominent Greek political analyst Aristides Hatzis told Britain's the Guardian.
The Greek government issued a statement on Friday evening explaining why it could not accept the offer:
"The proposal by the institutions to the Greek government entailed immediate legislation of deep recessionary measures as a pre-condition of five months of financing, which anyway, was judged to be wholly inadequate," the statement said.
"If this proposal had been accepted by the government and parliament, people and markets would have faced another five months of further shrinkage which would have lead to yet another negotiation under conditions of crisis. That is one of the reasons why the institutions’ proposal cannot be accepted."
"The government does not have a popular mandate, nor the moral right, to sign up to a new memorandum," the announcement concluded.
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Finally a real reaction. Now we shall see the blackmailers
Eurozone Rejects Greek Bailout Extension: All Bailout Programs Expire On June 30, Referendum Moot
First thing this morning, when summarizingthe flurry of overnight events, we focused on today's final gambit by Greece:
And, as expected, with the Eurozone meeting on Greece having just ended after a brief hour of deliberations, AFP reports that the answer, was indeed, no.
And then this:
In effect, and very symbolically, Greece is already out of the Eurogroup. Worse: the referendum is now moot as the programs will expire on Tuesday night and Greece won't have anything actionable to vote on next Sunday.
What happens next: Eurogroup makes it official that the Greek proposal ends on June 30 making the referendum moot as the institutions proposal will no longer be on the table, the ECB pulls a "Cyprus" on Greek ELA, and a Greek bank system which is put on indefinite hiatus, leading to a "soft" Greek default if not outright Grexit, paving the way for even more ECB QE.
In the meantime, here is the live feed from the Euro-ex-Greece-Group where now only 18 countries are allowed to opine on the future of the costliest, and most artificial monetary experiment in history.
And here is the official Eurogroup Statement on Greece, whose most important line is the footnote:Presenting the Euro-ex-Greece-Group
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Eurogroup got an ultimatum - game over. If Tusk understands what does the "game over" mean. From now on every EU part can call for a referendum when they don't like the order. They are not aware yet what a precedent was made now and that finally someone took power out of their hands
Eurogroup got an ultimatum - game over. If Tusk understands what does the "game over" mean. From now on every EU part can call for a referendum when they don't like the order. They are not aware yet what a precedent was made now and that finally someone took power out of their hands
I don't think that they are reasoning that way.
They think that they won - it will take some time for them to understand what did they (Troika) do to EU
U.S. urges Europe, IMF to reach a deal to keep Greece in euro zone
Top U.S. officials waded in at the weekend to try to help resolve Greece's financial woes, urging Europe and the International Monetary Fund to come up with a recovery plan that keeps the country in the euro zone.
In a series of separate phone calls on Saturday to IMF Managing Director Christine Lagarde and the finance ministers of Germany and France, Treasury Secretary Jack Lew urged them to "find a sustainable solution that puts Greece on a path toward reform and recovery within the Eurozone," according to a Treasury Department statement on Sunday about the calls.
Lew noted it is "important for all parties to continue to work to reach a solution, including a discussion of potential debt relief for Greece," in the run-up to a planned July 5 referendum in Greece on the terms of a bailout, said the statement, provided by a spokesperson.
Greece is facing a looming Tuesday deadline on a 1.6 billion euro payment due to the IMF. Earlier Sunday, Greece announced it will impose capital controls and keep its banks shut on Monday, after international creditors refused to extend the country's bailout.
Lew also underscored the need for Greece to adopt "difficult measures to reach a pragmatic compromise with its creditors," the Treasury statement said.
The Treasury spokesperson said senior department officials have also been in regulator communication with Greece and that Lew had spoken to Prime Minister Alexis Tsipras "multiple times" over the past two weeks.
The department has urged Greece to work closely with its international partners on planning for a bank holiday and capital controls, the spokesperson said.
President Barack Obama spoke with German Chancellor Angela Merkel on Sunday about the Greek situation.
"The two leaders agreed that it was critically important to make every effort to return to a path that will allow Greece to resume reforms and growth within the Eurozone," a White House statement said.
"The leaders affirmed that their respective economic teams are carefully monitoring the situation and will remain in close touch."
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Merkel says Germany is still open to negotiations if Greece wants
Lots of doors remain open to Greece, all bar the exit door
Merkel speaking after holding talks with party leaders earlier
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Deal in the Making? Tsipras May Travel to Brussels
European Commission (EC) President Juncker has made a last-minute offer in order to secure a deal that would keep Greece in the euro zone. While it has been known that the proposal suggested some changes in the VAT rate, it hasn't been clear whether there would be any additional changes.
Reports have been mounting throughout the day that Greek Prime Minister Alexis Tsipras may have accepted a proposed new deal, but would travel to Brussels on Tuesday evening to discuss the proposal with senior EU officials.
Germany's daily Bild contributed to the news, writing that Tsipras spoke with high ranking EU officials whom he will meet soon. "The prime minister’s plane is at the ready," Bild said.
Konstantinos Michalos, head of the Athens Chamber of Commerce and Industry, told Greek Mega TV that he had a growing sense that "positive developments" would be seen late this evening.
"I have a positive feeling that we will have developments, positive developments late this evening," Michalos said, adding that he was basing his optimism on contacts with senior officials in the Eurogroup, euro zone finance ministers.
"The situation in the market place is a nightmare and by the end of the week will be a lot worse. It is crucial that we get this agreement. Yes, the fiscal measures (demanded by Greece's creditors) are hard but we know them, we can deal with them. The alternative is catastrophe, a situation difficult for the human mind to comprehend," he added.
Greece’s President Prokopis Pavlopoulos also spoke to senior EU officials on Tuesday. He had said that he "will go to the boundaries of my authorities" to ensure the country remains in the euro zone.
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Greek default deals blow to IMF
Greece became the first advanced economy in the seven-decade history of International Monetary Fund to default on its loan payments, marking a significant setback for both for the country and the world's emergency lender.
Failure to pay the $1.7 billion due to the IMF, a record overdue obligation, puts Greece in a small group of mostly conflict-ravaged debtors that have stiffed the IMF, a short list that includes Afghanistan's Taliban and coup-stricken Haiti. Zimbabwe was the IMF's last major defaulter in 2001.
The default to the IMF sent a warning signal to Greece's other creditors, including domestic Greek institutions such as pension funds and federal employees.
In ascribing blame for the default, however, many economists point in part to missteps by the fund itself when it helped craft a EUR110 billion joint bailout package in 2010. Critics highlight the IMF's failure to demand Greece embark on an immediate debt restructuring and its reliance on far-too-optimistic growth forecasts.
"The entire Greek saga since 2010 has been hugely damaging to the IMF's reputation," said Ajai Chopra, a visiting fellow at the Peterson Institute for International Economics and a former deputy director of the IMF's European Department.
Joseph Stiglitz, a Columbia University professor and former World Bank chief economist, said the IMF's missteps with Greece would likely make countries think twice about seeking assistance from the fund. He notes how the fund's austerity focus in the Asian crisis of the late 1990s spurred many emerging markets to build up their foreign currency reserves as emergency-financing insurance.
"Turning over their sovereignty to the IMF is seen as an extraordinary risk," Mr. Stiglitz said, "especially when you do such a bad job of forecasting."
Officials from the IMF and the U. S.--the fund's largest single shareholder--lay the blame squarely on Greece's failure to deliver on promised economic overhauls. The bailout, they say, gave Greece space to restructure its economy while allowing Europe time to develop financial backstops and the global economy room to recover.
But Mr. Chopra, the chief architect of the IMF's bailout of Ireland, said Greece's creditors, including the IMF, are also culpable for the bailout's failure.
By many accounts, the first program negotiated in 2010 between Athens, the eurozone and the IMF set the country up to stumble.
According to confidential IMF documents reviewed by The Wall Street Journal, some IMF staff and nearly a third of the board's executive directors raised objections at the time to the bailout's design. Some executive directors warned the growth projections were unrealistic. Others stressed that a debt restructuring was needed to soften the impact of the deep budget adjustments and tough economic overhauls.
But under pressure by the fund's largest shareholders--the U.S. and Europe--the fund moved forward amid fears that a meltdown in Greece could spread across Europe.
The IMF's decision not to press for debt restructuring in 2010 "was the original sin," said Alessandro Leipold, chief economist for the Brussels-based think tank, the Lisbon Council.
The fund eventually did require a restructuring of a hefty portion of Greece's debt in 2012. But by then, much of the damage was already done. Greece failed to meet the IMF's forecast for a return to growth in 2012. In fact, the economy shrank by 25% over four years.
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