Greece's Euro Exit Seems Inevitable - page 8

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Greece and creditors play down fears of imminent default

Greece and its European creditors on Tuesday sought to play down fears that Athens would default on a payment to the International Monetary Fund next week.

Running short of cash to pay public sector salaries, pensions and debt obligations, senior members of Prime Minister Alexis Tsipras's government have said openly that Greece does not have the money to pay 300 million euros to the IMF on June 5.

The threats have spooked financial markets, which fear a default could forces Greece out of the single currency, pushing the European and global economies into uncharted territory.

Still, the government on Monday reiterated that it would try to make the payment and Finance Minister Yanis Varoufakis expressed confidence a deal with lenders would be struck in time to avoid default. Asked if Athens could make the payment, he said: "Of course, because there will be a deal by June 5."

The comments drew a positive reaction in Germany, Greece's biggest creditor and one of its toughest critics in long-running aid negotiations with its EU and IMF lenders.

"I find it encouraging, if it is true, that the Greeks signaled yesterday their desire to repay the 300 million euros to the IMF on June 5," a German official said.

"I think there is reason to believe that we will not be talking about a default situation around June 5, neither before or immediately thereafter."

European Commission President Jean-Claude Juncker - who has been in close contact with Tsipras through the slow-moving talks - also expressed optimism that Athens would pay up in time.

"My impression after talking to a series of colleagues is that the feeling is growing that a default should be avoided," he told the MNI news agency. Asked how a default would affect the negotiations, he said: "The Greek colleagues have to know that we think they have to pay in June."

Reflecting the slightly improved mood, a survey of mostly German-based investors showed the probability Greece leaving the euro zone in the next year has fallen to 41 percent in May from 49 percent in June.

LUMP SUM PAYMENT OPTION

The June 5 payment is the first of four loan instalments totaling 1.6 billion euros ($1.76 billion) due to the IMF next month, and the date has turned into the next crunch point for Greece's fast-depleting cash reserves.

Greece could win more time to negotiate a funding deal without defaulting if it lumps together all IMF repayments due in June and pays them at the end of the month, euro zone officials said, but Athens has ruled out such an option.

Shut out of bond markets and with bailout aid frozen, the country says it is running out of cash and would prioritize paying civil servants and pensioners over the IMF if it is forced to choose.

Talks between Greece and its creditors on more funding have been dragging on since late January, when Tsipras took power on promises of ending austerity and reversing reforms agreed with the creditors by the previous government.

A new round of talks with the so-called Brussels Group - the trio of IMF, European Central Bank and European Commission lenders - was scheduled to start on Tuesday but was postponed till Wednesday for "technical reasons", a Greek official said.

Officials said euro zone deputy finance ministers will hold a teleconference on Thursday to follow up on the negotiations, though there is no expectation of a deal by then.

The talks have foundered on Athens' insistence to roll back labor and pension reforms and lower the primary budget surplus target as well as creditors' demands for value-added-tax hikes.

The European creditors could accept 1 to 1.5 percent as a suitable primary surplus target for the year, but Athens would need to take additional budget measures to reach the goal, one euro zone official said.

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Greek exit is a possibility says IMF's Lagarde - Livesquawk

 

"The Greek Endgame Is Here": Probability Of IMF Default Now 70%, Says Deutsche Bank

As the farcical negotiations between Greece and its creditors unfold ahead of a June 5 IMF payment and as Alexis Tsipras is forced to spread false hope just to avoid a terminal bank run, a picture of the Greek endgame has emerged.

We’ve discussed the political implications of both an agreement or a Grexit and we’ve also taken an in-depth look at what a missed IMF payment means for the country’s EU creditors. On the political front, the troika is intent on sending a strong message to leftist political parties (such as Spain’s Podemos and Portugal’s “ascendant" socialists) that using the threat of a euro exit as a way to extract austerity concessions is not a viable negotiating strategy. What this amounts to is an attempt on the part of the “institutions” to subjugate the political process to economics. In terms of skipping a payment to the IMF — who, as a reminder, effectively paid itself earlier this month by allowing Greece to tap its SDR reserves to pay the bills — there are a number of cross acceleration concerns which you can review by referring to the following graphic:

Now, amid accelerating deposit outflows and an hourly flow of conflicting headlines, Deutsche Bank is out with a fresh take on the Greek endgame including an analysis of both the political wrangling that would need to take place in order for parliamentary approval of concessions to creditors and the mechanics of a default to the IMF.

Via Deutsche Bank:

Little has changed in terms of developments on the ground. Despite a number of reports that negotiations may be split into separate chapters and disbursements with more difficult issues left for September, this remains unlikely. The consistent European position has been that a full staff-level agreement between the institutions - inclusive of the IMF - and Greece is required to unlock funding. Talks in this direction has been progressing in stop-start fashion over the last few weeks, with the Brussels Group (former Troika) reconvening again yesterday to continue negotiations. But progress remains slow, with multiple European and IMF officials over the last twenty four hours stating that more needs to be done to reach agreement…

The Greek government's liquidity position will ultimately drive the timelines over the next few weeks. Close to 1.5bn EUR is due to the IMF in four instalments over the course of June, with Greek government officials repeatedly stating that there are insufficient cash buffers to satisfy these payments. Given that the last IMF payment was made by drawing down Greece's SDR reserves at the fund, an exhaustion of cash buffers is a fair assumption. The most likely catalyst in coming weeks is therefore likely to be the Greek government's ability or not to pay the IMF...

A number of press reports have suggested that there is a one-month grace period relating to a failure to pay the IMF. This likely confuses two issues: a non-payment and the implications this has on cross-default provisions on other loan instruments. IMF loans do not include any formally defined grace period, with fund staff required to send an urgent cable demanding payment to the Greek authorities immediately. This is then followed by a formal notification by the IMF Managing Director to the Executive Board of the failure to pay. It is this notification that is defined as an event of default in Greece's EFSF and other official-sector loans, triggering cross-default. If this materializes, European creditors then have the right (but not the obligation), to accelerate EFSF loans, causing them to be immediately payable. In turn such an acceleration event would trigger cross-default and potential acceleration in the post-PSI Greek government bonds. The timing of the IMF notification letter is itself a political decision, however, as is the decision to accelerate EFSF loans. IMF guidelines suggest the notification to the board happens in a month. Our understanding is that the notification period may be flexible, with some reports last week suggesting that the Executive Board has requested that this notification happens sooner in the event of a failure to pay from Greece.

Either way, it is important to note that it is not the response of the IMF that will matter in the event of a non-payment. It is the role of the ECB that is crucial. The funding of the Greek banking system remains highly dependent on the central bank's Emergency Liquidity Assistance, with a suspension or cap to this financing equivalent to an inability to make deposit withdrawals (or foreign transfers) from Greek banks and de facto capital controls.

source

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Greece was warned about using IMF default as a bailout tactic - MNI

The nitty gritty of Greek/EU negotiations from MNI

  • Tsipras tried to use May IMF payment to extract concessions
  • EU working group considered Greek proposals as lacking
  • Hollande, Merkel and Junker to talk about Greece on Monday in Berlin

MNI have gotten hold of a confidential letter from an EU source

 

Greece continues talks on aid, deal unlikely on Sunday: sources

Greece and its creditors were continuing talks on a cash-for-reforms deal but are expected to miss a self-imposed Sunday deadline for reaching an agreement to unlock aid, sources close to the talks said.

Athens and its euro zone and International Monetary Fund (IMF) creditors have been locked in talks for months without luck on a deal. Pressure to strike one has intensified as Athens faces a debt payment on June 5 as well as the expiration of its bailout program on June 30.

The government said this week it was looking for a deal by Sunday, but sources close to the talks at the so-called Brussels Group of EU/IMF creditors said that was unlikely.

"Brussels Group talks will continue today, in the evening. Although we don't expect a deal today we are very close," a Greek government official said on condition of anonymity.

Another source close to the talks said the major issues holding up a deal remained. It was not immediately clear if the talks would continue in Brussels on Monday.

In an interview published in newspaper Corriere della Sera on Sunday, Greek Economy Minister George Stathakis said he expected a deal in "a few days", followed by a meeting of euro zone finance ministers to approve disbursement of the aid.

Asked whether the debt payment to the IMF on June 5 was at risk and there was a question of lumping it together with other installments that fall due next month, Stathakis said: "There shouldn’t be any need. No danger."

Athens has frequently said it is on the verge of a deal in recent weeks but international lenders have been less optimistic, citing Greece's resistance to labor and pension reforms that are conditions for more aid.

In a sign of greater willingness to compromise, Interior Minister Nikos Voutsis said on Saturday that Greece was open to pushing back parts of its anti-austerity program to reach a deal this week..

Greek Prime Minister Alexis Tsipras chaired an eight-hour meeting of ministers involved in negotiations on Saturday which took stock of the progress made in talks with the lenders.

Tsipras is expected to have a teleconference with German Chancellor Angela Merkel and France's President Francois Hollande later on Sunday - his second in four days - in a bid to help close the deal, a Greek government official said.

Tsipras has long sought a political push to end negotiations and get aid flowing to his cash-strapped country, though the lenders have insisted that Greece must wrap up talks at the technical level with adequate concessions on reforms so that its budget and debt numbers add up.

Merkel and Hollande are also expected to meet Juncker at a business event in Berlin on Monday that could provide a chance to discuss Greece.

source

 

IMF's Lagarde considers Greek exit a possibility

The managing director of the International Monetary Fund considers a Greek exit from the eurozone a possibility, but such a step probably wouldn't mean the end of the euro, she told German newspaper Frankfurter Allgemeine Zeitung.

A Greek exit wouldn't be "a walk in the park," but probably doesn't spell the end of the eurozone, the paper quoted Christine Lagarde as saying ahead of an interview to be published Friday.

Ms. Lagarde also contradicted recent statements out of Greece indicating the country and its creditors are close to an agreement on funding.

"It's very unlikely that we'll reach a comprehensive solution in the coming days," Ms. Lagarde said. Ms. Lagarde is attending the Group of Seven meeting Thursday in Dresden, Germany.

 

Greece says there is no room for more compromise from them

Lenders must assume their responsibilitiesSo says the labour minister Panos Skourletis on Skai TV

Oh dear.. Header out just now on Rtrs

Euro recovers from a little wobble on the news

Elsewhere Spanish SER radio reports that the EU are ready to offer more funds to Greece totalling EUR 9bln. Offer is dependent on compliance with bailout programme

The soap opera continues

 

They will not exit

 
whisperer:
They will not exit

You are right. Greece is going to be used as an example for the rest

 

Greece will not pay IMF on Friday without prospect of a deal: lawmaker

Greece will not make a June 5 repayment to the International Monetary Fund if there is no prospect of an aid-for-reforms deal with its international creditors soon, the spokesman for the ruling Syriza party's lawmakers said on Wednesday.

The payment of 300 million euros ($335 million) is the first of four this month totaling 1.6 billion euros from a country that depends on foreign aid to stay afloat.

Greece owes a total of about 320 billion euros, of which about 65 percent to euro zone governments and the IMF, and about 8.7 percent to the European Central Bank.

On Tuesday, Greece's creditors drafted the broad outlines of an agreement to put to the leftist government in Athens in a bid to conclude four months of negotiations and release aid before the country runs out of money.

"If there is no prospect of a deal by Friday or Monday, I don't know by when exactly, we will not pay," Nikos Filis told Mega TV.

Greek Prime Minister Alexis Tsipras heads to Brussels on Wednesday to meet European Commission President Jean-Claude Juncker.

Tsipras, who has vowed not to surrender to more austerity, tried to pre-empt a take-it-or-leave-it offer by the creditors, sending what he called a comprehensive reform proposal to Brussels on Monday.

A Syriza European Parliament lawmaker said the government's 47-page proposal would be a good basis for discussion at a meeting of euro zone deputy finance ministers in the so-called EuroWorking Group which would convene on Wednesday.

"If the lenders show the same realism that the Greek government and the Greek Prime Minister is showing, then we can have a deal in principle by Friday or before Friday," Dimitris Papadimoulis told Antenna TV.

He said this could turn into a comprehensive deal next week.

"But right now there is no deal, there is convergence," he said.

Deputy social security minister Dimitris Stratoulis said a deal with lenders would have to respect the government's commitments.

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