Delay Game
If anyone has blinked, it now appears to be Germany and France, rather than
Greece. The latest proposal does not include any new money, but it will free
up enough cash until December. The game today is to continue the talks
forever, or until Greece finally says OK.
It is already a couple days past midnight, and the creditors, despite the
harsh talk from Germany, seem to be the ones who really want a deal.
Financing Dangle
Please consider Merkel, Hollande Dangle Financing Before Greece's Tsipras.
The leaders of Germany and France offered to release
billions in frozen aid on Friday in a last-minute push to talk Greek Prime
Minister Alexis Tsipras into contentious pension reforms in exchange for
filling Athens' empty coffers until November.
The leftist premier's response, according to a Greek official, was that he
could not understand why his country's creditors were seeking to impose such
harsh conditions in return for money to avert imminent default and damage to
the euro zone.
The creditors laid out terms in a document that went to Greece on Thursday
and was seen by Reuters on Friday. It said Greece could have 15.5 billion
euros in EU and IMF funding in four installments to see it through to the end
of November, including 1.8 billion euros by Tuesday as soon as the Athens
parliament approved the plan.
The total is slightly more than Greece needs to service its debts over the
next six months but contains no new money.
"PLAN B"
If Greece refuses, the ministers will move on to discussing a "Plan
B" on preparing to limit the damage from a Greek default to Greek banks
and other euro zone countries and markets, the official said.
However, Merkel and Hollande have refused to talk publicly about a "Plan
B", saying their efforts are focused on getting an agreement to keep
Greece in the euro zone.
Greece Says No
The Financial Times reports Greece Refuses to Abandon Tax and Pension Plans
Greece is refusing to abandon its tax and pension plans
despite the strong objections of its creditors to the proposals, in a sign of
the gulf remaining between the two sides on the terms of a bailout deal.
According to its latest counterproposals to its creditors, Athens is sticking
to its demand for a one-off 12 per cent tax on all corporate profits above
€500,000 and a rise in employee pension contributions. Bailout monitors
believe the plans would crimp economic growth and in their own final offer
earlier insisted on alternative savings measures.
The stark differences in the two proposals come amid mounting evidence that
several European leaders are preparing for the prospect that no deal will be
reached at a make-or-break meeting of eurozone finance ministers on Saturday.
According to EU officials, Mark Rutte, the Dutch prime minister, told his
fellow leaders at an EU summit on Thursday night that they may need to
reconvene to discuss Greece — not to negotiate, he said, but to deal with the
fallout from a Greek default.
Deposits Drop to Eleven-Year Low
Bloomberg reports Greek Bank Deposits Fall to Eleven-Year Low.
Official data from the Bank of Greece today showed
deposits fell €3.8 billion to €129.9 billion at the end of last month,
marking a 21 percent plunge since November. That was just before then-Prime
Minister Antonis Samaras brought forward a vote for a new president that led
to his government's downfall.
With Greece's continued presence in the euro hanging in the balance, and the
threat of capital controls looming if Prime Minister Alexis Tsipras fails to
reach a bailout deal with creditors, the outflow has continued in June.
Greek Bank Deposits
That's capital flight in a simple picture. It will continue as long as the
ECB provides Emergency Liquidity Assistance (ELA).
I suspect ELA ends tomorrow or Monday.
Round One of Saga Nearly Over
Default is just round one. In spite of the Troika threatening to expel Greece
from the eurozone and EU, the "damage control" operation starts as
soon as default occurs.
Neither side wants Grexit, so expect prolonged wrangling as to how to make
that happen.
Of course, Greece could just say to hell with it all right now, and be done
with it. I actually suspect something in the middle.
The key to how this plays out following default is Russia. Greece holds a big
trump card. It can end sanctions on Russia as soon as December.
Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com
