– Greece “Risks Bankruptcy” As Europe Rejects Varoufakis Payment Plan; Another Referendum Fiasco Ensues (ZeroHedge, March 8, 2015):
There was one reaction by the Eurogroup following the (delayed) submission of the Greek 7-point reform proposal – which includes the brilliant idea to use foreign tourists as wired, part-time tax spies – in advance of the latest Monday finmin meeting: laughter.
Financial Times reports that the reaction from eurozone officials to the tourist plan was received with humor. They thought the proposal was hilarious and even laughed when they read it. “It’s quite hilarious, if it were not so tragic, that this is what a government in an industrialised country comes up with,” said one eurozone official involved in the talks.
There will be little laughter in cash-strapped Greece, however, if the Sunday Times is correct in its report that the “Eurogroup finance ministers are to reject radical reform proposals from Greece at a meeting in Brussels tomorrow.”
The Greek finance minister Yanis Varoufakis will present a seven-point plan in a desperate attempt to unlock a €7.2bn (£5.2bn) cash injection — the final payment under a bailout plan agreed three years ago. According to a source close to the discussions, European officials believe Greece needs to do more “on the ground”.
As the Times concluded, Greece is hoping for a favorable response because unless the cash injection is approved, Greece faces a “full-scale default.”
Unfortunately for Greece, moments ago Germany’s Frankfurter Allgemeine Zeitung confirmed the bad news, when it said that the EU commission has rejected the Greek request for speedy aid payments, cites Valdis Dombrovskis, EU commissioner for the euro. The commissioner adds that the Varoufakis letter “lacks specific enough action plan and that the reform steps must be approved by Greek parliament and be implemented.”
In other words, as we reported before, Greece is back to square minus one, where first Europe will send the dreaded Troika inspectors “on the ground” in Athens to catch up to everything they have missed in the months they have been absent and then, and only then, does Greece have any chance of even being seriously considered for more aid.
The problem is that this will come far too late to satisfy not only the upcoming IMF payments (as a reminder these are due as follows: €350 million on March 13, €580 million on March 16 and another €350 million on March 20), but now that Greece no longer has access to the various pension and social security funding “swaps” it may even be unable to rollover its next T-Bill maturity. Recall Greece has a total of €2 billion in debt-servicing payments, including T-bill redemptions and IMF obligations coming due on Friday.
In the absence of bailout funds, Tsipras said in an interview with Der Spiegel magazine that he planned to use short-term treasury bills to cover any cash shortfall in the coming weeks. The ability of Greek banks to buy these securities is constrained by a deposit outflow and the ECB’s refusal to accept more so-called T-bills as collateral for financing the country’s lenders.
ECB President Mario Draghi poured cold water on Greek lobbying for the government to be allowed to issue more short-term debt, and for Greek banks to be permitted to buy it.
“The ECB is a rules-based, not a political institution,” and can’t provide monetary financing to governments, either directly or indirectly, “when banks bring collateral in order to buy that debt,” Draghi said on Thursday.
So with its back against the wall, and with its funds lower than ever, Greece had no choice but to resort to warnings/threats that either Europe steps up or the government will directly to the people, with another referendum.
Which led to the latest “lost in translation” fiasco involving Greece (the latest of very many in the past few weeks), in which Italy’s Il Corriere della Sera quoted Varoufakis as saying Greece may call new elections, and hold referendum on the euro if European finance ministers reject reform proposals.
Greece, without any leverage left, was then quick to point out that it wasn’t trying to give Europe merely another ultimatum, and a Greek government official said in e-mail to reporters that Varoufakis “never said that referendum would be held on country’s euro membership.” Instead, the referendum would be on the government’s policy. As Bloomberg adds, “Varoufakis never said or meant that the country’s membership in the euro area would be the subject of a hypothetical referendum in his interview with Corriere, the country’s finance ministry said in an e-mailed statement. Implementation an agreement extending the country’s bailout loans proceeds normally, and Greece will repay all financial obligations on time and in full, the ministry said.”
With what money? Quote the NYT:
Jens Bastian, a financial consultant based in Athens and a former member of the European Commission’s task force on Greece, [said] “The situation is dire, and this government is finding out in real time how difficult it is to meet its multiple obligations,” he said. “It tells you something about the sheer level of desperation they face to identify any funding resources wherever they can pinch pennies.”
Former Prime Minister Antonis Samaras, who is now head of the main opposition party, said a referendum would be “a very bad development” and allow the government to shrug off its responsibilities.
The now much-diminished Greek Socialist PASOK party, also in the opposition to Tsipras’ radical left alliance, said in a statement that Varoufakis’s statement was “irresponsible, thoughtless and contradictory”.
As for the semantics of the referendum, they all boil down to the same thing: Syriza would be asking the voters to resolve two contradictory ideals: either the Greeks concede to austerity, or they agree to exiting the Eurozone. Because for Greece there no longer is a compromise, middle ground.
Sadly, there is no money either.
“I can only say that we have money to pay salaries and pensions of public employees,” Varoufakis told Corriere. “For the rest we will see.”
Still, despite all the posturing and the return of quasi-threats on both sides, the fate of Greece may now be sealed:
ECB Governing Council member Luc Coene said some comments by the Greek government have left him wondering whether the country belongs in the European economic and monetary union.
“When I hear certain declarations of the Greek government, I ask myself: ‘what are they still doing in this mechanism?’” he is quoted as saying in an interview with Belgian newspaper Le Soir.
Right about now, as the Greek deposit flight is almost certain to resume on this latest escalation in rhetoric is set to resume, Greeks are likely asking themselves the same question.
As for Syriza, its days may indeed be numbered if the following graffiti are indicative of the rapidly shifting popular mood, whose brief infatuation with the new ultra-left and “reformist” government is now only a distant memory.
— The Greek Analyst (@GreekAnalyst) March 8, 2015
And if indeed Syriza’s days are numbered, is the neo-nazi Golden Dawn up next to rule the battered Eurozone member?