Alexis Tsipras will accept all his bailout creditors’ conditions that were on the table this weekend with only a handful of minor changes, according to a letter the Greek prime minister sent late Tuesday night and obtained by the Financial Times.
The two-page letter, sent to the heads of the European Commission, International Monetary Fund and European Central Bank, elaborates on Tuesday’s surprise request for an extension of Greece’s now-expired bailout and for a new, third €29.1bn rescue
Although the bailout’s expiry at midnight Tuesday night means the extension is no longer on the table, Mr Tsipras’ new letter could serve as the basis of a new bailout in the coming days.
Mr Tsipras’ letter says Athens will accept all the reforms of his country’s value-added tax system with one change: a special 30 per cent discount for Greek islands, many of which are in remote and difficult-to-supply regions, be maintained.
On the contentious issue of pension reform, Mr Tsipras requests that changes to move the retirement age to 67 by 2022 begin in October, rather than immediately. He also requests that a special “solidarity grant” awarded to poorer pensioners, which he agrees to phase out by December 2019, be phased out more slowly than creditors request.
“The Hellenic Republic is prepared to accept this staff-level agreement subject to the following amendments, additions or clarifications, as part of an extension of the expiring [bailout] program and the new [third] loan agreement for which a request was submitted today, Tuesday June 30th 2015,” Mr Tsipras wrote. He added: >> Read More
According to a copy of the letter sent to the ESM and Jeroen Dijsselbloem, the Dutch finance minister who chairs the committee of his eurozone counterparts, whichwe’ve posted here, the loan request is for €29.1bn to cover debts maturing into 2017.
That would seem to be a pretty traditional bailout request. But it also contains some untraditional demands that may be difficult for creditors to accept. Below is an annotated version of Tsipras’ letter:
Dear Chairperson, dear President,
On behalf of the Hellenic Republic (“the Republic” or “Greece”), I hereby present a request for stability support within the meaning of Articles 12 and 16 of the ESM Treaty.
The ESM treaty is the law that now governors all eurozone bailouts. It wasn’t in place for either Greece’s first or second bailouts, but it would set the terms for its third. Articles 12 and 16 simply state the purpose of a bailout programme: to “to safeguard the financial stability of the euro area as a whole and of its Member States.” Unfortunately for Tsipras, Article 16 also happens to mention that a new programme must include a new “MoU” – or memorandum of understanding, a phrase that is politically poisonous in Greece.
As you are aware, the Republic faces urgent and pressing financial problems in the second half of 2015 and for the whole of 2016 given that:
- no disbursements from its second program (the “Program”) have been made since July 2014;
- the Republic does not have access to market financing within the meaning of Article 1 of the Guideline on Loans (“Guidelines”) by the European Stability Mechanism (“ESM”);
- the Program expires on 30 June 2015, and our application for an extension to conclude the pending negotiations has not been accepted; and,
- the Emergency Liquidity Assistance (“ELA”) has not been extended by the ECB, and therefore, capital controls in the Greek financial system were necessary to maintain the financial stability of the Euro area.
>> Read More
Some fans of the Greek ruling coalition argued that it had become increasingly intransigent over recent months to pave the way for a default and/or Grexit, that it was not simply playing a game of chicken with its creditors but was working to create a set of conditions that would force a radical rupture in a way that it could tell voters that it had clean hands.
This 11th dimensional chess theory of Greek negotiations appears to be invalid. Both the Guardian and the Wall Street Journal are separately reporting that members of the Tsipras government are working on plans that amounts to capitulation on the most contested creditor demands: that of pension and labor market “reforms,” as in large pension cuts and changes to market regulations that reduce worker bargaining power.
Now it may turn out the Syriza offer is deemed to be too small, too deferred, and/or too cosmetic to satisfy the Troika and the European governments that must approve any bailout extension (we are now so close to the expiration of the second bailout on June 30 that it is now too late to get a deal approved by then. But since IMF chief Christine Lagarde has 30 days before she has to report a Greek non-payment of €1.5 billion on June 30 to her board, the real drop dead date appears to be July 20, when a €3.5 billion payment is due to the ECB). And since the Syriza cabinet is apparently hashing out details now, any media reports are on discussions in progress, and not a final plan.
Note that Tsipras has yet to sign off on a proposal key members of the government are devising. However, note that they would not be working on a proposal to, as the IMF demanded, “make the numbers work” without a go-ahead from him to try to close the gap. And also remember that last week, in a proposal the Troika rejected, Greece agree to meet their primary surplus demands of 1.0% of GDP this year, rising to the insane level of 3.5% by 2018 and thereafter. Last week’s plan from Greece was kicked back because the Greek negotiators freely admitted their reform proposals failed to meet those levels. >> Read More
The International Monetary Fund is maintaining its tough line on Greece
Here are three big points to come out of today’s regular press briefing by IMF spokesman William Murray.
The fund still doesn’t like the idea of an interim deal and is still insisting that Greece needs to reach a “comprehensive” solution with its creditors. “We cannot conclude the review based on a few measures. It needs to be comprehensive,” Murray told reporters.
The IMF does not want to talk – in public at least – about the possibility of a third bailout, or program, for Greece. “It’s way too early to talk about third programs. We are focused as you know on completing the current review,” Murray said. Which, of course, makes sense. The IMF has taken plenty of grief from shareholders and both internal and external critics over its work in Greece. So it’s not in a hurry to extend its presence there…
Greece can buy some more time if it wants to on its payments to the IMF. Athens owes the fund Euro1.5bn in four separate payments in June. But because it has multiple payments in the month it can choose to “bundle” those, Murray told reporters, and pay them all in one go on the final day of the month. The rule has been in place since the 1970s but is rarely used. The last country to invoke the rule was Zambia in the 1980s, according to Murray. Athens has not made any request to bundle its payments yet. But “they are entitled to do that if they want”, Murray said.
Greek finance minister Yanis Varoufakis warned the cash-strapped country could run out of money in two weeks, saying that the financial situation is “terribly urgent”.
“The liquidity issue is a terribly urgent issue. It’s common knowledge, let’s not beat around the bush,” he said.
“From the perspective [of timing], we are talking about the next couple of weeks.”
His warning came as European finance ministers prepared to kick off an Economic and Financial Affairs Council meeting today in Brussels.
Greece defied its more pessimistic commentators after making a €750m (£544m) transfer to its creditor the IMF, meaning it beat its deadline. The sheer size of the payment has led some to suggest it would be unable to pay.
As it attempts to stave of bankruptcy, Greece is trying to unlock the final €7.2bn tranche from its EU/IMF bailout fund. It has until the end of June to reach an agreement with its creditors.
Greece has scraped together funds to repay international creditors this month but will exhaust its cash reserves by the end of April, raising the possibility of a sovereign default next month if it fails to agree a new reform package with the eurozone.
A senior Greek official gave reassurances that a €458m loan instalment owed to the International Monetary Fund would be paid on April 9 as scheduled, along with another €420m due to international investors when a six-month treasury bill expires on April 14.
“We’ll meet international obligations without any problem but it will be a squeeze to raise cash for domestic payments in the second half [of the month],” the official said.
“Next month is a different matter. We are going to run out of money unless reforms are legislated to make some bailout funds available,” he said.
Greece has to make two further payments to the IMF in May amounting to €950m on top of €2.4bn of pension and salary payments. But Athens cannot raise financing by selling more treasury bills to Greek banks following a ban by the European Central Bank on increasing their exposure to the government, while foreign investors have been scared off by the country’s increased political risk. >> Read More
Greece, as a country, represents 2% of Europe’s GDP. The country lied in its financial to enter the EU. Since that time, it’s been officially bankrupt since 2010.
The country has since gone through a series of “bailouts” and experienced a 25% collapse in GDP (roughly equivalent to what Argentina experienced in its 2001 implosion).
And yet, despite all the bailouts and claims that Greece was “fixed,” the country is set to default on some of its debt this Friday.
How on earth does this farce continue? How can Greece be broke FIVE years after it was first allegedly “fixed”?
The answer is very simple. Greece was never fixed. The Greek bailout was about getting money to German and French banks, many of which would go broke if Greece defaulted on its debts.
This story has been completely ignored in the media. But if you read between the lines, you will begin to understand what really happened during the previous Greek bailouts.
Remember: >> Read More
Greece must immediately start adopting some of the economic reforms demanded by its creditors if it is to receive much-needed access to emergency funds in the face of a mounting March cash crunch, the eurozone’s chief negotiator has warned.
Jeroen Dijsselbloem, the Dutch finance minister who leads the Greek talks as chairman of the eurozone finance ministers’ group, told the Financial Times that he was prepared to make a “first disbursement” of the €7.2bn remaining in Athens’ €172bn bailout as early as this month.
But the funds would only be transferred if the new Greek government, which for weeks has resisted implementing measures contained in the existing bailout after campaigning to kill the programme, adopted reforms the two sides could quickly agree on.
“My message to the Greeks is: try to start the programme even before the whole renegotiation is finished,” Mr Dijsselbloem said. “There are elements that you can start doing today. If you do that, then somewhere in March, maybe there can be a first disbursement. But that would require progress and not just intentions.” >> Read More
26 February 2015 - 21:31 pm
Greek savers withdrew 12.2 billion (£8.9 billion) from their accounts in January amid fears over a standoff between Athens and its European partners, according to new central bank data.
The outflows underline the pressure that the Greek authorities have been under to reach a deal before the funding problem for its banks became too acute.
At the start of February the ECB withdrew a waiver that allowed Greek banks to access loans from the central bank using government bonds and government-guaranteed assets as collateral, forcing the institutions to rely on Emergency Liquidity Assistance (ELA) provided by the Bank of Greece. However, the amount that the Bank of Greece could provide is capped and subject to review every two weeks.
And this is what happened – ELA lending has spiked:
>> Read More
25 February 2015 - 19:22 pm
After the new Greek government fought valiantly a la David vs Goliath for several weeks, only to cave in the last minute and admit that the best it can do is continue the much hated policies of the predecessor Samaras government by extending the Greek bailout program, it now has a bigger problem: assuring its European “partners” that, having flipflopped, it is as trustworthy as the Samaras government. And none other than the German FinMin Wolfgang Schaeuble made that point early on Wednesday when in a radio interview with SWR2 radio, he said that it had not been an easy decision for euro zone finance ministers to extend the Greek rescue plan by four months and “much doubt remained about how credible Athens’ latest reform commitments really were.”
Reuters quotes Schauble who said that: “It wasn’t easy an easy decision for us but neither was it easy for the Greek government because (they) had told the people something completely different in the campaign and afterwards.”
“The question now is whether one can believe the Greek government’s assurances or not. There’s a lot of doubt in Germany, that has to be understood,” said Schaeuble who despite his misgivings, he has urged German lawmakers to approve the Greek extension in a vote in parliament expected on Friday. >> Read More