I just realized what you were saying about staying range bound for many moons. Yves Smith at Naked Capitalism says measures like nationalizing all domestic banks works only if the Greek central bank can backstop the domestic banks, and that in turn works only in the event of a Grexit, since the central bank needs to be a currency issuer. I don’t think the BofG has the funds do that. I just hope the banks can avoid bankrupcy during the protracted negotiations. I don't see the ECB letting that happen either although officials are talking tough lately..
Krugman also stated on his recent visit that he applauds Greece’s new government. “It is a myth that Greece has [just] made efforts, stressing that the government has made huge fiscal adjustments. The only solution is to get rid of Greece austerity." He reiterated reforms are needed in order to achieve a primary surplus, but at a reasonable level rather than 4% or 5%.
“We are at a turning point here [in Greece] and in Europe. We need to change things and turn in better policies for this period and for the years to come. There are moves in the right direction, and I think there is an opportunity; there is a chance to move forward at last. And I certainly endorse and applaud your work overall and the hard work done so far," he said
The government hopes that even if no agreement is reached, that it will manage to 'stay up' and its survival will be ensured. And that's because debt obligations of Greece from September are drastically reduced to the extent that it is able to serve the primary surplus, according to the estimate of a top government agent. How, though, can be reached by September? Even though by law drew all the reserves of the broader public sector, even if Moscow carries out its promise and disburses about $4 billion (as a deposit with the signing of the pipeline agreement), it is not enough money to pay normally all loan obligations.
The key is the two bonds totaling 6.7 billion held by the ECB that expire in July and August. The government considers the repayment of the two bonds not mandatory. The first reason invoked is that these bonds are in Greek law, which provides in Athens some leeway. The second reason is that, apart from Greece itself, the Eurozone is interested in avoiding a default on bonds held by the ECB. For these reasons a way may be found around the obstacle using funds intended for Greece and retain the Eurozone.
In the above scenario, the economic team hopes that by September the climate will have changed radically in the economy. Currently, according to reliable sources, the government is no longer able to launch major infrastructure development projects for which there had been manifested interest from abroad. As confesses a government agent, a prerequisite for all this is to restore political and economic stability. Investors are afraid to negotiate with a government that does not stand confidently on its feet.
Also it has been discovered Merkel is trying to negotiate with China about its plans in Greece! This finding surprised the Greek delegation at the recent talks in Beijing. If finances increase in September, it will dispel concerns about Greece’s viability and improve its capacity to negotiate foreign investment projects.
a government lion trapped in the perception that the euro is to blame for the Greek bankruptcy, thinking the exit from the euro would restore the economy to growth and prosperity in society. This perception disregards and ignores that Greece had gone bankrupt four other times before 2010, having [drachma] national currency. This did not save her. What had been created by a postwar productive fabric mainly dissolved in the 80s, a time when we had the drachma which indeed depreciated at a regular interval.
There is a way out but it takes courage. We need a social contract between all productive classes and a political contract between the major political forces. Everyone, communists, leftists, social democrats, centrist, center-right and right-wingers have to put water in their wine and agree to keep the country in the euro and be part of a contract, economically and socially recast. If you do not succeed, the collapse and exit from the euro will lead to such disasters that the situation will become uncontrollable. Whenever this happened, the people paid... capital.gr
dimitrios1983 replied: How to put these people water their wine since it means to compromise, and compromise is considered treason, defeatism. Here's why they never solved anything in Greece, because nobody wants to listen to another, no one wants to compromise despite the fact that a life is invoked to consent and consultation especially by those in power, who, when in opposition, do not want to agree nor reconcile. Let us remember when PASOK and New Democracy alternated in power that the one refused categorically and vice versa.
Reuters reports: According to finance ministry officials, without extracting the cash deposits remaining in various public bodies, the state would be 1.6 billion euros short of what it needs to pay month-end salaries and wages.
Reuters continues, However, regular tax revenues, which start flowing early in the month, should help the state's financial position. Tax revenues had begun to slip early in the year when Tsipras' government was elected, but have stabilized since to around 4 billion euros a month..
To tap the remaining 2 billion euros from the pension funds and regional administrations, the government would have to put pressure on them to lend the money via new repo transactions.
Today European Commission president Jean-Claude Juncker said, "I appreciate that there will be no problem with payments of Greece, or as called credit event in May. The EC is preparing a plan of action to avoid a Greek default before June.” He stressed that the Greek request to delay repayment of an installment to the IMF is not something new.
Deputy Finance Minister Dimitris Mardas said when asked on Thursday if Athens could pay wages and salaries in April and make IMF payments in May: "Our aim is to be able to fulfill our obligations.”.
In its analysis, the Citi believes that central government’s cash reaches 4.7 billion and they can meet the needs of May, meeting the main problem in June.
I agree with your post. However, Eurobank reports Q1 2015 budget data as encouraging. Tax refunds of 796mn exceeded the target by135mn. That primary balance, excluding interest payments, was 1.735mn, outperforming the target of 119mn. Deficit was 500mn.
Ha, the primary balance target was way off the mark – prepared by the prior government – maybe the current government will have better accounting.
Good find. And in this regard, notice the planned meetings. For Washington departs tomorrow Foreign Minister Nikos Kotzias where he will meet on Monday his US counterpart John Kerry.
Kotzis will remain in Washington until Thursday as meetings are planned with the National Security Adviser Susan Rice and leading members of the Senate and House of Representatives.
He will travel on Friday to New York where he will meet with the UN secretary general Ban Ki-moon and with Matthew Nimetz, personal envoy of the UN Secretary General for Macedonia naming dispute. On the same day he will meet with leaders of major think tanks.
I didn't hear the CNBC discussion. However, IMO an agreement will be reached before the banks will need capital controls.
Could be a part of ‘game theory,’ leaking false information, mostly by “unnamed” officials. Even though the info is later reported inaccurate, it adds strength to their bargaining position as it plants the seed for the possibility of an event occurring.
Note, “Greek government officials were not immediately available to comment on the Spiegel report.”.”
I’m sure Putin desires the Turkish (Blue) Stream gas pipeline. But I wonder if Russia will really advance funds to Greece for that purpose. The Turkish Stream is in competition with the Southern Corridorl. Both pipe lines would pass through Greece.
The European Commission is currently analyzing the Turkish Stream plan for its economic viability. The EC so far doesn’t seem interested in financing the cost of the Turkish Stream. “They are asking us to make big new infrastructure developments. We are not doing that,” says European Commissioner of Climate and Energy Miguel Canete.
The EC is more interested in the Southern Corridor that has backing of several companies, and they may be unwilling to offer any financing to Greece for the Turkish Stream, now or later, There is financial backing for the Southern Corridor.
And of course for that to happen Greece will have to leave the Eurozone as the IMF/ECB will not approve it. I recall you expect an exit.
It’s not certain that Emergency Liquidity Assistance (ELA) for the banks would cease if Greece left the Eurozone. Many believe the stoppage of ELA is one possible result of exit and would entail the direct collapse of the banking system. But according to JP Morgan this is a gray issue.
The ECB Statute says ELA is a mechanism to support banks that are facing temporary liquidity problems, which however, does not impede the operation Eurosystem. If the institution/ bank were declared insolvent or a problem proved permanent or prevented operation of the Eurosystem, the ECB may lift its support of ELA with the vote of 2/3 of the members of Executive Board.
The bottom line, according to JP Morgan, is that the ECB may act just as it wants, as the rules are vague and do not provide a strict "line" action.
In Greece, Mr. Mr. Buchheit says, there is more to do. Yes, it has slashed its debts but much of it has simply been transferred into loans from public institutions. Another "haircut" is not politically feasible.
"No northern European politician is going to gleefully sign on to the proposition that they lost a euro. But they can say, 'Let us stretch this out so that it matures on the 12th of never.’”
So Germany and the other eurozone countries might lend to Greece at a rate of 2%, and agree not to be repaid for another 40 years. But, he explains, investors will not worry about that if they can lend to Greece over, say, 39 years, as they will get their money back before the public sector lenders..
The eurozone crisis rumbles on. After a period of relative calm, the deadlock following the Italian election reignited fears of a eurozone breakup. While the markets may have recovered momentarily, the shock reminded everyone that the crisis never really went away.
Despite having an economy worth 0.2% of eurozone GDP, everyone watched the terms of the Cyprus bailout as crucial to the next stage of the [European] crisis, says Buchheit. "… the world watched what they did in Cyprus and viewed it as an expression of their current thinking.” By Josephine Moulds
And now all eyes are on Greece.
Mr. Buchheit’s reputation among investors is as a fearsome and aggressive litigator. He has been present at all the major debt crises of the past three decades. In Iceland he was named man of the year after negotiating a deal delaying repayments to Britain over the collapse of Icesave (an Iceland bank that went bankrupt wherein Brits wanted their $ back). The Mexican finance minister hired his firm to negotiate its debt.
He insists he does not make a moral judgement in choosing who he acts for, but rather enjoys working for the debtor nations. "It's just more fun," he says. "If you represent the lender, your client is tiresomely saying things to you like, 'Why don't they just pay us the money back?' When you're on the debtor side, you can say, 'If you want to get it back, why did you give it to us?'"
These conversations, he says, reveal a lot about a country (or, in the case of the eurozone, a whole region). "The Europeans, many of them feel that even talking about this problem is an affront to national honor. To restructure your debt is tantamount to saying you are an emerging market and that is an intolerable affront to the dignity of a developed modern European state." (Ha, an expensive lesson for Europe)
Buchheit says he was surprised when the troika stepped in to prop up Greece and help repay its debts. It was an expensive experiment. The international lenders shelled out billions repaying Greece's hungry creditors before coming to the same conclusion Buchheit posited in a paper in spring 2010: that Greece would have to radically restructure its debt.
So what does he think will happen next? (cont)
He is the infamous sovereign-debt attorney Lee Buchheit who has helped numerous countries restructure their debt and the man who managed the eventual Greek debt restructuring in 2012.
Varoufakis repeated earlier today in an interview with Huffington Post, "Any form of bankruptcy would not be "the solution right now. We are striving to create a new contract Between Greece and our international partners. There is a uncertain inertial and new data on the table, the priorities of our government, the requirements of new macroeconomic reality we face.”
With Buchheit’s help, my bet is Greece gets their debt restructured again.
The funds from the sale increase the bank’s liquidity so more loans can be made to Greeks to start businesses, etc.