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.


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