Those who thought the situation in Greece was solved after prime minister Alexis Tsipras suddenly caved in to creditors’ demands need think again.
Greek tax revenues are running well under expectations. A default looms in July unless the creditors give more money to Greece so that Greece can pay back the creditors. As convoluted as that sounds, that’s precisely the way this madness works.
The creditors demand still more austerity but Tsipras said “no”. Instead, Tsipras seeks an emergency meeting, but European Commission president Donald Tusk said “no” to that proposal.
Supposedly this standoff represents “renewed uncertainty”.
Emergency Meeting Request Denied
The BBC reports EU Rejects Greek Request for Emergency Summit.
The head of the European Union has rejected Greece’s request for an emergency meeting aimed at ending an impasse over the country’s bailout.
Greece agreed to a third rescue package worth €86bn (£60bn; $94bn) last year and faces a looming debt payment. However, it has been unable to unlock the next loan instalment after clashing with its creditors over more reforms.
The International Monetary Fund and other European partners are demanding that Greece implement further austerity measures. They are looking to generate nearly €4bn in additional savings or contingency money in case Greece misses future budget targets.
But the left-wing government led by Alexis Tsipras has said it will not agree to any “additional actions” to what it had already signed up to last summer.
A special ministerial meeting was supposed to be held on Thursday, but Dutch Finance Minister Jeroen Dijsselbloem, who is in charge of the Greece negotiations, called it off.
Summit Request Denied
The Financial Times reports Donald Tusk Rejects Alexis Tsipras Summit Request.
Donald Tusk, the European Council president, has turned down a Greek request for an emergency summit on Athens’ bailout and told eurozone finance ministers to do more to narrow their differences.
Without a deal on new austerity measures, Greece faces a default on €3.5bn in debt payments that come due in July.
Greece is fast running out of cash to pay salaries and pensions in May because of lagging tax receipts. To cover the gap Mr Tsipras’s government has been strong-arming state entities, from the cash-strapped health service to the profitable water utility, to empty their bank accounts and place the funds with the central bank in a short-term loan arrangement.
Bailout negotiations have stalled over a request by the EU and the International Monetary Fund, Greece’s main lenders, that Athens legislate €3bn in “contingency” budget cuts that could be triggered if the programme veers off-course and fails to produce projected surpluses.
Euclid Tsakalotos, the Greek finance minister, has told negotiators getting additional cuts through the Greek parliament is politically impossible, and has asked instead for lenders to accept across-the-board budget cuts in case targets are missed. EU and IMF negotiators have rejected that proposal, however, insisting the additional reforms be targeted carefully to ensure they do not damage economic growth.
“Renewed Uncertainty”
“I am convinced that there is still work to be done by the ministers of finance who have to avoid a situation of renewed uncertainty for Greece,” Mr Tusk said after a phone call on Wednesday morning with Alexis Tsipras, Greece’s prime minister.
Talk of renewed uncertainty is ridiculous. It’s a certainty that what cannot be paid back, won’t be paid back.
The only thing “uncertain” is the same that that’s been uncertain since the beginning of the crisis: the timing of the credit event.
For more on the ridiculousness of the overused word “uncertainty”, please see Uncertain Measures of Uncertainty; Fed Uncertainty Principle Revisited.
Mike “Mish” Shedlock
“A default looms in July unless the creditors give more money to Greece so that Greece can pay back the creditors. As convoluted as that sounds, that’s precisely the way this madness works.”
A Rolling Loan Gathers No Loss
EU = government OF and BY and FOR government officials and government employees.
I’m really getting tired of reading the word ‘uncertainty’. I know you are just repeating what somebody else said, such as Ms Yellen, but it’s a fluff word. It’s an econ 101 buzz word. It’s a filler word. It’s empty air.
It’s time people declared war on the word ‘uncertainty’ when it’s used by people who are supposed to be professionals in economics and/or finance. Especially if they’re the one(s) who impact the daily lives of ordinary people profoundly.
From now on, I believe such people should be called on the carpet and challenged to explain themselves. Not you. The public officials who are uncertain but shouldn’t be.
To me, ‘uncertainty’ means ‘I don’t f**king know, pi** off.’
Pi** off is the operative reply.
The proper polite response should be to ask ‘What is the problem? Why don’t you know this? What have you known up to this point and what has changed?’
You have connections with people i don’t know. They are in media and some have access to people who profess uncertainty as a learned answer. If they don’t, they know others who do. It’s time people get pinned down on what is ‘uncertain’ and why and what do they intend to do about it. ‘Why’ is a great point to pursue.
I’m uncertain about your comment.
huh?
“Uncertainty” is generally understood to differ from “risk”, in that while both involve unpredictable events, when one speaks of risk, one presumes to have an idea about the probability distribution of the event occurring. With “uncertainty”, there is no presumably known, or even knowable, distribution. Hence you can, at least theoretically, hedge risk. But not uncertainty.
Of course, most of what politicians and central bankers deem “uncertain,” is what common sense call “obvious” and “inevitable” 🙂
Probability distribution? As used in financial matters doesnt work so its as uncertain as uncertain! There! Ive git it twice in one sentence!
Maybe the Euro will return to parity where it belongs. Oil will drop and I can go back to paying 1.60 for gas.
More likely they will paper this over like they usually do.
Greece only needs to ask for MILLIONS of Euros to help settle the Syrians and North Africans into Europe.
They will get all the money they need for that.
Paging Dr. Evil…..paging Dr. Evil…..
Evil is the genocide of a People, a culture. Even the UN is against the invasion and subjugation of a culture. I guess Greece has no culture worth protecting or defending. That is evil.
Mish, do you think it’s possible Tsipras agree to last years debt deal to buy more time to prepare for Grexit later?
He must have known last year’s debt deal wouldn’t succeed and I can see how he may have felt that signing on for short term deal would give him time to prepare in secret for a return to the Drachma.
Mish, do you think it possible that Tsipras may be preparing for Grexit in secret?
He must have known last year’s debt deal wouldn’t work and he would not have had time to make preparation so soon after winning power. It’s possible it was all done to buy some time to prepare for Grexit.
Not really – he collapsed – history suggests he will do so again
But it is possible
As John Adams said, “Democracy never lasts very long. It soon wastes, exhausts, and murders itself. There was never a democracy that did not commit suicide.” Sooner or later this happens to all Democracies and Republics. They spend more than they can ever repay, and then they end, and they always end badly.
Interestingly, all non-democracies eventually commit suicide also. Probably because after a couple generations of zero accountability, the masses rise up and establish democracies.
The only ultimately stable form of government, is no government. The notion that one weird ritual for picking who shall be slave and who shall be master, is somehow superior to another, is just plain silly.
Which is why democracies and other -cracies are both ultimately the same. And both suicidal, as you pointed out.
Afghanistan has remained largely free of the scourge of oppressive -cracies since pretty much forever. And while the Greeks and Persians, then the Romans, then the Popes, the British and now “Us” have been calling them barbarians and whatnot the whole time, they are still doing what they have always done. While those denigrating them, are either gone and forgotten, or soon about to be.
What’s your point?
To answer the main point of the post:
Greece will ALWAYS need more money to make it’s nut, which is an imprecise accounting term that means 100% non-negotiable costs. it’s IMPOSSIBLE for any other outcome. The EU posturing otherwise is evidence of either desperation or extreme extreme stupidity or can kicking.
Greece will ALWAYS get a bailout. Period. To not send money is to put the entire Eurozone project at risk, meaning it’s continued existence and all the debt created to this point is at high risk.
It’s only theater, Greece will get enough to meet interest and costs that might adversely impact the Eurozone if not met. Then it’s wait for a few months until the next cash call from Greece. Repeat.
Too big to fail Greece is “Collapsing” again? So, what else is new?
There is one certainty in all this. Insatiable governments must be fed until all the seed corn is consumed, the geese that lay the golden eggs are cooked and the government cannibalizes itself.
The process might take 70 years, ala the USSR, or it might be put out of it’s misery rapidly as in Venezuela. Or, heaven forbid, some crackpot leader decides to take the world war option, in which case it will be over in a few minutes.
Organized governments are themselves the ultimate Ponzi Schemes. Must be why they never last more than a couple hundred years?
Or,,,
“You have a choice between the natural stability of gold and the honesty and intelligence of the members of government. And with all due respect for those gentlemen, I advise you, as long as the capitalist system lasts, vote for gold.”
George Bernard Shaw
Ideally, countries go through business cycles, Greece goes through borrowing cycles instead.
The last, the very LAST thing the establishment wants is for some entity – a major company, a stock, fund, insurer or pension provider, or government – to go categorically BANKRUPT openly, undeniably, un-hide-ably and visible to all.
It’s still ‘extend-and-pretend’: all about propping up fake valuations and insolvent zombie entities. The Greek state is one of them.
My sentiment re US financials. No way US will have another financial crisis that spills over into a recession. I would bet a chunk of change that following the last crisis, leaders from both parties – behind closed doors – told the US Treasury Department / Federal Reserve to do WHATEVER you have to do to avoid forcing Congress to have TARP.2 vote.
But I still think a typical inventory correction led recession could/will morph into a financial crisis.
Non-GAAP reporting
Hedonic adjustments
Stealth clawbacks
FASB 157 rulings
Analyst “whisper” numbers
LIBOR manipulation
Rampant currency volatility
Ad nauseum UE rate revisions
How can true price discovery take place? What is anything worth?
How can anyone know when a decline/improvement is at hand?
We get an enormous collapse and then Henry Paulson cooks up another TARP and serves it to the taxpayers.
Greek worm meets German fish hook.
Greece is going nowhere.
The political class of Greece, and all other Euro Nations, don’t give a damn about the people. The people are ignorant smelly peasants. The political class works for those who set up and “own” this European Union.
Stop with this idea that the “people” have anything to do with this. The goal is One Europe with the original population reduced to a minority so the rulers will never be challenged.
This was planned 200 years ago. A most perfect plan. Brilliant.
They even have everyone believing that this is what they have chosen themselves and are obliged to .
People don’t dare question when they can no longer imagine anything else.
They let the traditional leaders hang themselves and introduce their substitutes . As EU has no head , just a clerk with a title who is rarely seen , it is irreproachable – every decision it takes is the combined responsibility of several countries , well beyond the ability of any citizen to be able to even start to intellectually challenge, let alone pin with a nationalistic emotion due to that needing a counter nation as reference – he will automatically feel outnumbered and confused even though the other countries, and his own leader probably , could not care less .
Amazing, but also void of any proper meaning should you look for it .
These people are blowing through the good will that took half a century and two world wars to forge into some kind of peaceful understanding and respect – they have nothing to show for it except a lot of pretence and a continent that is no longer at ease with itself .
All this to bail out the banks. Again. Europe should have just let their banks go chapter 7. New banks would have started up that followed more sensible business practices. Banks that didn’t need to be bailed out every few years.
Instead they have endless pension trimming to bail out zombie banks, and zombie banks taking ever more absurd derivative risks to escape ZIRP. A recipe for endless future bank bailouts.
Letting a few more Syrians pass through Greece might change the EU’s mind.
We should add to this topic the dissection of how illegal the whole idea of bailing-out Greece was. Check out discussion below this article (http://independenttrader.org/is-time-to-short-already-here.html#comment-111) – this is just a part: EFSM – based on art.122(2)”exceptional circumstances beyond Member States control” [the 2008 meltdown] and Vienna convention tells you that reading those words should be in good faith and in their ordinary meaning i.e. the help should be only granted given 122(2) conditions are met.
Now Greek governments lied about their economic data to the EU, binged on cheap credit and got what markets gave them. Read Boris Ryvkin about that and basic Austrian Business Cycle theory. Also, EU knew about that – Parliamentary reporter Anne Silbert wrote that: 122(2) was supposed to be used against earthquakes, floods and hurricanes not 3 decades of bad policy, but due to the small size of this fund no one cared.
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