In the wake of an IMF threat to back out of the Troika deal with Greece, Germany blinked under the IMF pressure.
Well, sort of.
The result was not quite the debt relief the IMF wanted, but it was more than Germany was prepared to offer yesterday.
Please consider Berlin Opens Way to Greek Debt Relief Talks.
Germany eased its objections to debt relief talks for Greece on Monday as eurozone finance ministers sought to narrow their significant differences with the International Monetary Fund over Athens’ €86bn bailout.
With Greece facing €3.5bn in debt payments in July that it will be unable to meet without support, eurozone ministers said they were ready for a political push to break a stalemate between creditors over austerity measures and Athens’ debt burden.
The political space for a deal was opened on Monday by the readiness of Wolfgang Schäuble, Germany’s finance minister, to explore ways to ease Greek debt repayments. He had, until then, strongly resisted such talks as unnecessary, putting IMF participation in the programme in doubt.
Ministers said they would seek an agreement at a meeting on May 24. The package would require Greece to prepare “contingent” budget cutting measures to be enacted if its public finances failed to sufficiently improve, as well as parallel commitments from eurozone nations to deliver on promises of debt relief, covering the short, medium and long term.
[Mish Comment: the noose around Greece tightens further]
The talks framed the discussion around options, such as interest payment holidays or extensions of debt maturities, while deferring the hard political battle over what is actually needed.
[Mish Comment: They agreed to kick the can, nothing more.]
“Today was about opening the debate, exploring options and giving political guidance to the technical people,” said Jeroen Dijsselbloem, Dutch finance minister and chair of the eurogroup of finance ministers.
[Mish Comment: They have been debating this for years.]
This may not go far enough to satisfy the IMF, whose managing director, Christine Lagarde, reiterated in a letter to EU ministers last week that Greece’s budgetary targets were unrealistic and that any effort to meet them should be based around deep economic reform rather than arbitrary, and potentially damaging, cuts.
[Mish Comment: The targets are still absurd.]
Some creditors may demand, however, more detailed commitments from Athens on what exactly would be triggered.
[Mish Comment: the noose around Greece tightens further]
Governments have firmly and repeatedly rejected any formal writedown of their holdings of Greek debt, leaving them to look at other options, such as longer grace periods and extended payment timescales.
An ESM paper, seen by the FT, outlines a range of options including 5-year maturity extensions, capping annual loan repayments at 1 per cent of gross domestic product until 2050 and capping interest rates at 2 per cent. One more radical move mentioned is to buy out the IMF with cheaper and more long-term ESM loans.
Mr Tsakalotos said the discussion, while very broad at this stage, was a breakthrough: “It’s a great relief that we’ve had this debate on debt,” he said. “We are working on a situation where Greece can at last turn the corner.”
EU officials have made clear they do not want messy negotiations to clutter the run-up to the UK’s Brexit referendum on June 23 — meaning if no agreement is reached this month, discussions will not resume until shortly before a possible Greek default.
What a Joke!
- The EU cannot tackle this issue out of fear of Brexit.
- The EU agreed to do something, without saying what that means.
- The EU is tired of IMF interference and wants to buy the IMF out.
The idea that noose tightening will allow Greece to “turn the corner” is the biggest joke of all.
It’s truly a sad state of affairs when the IMF makes more sense than anyone else in the picture.
Related Articles
- Brexit: European-Wide Exit Poll Slideshow; “Peace at Risk” Says Fearmonger Cameron
- Greece Pension Reform: As Expected (and Commanded) Greek Puppets Approve Pension Reform
- IMF Showdown With Germany: Showdown! In Leaked Letter IMF Tells Germany “Debt Relief for Greece or IMF Drops Out”
Mike “Mish” Shedlock
EU-thanize the leaders.
http://www.pravdareport.com/news/world/europe/06-05-2016/134357-Spain-0/
Do nothing? How do we get the US congress & pres to do nothing? Most of what they do just seems to make things worse. Current US debt well over 19 trillion:
http://www.usdebtclock.org/
and rising about $750,000 per minute. The “unfunded liabilities” which is not included in the “debt” is $102 trillion and rising much faster.
“We are working on a situation where Greece can at last turn the corner.”
Mr Tsakalotos , you know who and what is around the corner don’t you ?
Sure you do , Lagarde , IMF , Brussels , Dijsselbloem , Schauble , Troika , more bailouts , more EU , more negotiations … Greece has been turning corners for over half a decade , and you didn’t notice you keep passing the same point , none the better and a little more weary each time ?
Must be a really great prize at the end of it all – won’t you share it with us ?
Thought not .
Torture will continue until the debt is paid.
Torture will continue until the debt ISN’T paid
The problem isn’t so much that Greece defaults, but that sovereign Euro-debt defaults. Besides being a scary example for real debtors to their creditors, what does this say about sovereign debt as the bedrock of the financial system and all those banks carrying sovereign bonds as assets with Zero risk.
+1.
That’s the core of the unholy alliance of governments, banksters, lawyers and central banks everywhere.
It’s also increasingly killing off the ability of even well run companies to obtain funding. Or to be more precise, it is killing off the ability and willingness of savers/investors to bother differentiating between good and bad companies as recipients of their funds.
Hence, contributing to malinvestment, then slower growth… Making the original problem more acute…. in a viscous downward spiral whose only demonstrated so far solution, has been war.
Germany has two bad options.
1. Provide relief and kick the can down the road.
2. Do nothing and provide fuel for someone to leave the EU.
Once power has been further centralized in Brussels, look for a rule change that makes it impossible to leave the EU.
Then next up will be war breaking out all over Europe by those wanting out of the EU concentration camp/death trap.
“An ESM paper, seen by the FT, outlines a range of options including 5-year maturity extensions, capping annual loan repayments at 1 per cent of gross domestic product until 2050 and capping interest rates at 2 per cent. One more radical move mentioned is to buy out the IMF with cheaper and more long-term ESM loans.”
This is what happens with companies. At the end of the day debt turns into equity. The above sounds like the debt being turned into preferred shares that pay 3% of production (aka GDP).
And that may not be so bad. EU as a whole has GDP per capita of about $30K per year (US dollars). Greece has 11 million people so if Greece achieved that, it would be a GDP of $330B per year. A 3% ‘dividend’ would be $9.9B. Not bad on an underlying debt of $400B or so in an environment of 0% or lower interest rates.
Of course Greece has below average GDP per capita for the EU but that’s the point of converting debt holders into equity holders. You give the debt holder a more productive incentive to actually ensure the underlying entity turns itself around and does good rather than simply screaming for funds.
Makes sense, as long as Greek people accept their country being run by foreign creditors looking to secure their profit, instead of by an elected government. Ultimately you risk a confrontation between pro-EU and nationalist forces, between a corrupted political class and those who have nothing left to lose.
While Greece held its own currency corruption was a jealously guarded domestic affair, part of the country’s identity and closer to the street, now it is owned several thousand miles away.
“Some creditors may demand, however, more detailed commitments from Athens on what exactly would be triggered.”
Trigger warning.
Mish, Your finishing quote is priceless and a classic. “It’s truly a sad state of affairs when the IMF makes more sense than anyone else in the picture”
Pingback: May 10/Comex gold and silver open interest hardly move southbound despite the massive raid yesterday/GLD inventory rises by 2.38 tonnes despite the lower gold price/Chinese onshore and offshore yuan decrease in value sending another message to the USA not