The crisis in Greece goes on, and on, and on, and on, and on.
Greece still needs another debt relief extension, but as expected in this corner, another battle is brewing. Talks are cancelled.
This time, the battle is over pensions.
Please consider European Bailout Chiefs Suspend Greek Debt-Relief Measures.
European bailout monitors have suspended planned debt-relief measures for Greece in response to the surprise move by Athens to spend an additional €600m on poorer pensioners in breach of its international commitments.
European finance ministers this month agreed to a series of short-term debt relief measures that would cut Greece’s debt-to-GDP ratio by up to 20 percentage points.
But Athens’ announcement last week that it would allocate €600m to more than 1m low-income retirees and halt a planned VAT increase “appear to not be in line” with Greece’s commitments under its €86bn bailout programme, a spokesman for Jerome Dijsselbloem, eurogroup president, said on Wednesday.
Under the terms of its bailout, Greece is obliged to notify euro area authorities of such changes to its spending plans, something it failed to do in this case.
Greek 10-year government bond yields surged more than 30 basis points to 7 per cent after the suspension, their highest level in three weeks, while Athens’ benchmark stock index fell 3.5 per cent.
Hans Michelbach, one of several sceptical parliamentarians in Ms Merkel’s CDU/CSU bloc, on Wednesday told the Bundestag that they could no longer accept Greece’s “orgy of empty promises”.
The clash also adds to the complications around an ongoing policy review of the Greek programme that needs to be concluded before the IMF can decide whether to join in with the bailout.
In a blog post this week senior IMF officials reiterated warnings that they fear Greece’s debt is deeply unsustainable and that the best course would be to rethink key aspects of the programme.
The post sparked a backlash from Athens and euro area policymakers who accused the fund of being unduly pessimistic.
Not that I like the IMF (in fact I cannot stand them), but the only player halfway in Greece’s court is the IMF.
The IMF has been arguing for seversal years that Greece needs debt reduction.
Curiously, Greece wants the IMF out of the picture. Why? Is Greece going to win a battle with Germany on its own?
Something is going on that does not add up. But what?
Snap elections are a possibility.
It doesn’t really matter what the battles are over, eventually some politician in Greece will have had enough.
When Greece has finally had enough of servitude, I do not know. But I am confident that time will come.
Unfortunately, I do not expect Greek politicians to play the crisis correctly. Everyone will lose.
Mike “Mish” Shedlock.