Yet another Greek debt cliffhanger is in the works.
After eight hours of intense negotiations, Greece, EU creditors, and the IMF did not reach agreement on restructuring Greek Debt.
However, a big debt repayment does not come until July so negotiations will drag on and on. In the past, there was always a last minute deal. Will it be any different this time?
Bloomberg reports Greek Deal on Debt Relief Founders as Talks Stretch to June.
After nearly eight hours of talks and multiple draft compromises, Athens and its creditors couldn’t reach an accord that would ease Greece’s debt and that would convince the International Monetary Fund to agree to help finance the country’s bailout.
The IMF has been seeking more debt relief for the country, pushing euro-area creditors to ensure the sustainability of Greece’s 315 billion euros ($354 billion) of obligations before it participates in the program. Some nations including Germany object to a debt restructuring while also insisting that the Washington-based fund join the program to lend credibility to the bailout.
Greek and EU officials said that a proposed final compromise was considered too vague by the Athens delegation, which rejected the draft plan arguing it wouldn’t bring sufficient certainty on the country’s debt prospects.
Greece doesn’t have a large maturity deadline until July, when about 7 billion euros in obligations come due, but delaying the resolution of the program review adds to months of uncertainty that have taken their toll on the Greek economy — which has slipped back into recession — and kept the country from returning to the bond market.
The IMF and Germany disagreed over Greece’s economic outlook and the amount of debt relief required to assure economic stability, according to two European Union officials with knowledge of the talks, who asked not to be identified because the discussion was private.
A key issue of contention is the forecast for Greece’s economy after 2018, when the current bailout expires. The IMF has raised doubts about Greece’s ability to maintain such an optimistic budget performance for decades, while key creditors have been pushing for a more positive outlook. Less ambitious fiscal targets would increase the amount of debt relief needed.
Even if Greece was not in a recession there is no Greece can pay back what is owed.
Germany knows that full well, but it cannot give Greece any relief, especially with national elections coming up.
Has Anything Changed?
Greece cannot pay back its debt obligations so that aspect has not changed.
The IMF has threatened before to pull out of talks but always caves in at the end. Typically, in these debt negotiations, Germany tosses Greece some meaningless tidbit and the IMF goes along.
One difference this time is Tump does not appear to want a deal to save Greece. But with Trump, who really knows?
Yet, somehow these negotiations seem different. There is no panic and no fear. The market is not fixated on the event.
One wonders if anyone gives a rat’s ass if Greece leaves the Eurozone or not. A sense of complacency has replaced all the 11th hour fearmongering.
Most expect the IMF to cave in, simply because it always has.
What better time than now for the IMF to throw Germany a major curveball?
Mike “Mish” Shedlock
Solution will be post German election. Everything will happen post that. Rush to integration and acts of “solidarity” like debt relief or forgiveness.
Until Merkels backside is back on the seat secure again all that will happen is for Greece to be played with and strung along.
All that matters in the EU are Germany and France. Once both secure with planted leadership they will decide to help Greece or throw them to the lions.
Market probably knows that so just doesn’t react until closer to crunch time.
What does it say about the Eurozone and EU that they so rushed to expansion, create their empire, that they allowed Greece into the club. Now they say discipline, discipline. Where was the discipline at the outset?
Nothing changes. They will repeat these mistakes in Foreign Affairs, Diplomacy, Military etc. whilst convincing themselves they are the future and those not involved are backward.
Might it not be the other way round?
Why should IMF shareholders outside Europe pay for the stupidity of Bruxelles bureaucrats?
If debt relief takes place that will be the end of the Ponzi scheme. This is a creditor problem. And some of the creditors are insolvent themselves. Italy, Spain etc.
If German voters realise the huge exposure they have to the PIIGS, € 800 bn only via Target 2, they will become angry.
The show will go on until it cannot continue.
I doubt the Germans will become angry, they do as they are told.
That’s been the problem in the past and some behaviours just don’t change.
German discipline and the mantra to others is “resistance is futile”.
The others will be steam-rollered.
Denmark had an opt-out of the Euro. Will they change that I wonder?
How can Denmark be allowed to have an “exception” now the UK is going out the door.
Denmark will stand alone.
You’ll have the nut cases talking of and denegrating “Danish Exceptionalism”. There have been articles about “Bristish Exceptionalim” as if such a thing exists, it doesn’t. In Leftist magazines that are pro-EU.
They write menacingly. No exceptionalism exists except the recognition of the value of Sovereignty amongst some peoples that have fought to maintain it and recognise its value in the blood spilt defending it an others rights to it – WW1, WW2 etc.
Poland, France forget too quickly.
Yancey Ward said:
It has always been a charade- once the charade is up, someone will have to write Greece’s debt off recognizing the losses. That is the only thing that matters- who writes it off and when. All politicians, and they are all politicians, want it to happen as far into the future as possible.
Meanwhile Turkey doesn’t give a sh!t about EU words and treats ignores sovereignty of an EU member. EU will rush to get Turkey into the EU so it won’t need to complain Turkey ever again.
Poor Greece trapped between Turkey and EU.
Mish, read this link below – 22nd May.
Only Denmark and UK were exempt.
Was in Presidents report a while back, let’s see if the Poles have the balls to say no.
Everyone in Euro by 2025. This will increase influence in the trade weighted index vs dollar. With central fiscal controls on the cards the sovereign European states will cease to have much control. THEY NEVER LEARN.
Why bother voting thereafter as your politicians will be no more than ambassadors.
THEY NEVER LEARN. Democratise is a word they should never use as they are anti-democratic. If this happens it may be to spread the cost of Greece over all members and less burden to Germany. I don’t see them letting Greece go whilst pulling others in.
“The alleged secret meeting was held last week between Valdis Dombrovskis, EU commissioner in charge of financial services, Pierre Moscovici, in charge of economic and financial affairs, and MEPs.
The memo of the meeting was obtained by the German Frankfurter Allgemeine Zeitung daily.
“The aim of the European Commission is to introduce the euro in all 27 EU Member States by 2025,” the daily quoted the memo as saying.
The memo indicates that Moscovici aims to “democratise the monetary union”, the paper said, adding that in his view, the European Parliament has the power to exercise democratic control over the eurozone.
The Polish government has repeatedly said that Poland is not ready to join the eurozone. Lat week, Finance Minister Mateusz Morawiecki said that it is “not in Poland’s interest” to be in the eurozone, and Warsaw does not want to lose the possibility of running an independent monetary policy.”
Think of it. Eastern Europeans ran away from Russian control only to land in the lap of Eurocrat control.
Remember Rothschild – control the money, control the country.
Will anyone learn from the Greek debt crisis. Only when Greece defaults and not a day before then. The Greeks had a chance to show and use their balls and then they collapsed. The simple solution is Greek default and removal from the Euro and maybe the EU. What are they exporting to Germany, olives? The fact is, they will continue to bleed all those on state pensions, continue to try and collect taxes (so many owe back taxes on real estate but if the property is confiscated who will buy it and at what price?), pay workers for basic services, and all those wonderful things that need to be done like maintenance on roads, buildings, port facilities, and the like. I suppose when things get serious enough they’ll stop lying to themselves and stage a coup.
Tony Bennett said:
Greece needs to split.
They’ll do OK with offshore gas deposits / tourism / possible pipeline routes to lease.
The adjustment period will be rough … but the mid / long term will be far better than perpetual depression under the boot of the troika.
Enlarging the Eurozone to all EU members – will they pull it off?
It looks very ambitious and will prevent Eastern European countries devaluing in a competitive fashion thereby making their development dependent on the fiscal allowances of Brussels and/or FDI. I bert FDI will result in tighter fiscal constraints as Brussels will determine they don’t need the spending if they have foreigners investing.
It will cement German- French hedgemony. All the Eastern Europeans will be able to compete on is labour, not x-rate. How can countries not seee this?
It will allow greater competition with the USD for world trade.
It could help spread the cost of the likes of Greece over more countries & offer a bail-out route to Italy in future over more contributors.
This is where having a European head of the IMF looks like a conflict of interest imho. LaGarde has a love affair with the Euro & is part of the problem – hasn’t helped Greece get back to being soverign – even if that would involve massive devaluations.
Dictatorial, but what else can you expect from people that have formerly been under Fascism or Communism?
The only long term solution is to drop all political boundaries and let Germany take over. I will be like if Germany won WWII.
Medex Man said:
July Greek debt negotiations — Spoiler ALERT
Greece isn’t going to pay squat. Brussels will refuse to admit their whole scam is neither a union nor European. They will not admit the ECB broke EU law trying to pretend like Greek government debt is even money good, never mind investment grade.
Repeat above until the “crisis” is too big to ignore — then declare bankruptcy and war, kill lots of people to cover up the failed leadership, then blame whomever loses the war for the bureaucrats misdeeds.
next year this whole stupid-from-the-get-go experiment comes apart…….setting off world sovereign debt contagion.
anyone thinks you can paper this over forever will be losing big.
Jon Sellers said:
At some point, the ECB will quietly print euros and buy The Greek sovereign debt from European banks. Then they will quietly write it down. The only losers will be those who were too conservative to buy Greek debt.
Tony Bennett said:
There is no quietly. ECB has a balance sheet. The asset held is Greek debt. The liability is the euros “out there”. If the ECB wrote it off that is PRINTING (QE is NOT printing) money and euro will take hit … and once the camel has his nose under the tent … where will it end?
No doubt Italy (Spain?) would love to have some write offs.
Do not foresee Germany being OK with that outcome … they’ll split before.
End of euro as viable currency.
Jon Sellers said:
Why couldn’t it be done exactly like QE? The Euros just show up as bank reserves. The camel’s nose is well under the tent already.
Tony Bennett said:
QE – in theory – reversible.
In QE you can run off or sell assets to bring euros back to the ECB.
In a write off there is no way to bring back euros to ECB balance sheet.
Wouldn’t take investors long to think: Zimbabwe
Astute comments and interesting information from The_Fish. One small point – Sweden also opted out of the euro.
Regarding Greece, we should also remember who was advising them in creative accounting when they joined the euro enclave. The US is very fond of fining wayward foreign banks multi billions.
Danes and Swedes will be sold out by their political class.
john wetherhold said:
what a farce. this angst of course is about protecting the continental banks (Germany and france). what cannot be paid back will not be paid back. the farce goes on.
Carl R. said:
Mish, you say “Even if Greece was not in a recession there is no Greece can pay back what is owed.” I don’t dispute that that is true, but it’s also true of other countries, including the US. Governments can easily run deficits and acquire debt, but it’s virtually impossible for them to have the political will to run the surplus required to pay back debt.
Jon Sellers said:
Consider the consequences of the US “paying back the debt”. They would have to increase taxes and take money out of the economy, then transfer that money to some one (or more likely a financial organization) and relieve them of an interest bearing asset.
Taxpayers would have less money. Bankers would have a non-interest bearing asset (cash). The economy would almost certainly go into a long-term depression, similar to the years after the Civil War when the government was attempting to pay back the debt from the Civil War.
The weakened economy would generate less revenue. And, like Greece, continuously put pressure on the government to increase taxes. All of that just to make the country poorer.
Joseph Constable said:
U.S. graduates with student loans they cannot pay must feel like Greeks.
European cultures are incompatible in regard to integrity.
Which banker does Bill Murray play?