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Joined: 16 Dec 2009
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PostPosted: Thu May 14, 2015 10:31 am    Post subject: Is it over for Greece? Reply with quote


Bankrupt Greece raids emergency IMF funds to avoid unprecedented default
Athens is forced to tap reserves at an IMF escrow account after reports suggest the Fund will not participate in a fresh Greek bail-out

Greece avoided an unprecedented default to the International Monetary Fund on Tuesday after raiding its emergency cash account at the Fund, in a major sign the country is edging ever closer to stiffing its senior creditor.

Athens tapped €650m from its "special drawing rights" (SDR) account held by the Bank of Greece at the IMF, scraping together a further €100m in cash reserves to avoid going into arrears.

The news came after reports in Spanish paper El Mundo said the IMF was ready to pull the plug on the debt-stricken country.

Fund officials reportedly told European finance ministers they had grave concerns about Athens willingness to slash spending, raise tax revenues, and implement a raft of structural reforms, ruling themselves out of a fresh rescue which could be worth €30bn-€50bn.

Alexis Tsipras held a four-hour crisis cabinet meeting The move to effectively shift funds from different accounts at the IMF signals Greece has all but run out of cash to meet its international and domestic obligations. According to estimates, Greece only has a paltry €90m in spare cash reserves after paying out its monthly wage and pensions bill of €1.4bn for May.

Officials from the IMF said the Bank of Greece was under no obligation to replenish its emergency account and could use its money as it wishes. Using IMF reserves to pay off debt obgligations is not unprecedented. The IMF says "a number of members have used SDR acquisitions to meet forthcoming obligations to the Fund or as part of reserve management".

Figures from April showed the debt stalemate continued to spook ordinary Greeks, who pulled more than €7bn out of the financial system last month, sending bank deposits to fresh 10-year lows.

With capital still fleeing the country, the European Central Bank was forced to hike its emergency provisions for lenders a day earlier than usual. The ceiling on emergency liquidity assistance was raised by a further €1.1bn on Tuesday, taking total liquidity support to more than €80bn.

The ECB also decided to maintain the current level of haircut it requires from Greek banks posting collateral for the emergency cash. There were fears the central bank would tighten its collateral rules, further squeezing Greece, as the country struggles to meet conditions for its bail-out extension.

The IMF has been at loggerheads with its creditor partners over debt relief for the stricken government. The Fund is reported to be pushing for a debt write-off for Athens, as its liabilities have topped 180pc of GDP.

Greece owes the IMF a total of €9.7bn this year and will need to repay a further €2bn over the course of June and July.

Christine Lagarde has maintained the IMF will not countenance a default from any debtor nation. The Fund holds "senior creditor" status among Greece's lenders, and is due to provide €3.5bn of the remaining €7.2bn in bail-out cash due to Greece as part of the remainder of its bail-out.


Greece's finance minister Yanis Varoufakis has warned his country now faces an "urgent" liquidity situation.

The government has resorted to raiding the coffers of its local government bodies and confirmed it had raised a further €600m from municipal transfers on Tuesday morning. The raid is expected to generate nearly €2bn in total, but is being resisted by authorities who see the emergency decree as "unconstitutional".

Athens has already fallen into arrears with its suppliers, while the country’s hospitals, universities and pension funds are struggling to make their obligations.

Greece’s largest pension fund was forced to take out a short-term loan worth €360m in order to continue paying its members in June.

European finance ministers convened in Brussels on Tuesday to further discuss the Greek question but failed to make any substantive progress towards sealing a bail-out extension.

“Each week becomes more precious than those that have passed, because the weeks remaining are fewer and fewer,” said France’s finance minister Michel Sapin. [....]

Obviously, the Greek governments have drained all the big pools of publicly held capital, including the pension funds ... now they are draining Greek deposits (if I understand it right) in the IMF. They have probably squeezed about as hard as they can. Now what?

Big question. The news has the bias that Greece is being 'bailed out' ... but it seems more likely that the citizens of Greece are being looted, which implies that the remaining husk of Greece will be simply discarded. What keeps Greece in the Euro group?

It's probably the case that Greece's best course of action is to leave the EU all together.

These are the stakes, as I see it. Greece leaves the EU, and borrows from ... RUSSIA and/or CHINA!!! And they'd do that in a nanosecond. A free Greece, cut loose from its obligations to the EU, and being financed by Russia or China, would put NATOs flank in jeopardy.


Joined: 16 Dec 2009
Posts: 5505
Reputation: 276.6
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PostPosted: Wed Jun 17, 2015 8:22 am    Post subject: Reply with quote

One month later, and the situation only grows worse. Greeks are taking their money out of the banking system, and the population -- even those with small accounts -- seem to be trying to avoid what happened to their cousins in Cyprus.

Bank Of Greece Pleads For Deal, Says "Uncontrollable Crisis", "Soaring Inflation" Coming

The situation in Greece has escalated meaningfully since last week. After the IMF effectively threw in the towel and sent its negotiating team back to Washington on Thursday, EU and Greek officials agreed to meet in Brussels over the weekend in what was billed as a last ditch effort to end a long-running impasse and salvage some manner of deal in time to allow for the disbursement of at least part of the final tranche of aid ‘due’ to Greece under its second bailout program. Talks collapsed on Sunday however as Greek PM Alexis Tsipras, under pressure from the Left Platform, refused (again) to compromise on pension reform and the VAT, which are “red lines” for both the IMF and for Syriza party hardliners.

By Monday evening it was clear that both EU officials and Syriza’s radical left were drawing up plans for capital controls and a possible euro exit with Brussels looking to Thursday’s meeting of EU finance ministers in Luxembourg for a possible breakthrough. That seems unlikely however, given that Athens is sending FinMin Yanis Varoufakis whose last Eurogroup meeting ended with his being sidelined in negotiations after putting on a performance that led his counterparts to brand him an amateur, a gambler, and a time waster. For his part, Varoufakis says no new proposal will be tabled in Luxembourg as Eurogroup meetings aren’t the place for such discussions, which is ironic because Jean-Claude Juncker said something similar not long ago when the Greeks were trying to get a deal done at the very same Eurogroup meetings.

Perhaps realizing that pinning everyone’s hopes on a Thursday breakthrough is a fool’s errand, the EU will reportedly convene a high level, emergency meeting over what we’ve suggested may be a “Lehman Weekend” for the market.

Against this backdrop the war of words heated up on Tuesday with Tsipras delivering yet another incendiary speech to parliament in which the PM claimed the IMF has “criminal responsibility” for trying to “humiliate an entire people”, which is ironic because if anyone should be humiliated here it’s probably the IMF given that Athens employed the old “one move and Greece gets it” routine to force the Fund to pay itself €730 million in May and now faces the uncomfortable prospect of being railroaded into disbursing €3.5 billion in doesn’t want to disburse so that Greece can make June’s payments which have already been delayed and which Athens now wants to put off for another six months. Meanwhile, Jean-Claude Juncker has dropped the “Tsipras is my friend” routine altogether, saying he “doesn’t care about the Greek government” but rather about “the Greek people.” Juncker (who once famously opined that "when it gets serious, you have to lie") took it a step further on Tuesday, blaming Athens for misleading Greeks: “I am blaming the Greeks for telling things to the Greek public which are not consistent with what I’ve told the Greek Prime Minister,” Juncker said. “Juncker either hadn’t read the document he gave Tsipras…Or he read it and forgot about it,” Varoufakis quipped, in a terse response. Finally, France’s European commissioner, Pierre Moscovici, brushed off Tsipras' contention that the troika's demands are "absurd," saying creditors' push for pension and VAT concessions is "far from crazy." [....]

What are the consequences for us? Well, whatever happens in Greece will affect credit markets all over the world. All the West's assets seem to be mortgaged, and governments all over the industrial world are swimming in debt. Greece is now paying 15% on 10 year bonds, is probably unsupportable in a welfare state.

I can't predict what will happen here, but there is always the prospect of cascading credit collapse, and a resulting depression -- the fear of which will probably compel central banks to keep creating more and more 'liquidity' ... which means they will simply print more currency, with the inevitable effect being inflation ... at some point, in the future. More economically astute people than I fear a decade of 'stagflation' ... where wages decline and prices and taxes rise, and economic activity goes negative.

Nobody is predicting that printing more money will solve any of the problems.

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Is it over for Greece?

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