Crossing the Greek Dead Lines

Louise Cooper of BGC Partners pointed out an interesting fact about the etymology of the English word “deadline” – it came from the American Civil War and referenced a line that a prisoner could not cross without being shot dead. So, with that in mind, does anyone really think Greece has not passed the “deadline” for making its debts sustainable (oxymoron) and staying in the common currency zone?

The Greek government told us today there was no 11am deadline for it agreeing to the Troika’s harsh bailout conditions (which includes slashing the minimum wage to €550/month), and the real deadline was before a meeting of Eurozone finance ministers took place, and that meeting would only happen once Greek politicians reached an agreement on agreeing to austerity demands. Here is Open Europe Blog’s take on this latest act of the circular tragedy that is Greece:

The Greek End-game?

 

All of this puts the eurozone at yet another impasse. There is no way eurozone states will agree to disburse another €130bn – €145bn without a greater commitment to austerity in both the Greek public and private sectors. But without support from all three parties any commitment would be an empty one.

Usually, this would spell another round of talks, negotiations and some form of muddling through. However, this time they have essentially set a deadline of the start of this week to finalise the entire Greek package. The reason for this is the €14.4bn in Greek debt which needs to be paid off on 20 March. For the next bailout to be released, the ‘voluntary’ restructuring needs to have taken place and the new austerity measures need to be making their way through parliament. Without the money from the second bailout Greece will not be able to pay off this maturing debt. Most experts and those involved expect that six weeks is the minimum amount of time it will take to put the restructuring in place – meaning that it needs to get underway this week, hence the deadline.

There is also the ‘side’ issue of how much money will actually be paid out in the second bailout and whether the official sector (eurozone loans/ECB) will take losses in the restructuring. These are in themselves massive issues which will affect the future of the eurozone – particularly the role of the ECB (as we have previously discussed here). But in the eyes of the eurozone these discussions cannot even take place until there is a consensus from the Greek political elite to commit to greater austerity. Unfortunately, then, there are still some very big issues to be ironed out, even after the current disagreement is settled.

2.00pm – Despite rumours of an agreement being reached, it looks as if the negotiations are far from over. Greek Prime Minister Lucas Papademos is set to hold talks with the troika later this evening to update them on his progress. Papademos will then hold another meeting with Greek political leaders tomorrow, presumably to communicate any messages which the troika wish to send. We assume the message will be for greater austerity. So don’t expect a Euro-group meeting until at least Wednesday.

Needless to say, all of this is self-referential kabuki theatre at its worst. Greece will default on its loans in March, its economy will continue to shrink dramatically and its public debt situation will never become sustainable. It will be forced to revert to its own national currency, most likely sometime between one month and change from now and the end of the year, at the latest.

That much is already baked in to the cake and is being prepared for by private and public institutions across Europe. Bruno Waterfield, The Telegraph’s Brussels Correspondent, comments on the transition from speculative scenarios of a Greek exit by the EU into concrete plans:

Telegraph Live Blog, February 6

 

Maria Damanaki, the Greek European Commissioner, has revealed that scenarios for Greece’s exit from euro have turned to plans.

She told the To Vima tis Kyriakis newspaper that discussion over a Greek default had moved over the last year from contingencies to “preparations”.

“Now they’re not simply scenarios. They are alternative plans that are being openly studied. They are not preferable at the moment. What is promoted is Greece’s internal devaluation within the eurozone. But there is preparation for other solutions, if Greece doesn’t make it despite its efforts, to continue on the eurozone path,” she said.

A European Commission spokesman said: “I have no comment on the fishery commissioner’s comments on the financial situation in Greece.”

Greece’s unions have their own plans to hold a 24 hour strike tomorrow in opposition to any further austerity. The only real deadline for Greece now (as in a line that cannot be crossed without being shot dead) is the one they must stop short of before cascading into full-blown, bloody revolution on the streets. Once the ruling and opposition parties of Greece accede to the Troika’s latest demands, this deadline will have passed as well, if it hasn’t already. Unlike Europe’s bureaucrats and politicians, the people of Greece cannot afford to keep delaying the inevitable.