Tag Archives: ECOFIN

OK, not the best title, but it is time to throw a little hardship onto the fire. Now, the next part will be one you might not agree with, especially if you’re an economist, yet, so far, my prediction have been spot on and there is a lot more to come.

First there is the answer to those who either revoiced or proclaimed that Greece still had plenty of time, in addition, we now see the how the inactions of Tsipras is now showing to be the death of his fellow Greeks. The message that is only hours old “It’s official, Greek cash reserves are running dry” The quote gives us “In a move that puts Greece’s credit crunch into perspective, prime minister Alexis Tsipras’ government has revealed that it has just over €600m euro in cash reserves. A presidential degree allowing the state to sequester the funds of public bodies has seen €64.5m being transferred from local authorities to the Central Bank of Greece, said a government statement released this morning“, in addition we get “The statement’s timing – hours after Greek finance minister Yanis Varoufakis’ alarming warning that the country could go bust “in a couple of weeks” – is clearly aimed at focusing minds as EU finance ministers meet in Brussels” and last there is “described by the leading economist Mohammed El Erian today as potentially “devastating for Greece’s long-suffering population.””. That part I stated weeks ago, but several people disagreed. It would never get that far. Now we see it! It has come that far! In addition the 600 million part implies (implies not fact) that the loans can no longer be honoured. Now we see the first clear consequence of the Status Quo push I opposed all along.

Now we get to the utter incompetent politicians, better known as Alexis Tsipras and Yanis Varoufakis. The quote “Media and analysts in Greece this morning believe it is almost inevitable that a deal will now be put to public vote” means that these two are going to hide behind a referendum, In my mind, the actual response should be ‘If Syriza actually loves its nation, it will abdicate today and returns power to New Democracy and the seat of power returns to Antonis Samaras’. I believe that such a change, with additional austerity would give Greece a chance to remain in existence. This had also been my view all along and is now voiced by Costas Karagounis (at http://greece.greekreporter.com/2015/05/11/new-democracy-the-greek-government-has-put-the-party-above-national-interests/). This will not be an easy sell.

The only way that this works is to do two steps that the Greek rich will not like.

1. All tax settlements from December 2014 are to be declared null and void in Greek Parliament.
2. All tax evaders to be prosecuted with late fines set at 20%.

2b. the accounts of any listed tax evaders are to be frozen through the Palace of Justice in The Hague and to be monitored as payment is properly made to the Greek treasury.

Now for the other parts, this is the one that will cost the IMF, however, they can now consider an option where the payments will become an option.

3. All loans are to be reset with the total amount set at 1% interest and all bonds are to be matured immediately and added to the debt, also at 1%.
4. Greece is prohibited from entering the bonds market until 2040, in addition, they are not allowed any more bond actions until 75% of the debt has been repaid (whichever date comes last).

 

Now we get to the future of Greece, for that to work a harsh change will be needed if Greece is not to become extinct (again).

5. Every municipality is now under austerity for balanced budgets, which means that services would cease unless there is money coming into the city. Debts are no longer allowed to be passed on, in every municipality the mayor and the local treasurer are liable for prosecution and mandatory prison terms if they fail. It seems to me that wasting funds should be stopped at the source.

You see, some will see my steps as ‘too extreme’, but when we get the quote: ““there is almost no-one who believes that negotiations over a [long-term] deal will end in June. Everyone is saying journalists should be prepared to work right the way through the summer and ensure they are around in June, July, early August.”” This implies that Tsipras is still playing the ‘let’s delay it all game‘. This is given added weight, but the following statement from Wolfgang Schäuble: “12-May-2015 11:21:47 – GERMAN FINANCE MINISTER SCHAEUBLE SAYS IMPROVEMENT IN GREEK TALKS CLIMATE NOT MATCHED BY SUBSTANCE“. Which was a clear reported issue in February 2015, so in one quarter the Greek team had not learned anything at all. This was not a ‘pissing’ content, this is a situation where two politicians are playing with the very existence and livelihood of millions of Greeks. You see, when it all stops the Greek retirees are literally left with nothing.

So as the EU finance clambake ended with no progress for Greece, we see a small message at the end. The message is: “They also hope to reach agreement on a new scheme, the European fund for strategic investments (EFSI), by June – so it can begin investing in private projects this summer“. Can anyone tell me where that money is coming from? Another trillion euro’s? I have no idea how much is involved, yet with the EU at large out of cash, who will fund those investments?

Yet, the trouble for Greece is not even close to over, it only deepens, that part was shown less than two hours ago, when we got the following from Twitter source: @enikos_en

“The Social Security Foundation (IKA), Greece’s largest pension fund, has decided to take short term loans worth €360 million in order to pay June’s pensions to its members, financial site enikonomia.gr reports. The decision was made Monday by IKA’s governing board. The loan is comprised of €150 million in repos from a private bank, using Greek Treasury bonds that IKA owns as collateral, and the rest from cash reserves of three other funds, including €100 million from the Public Power Corporation (PPC) employees’ insurance fund” (source: the Guardian).

Now we get to the issue I had less than two weeks ago, I predicted this to some extent, get loans to pay for loans. This situation is so much more dangerous when you analyse the information, which should get you the following:

1. IKA takes a loan to pay members.
2. It is using Greek Treasury bonds it holds in collateral (Which the Greek government cannot pay as it seems).
3. Consider the previous statement, if payments are not met those bonds will get value $0.00, in addition, we saw that Greece has 600 million left and this Friday 1.4 billion in Greek bonds mature. So, how is this going anywhere else but to a really bad place?
4. The loan drained the PPC insurance fund.

So these facts imply that IKA will have no more payment options in a month, whilst the loans could claim chunks of whatever IKA had as a foundation, which could now give added dangers to the PPC getting hit. Can anyone else see the dangers here? You see, if IKA had so many reserves left, the Greek government would not be out on a limb claiming it only had 600 million left. It seems that when we see a full list of everyone’s money in the Greek bonds, we will see a few names that had been quiet, then what?

So as we see no results from Ecofin, we should wonder what will happen this Friday. One set of 1.4 billion in Greek bonds matured on May 8^th, the press has remained awfully silent there. I cannot find any actual news on what happened, there are mentions that the debts will be rolled over with new bonds, but that is also a clear misrepresentation. Many of the old bonds were at 6%, now the rollover, will mean that the new set will represent 1.6 billion, more important, if bonds are usually set to a 1% commission, who did all this and where EXACTLY did that 16 million go? That is quick money, but for whom? A fan/friend of the Varoufakis rock band? I actually have no idea, so perhaps someone else knows.

Any finally we see that ‘rock star’ (Varoufakis) back on the microphone stating “From the perspective [of timing], we are talking about the next couple of weeks” regarding the liquidity. Well, that is not the case, because the bills due before Friday, in addition another 1.4 billion bond, that 600 million will have melted like snow in the sun. As payments are now an issue on several levels form a multitude of places, this weekend could start the end of Greece in a very real way, which is only hitting harder as the ECB has raised the Greek ceiling again, now by an additional 1.1 billion. Giving the Greeks now a total minus cap of 80 billion, put that on top of the 300 plus debt they already have and we see the makings of a new level of approaching disaster.

Are you, the reader still thinking that my approach was extreme?

Now consider the 750 million due today. Greek repaid it, but it did so by using money which was already at the IMF, so basically, they extended their death line by one month. Yet in the Guardian it was stated as: “Greece moved to banish fears it was on the brink of insolvency and default on Monday, ordering the repayment of €750m (£535m) in IMF loans hours before they were due“, that news came on May 11th. However, the Financial Times gave us “Greece took the unusual step of raiding its holdings of the International Monetary Fund’s de facto currency to make a €750m payment to the fund on Tuesday, in another sign of the country’s increasingly desperate cash crunch” (at

http://www.ft.com/cms/s/0/ddb97ae8-f899-11e4-be00-00144feab7de.html#axzz3ZzefGf2r), so the consequence here is that any bond action will be a lot more expensive and under these conditions, the Greek debt goes up by something approaching another billion.

There is now another question, are the releasers of information guilty of manipulating the markets? The markets released pressure because of the initial news and panicked when the ‘true’ facts came out. Moreover, this gives us more clarity that Greece is still all about misrepresentation, an issue the creditors might find alarming on several levels. We cannot truly condone the way Greece went about paying the amount, but this game of extensions, deferment and delays has been made for too long, whilst we see from various sources that the reformation essential to the survival of Greece is being made, in addition, staff that had been fired earlier is now rehired, which means that the governments costs are going up again, no real income is reaching Greece. Add all this up and Greece seems to be working itself into a deeper hole with every passing minute.

The Greek people deserved better!