The Greek crisis - 07/12/2015

Greece nears euro exit as bailout talks break up without agreement

Last-ditch negotiations to resume on Sunday after eurozone’s fiscal hawks put up fierce resistance to Alexis Tsipras’s rescue plan

the Guardian,

11 July, 2015

Greece’s final attempt to avoid being kicked out of the euro by securing a new three-year bailout worth up to €80bn ran into a wall of resistance from the eurozone’s fiscal hawks on Saturday.

Finland rejected any more funding for the country and Germany called for Greeceto be turfed out of the currency bloc for at least five years.

The last-chance talks between the 19 eurozone finance ministers in Brussels ended at midnight, as they struggled to draft a policy paper for national leaders at yet another emergency summit on Sunday that was billed as the decisive meeting.

With Greece on the edge of financial and social implosion, eurozone finance ministers met to decide on the country’s fate and on what to do about its debt crisis, after experts from the troika of creditors said that new fiscal rigour proposals from Athens were good enough to form “the basis for negotiations”.

But the German finance minister, Wolfgang Schäuble, dismissed that view, supported by a number of northern and eastern European states. “These proposals cannot build the basis for a completely new, three-year [bailout] programme, as requested by Greece,” said a German finance ministry paper. It called for Greece to be expelled from the eurozone for a minimum of five years and demanded that the Greek government transfer €50bn of state assets to an outside agency for sell-off.

Timo Soini, the nationalist True Finns leader, meanwhile, threatened to bring down the government in Helsinki if Alex Stubb, the finance minister, agreed to a new bailout for Greece. Stubb apparently came to the crunch meeting on a new bailout without a mandate to agree one.

“The hawks are very vocal,” said an EU diplomat. “It’s very tough.” Berlin also demanded stronger and more intrusive powers for outside monitors to police the economic and fiscal reforms that Alexis Tsipras, the leftist Greek prime minister, would need to commit to to secure the new bailout.

Saturday night’s talks were not to agree on a third bailout, but were negotiations on whether to launch more talks on Greece’s third rescue package in five years. The ministers faced formidable problems, said Schäuble, who argued debt relief for Greece, broadly seen as essential, was banned by the EU treaties: “Athens’s proposals are far from sufficient. The funding gaps are way beyond anything we’ve seen so far,” he said.

The hard line was echoed by Peter Kazimir, finance minister of Slovakia, who said that new austerity measures tabled by Athens were already past their sell-by date.

The eurozone has been united for five months in the negotiations with Tsipras, but with the stakes rising greatly in the last 10 days, major divisions have surfaced, with the French working tirelessly to save Greece and the hardliners now pushing Greece’s expulsion for the first time openly.

The European commission and the European Central Bank issued dire warnings that a failure to grant Greece new rescue funds of up to €78bn would put the country on a trajectory of complete banking and financial collapse.

The widening gulf between eurozone hawks and doves paves the way for an acrimonious summit on Sunday, with France and Italy lining up against Germany and the northern and eastern Europeans. Matteo Renzi, the Italian prime minister, is expected to tell chancellor Angela Merkel that enough is enough and that Greece should not have to put up with any more humiliation.

Merkel is under intense pressure from the Americans not to “lose” Greece and is worried about her own legacy. But Greece fatigue is becoming endemic in Germany, and she faces growing unrest in her party ranks where Schäuble’s hard line is popular. She was said to have endorsed Schäuble’s tough position.

If the talks break down irretrievably and Greece is allowed to slide into even greater chaos, relations between Berlin and Paris will come under tremendous strain. Michel Sapin, the French finance minister, lauded Tsipras for putting his austerity proposals before parliament and saw the moves of the past few days as “positive”.

Tsipras won a sweeping majority with the support of opposition parties, but many in his Syriza movement defected, leading to speculation that he could either call new elections or ditch his hardliners and lead a new “national unity” government.

On Thursday, Tsipras performed a remarkable U-turn and accepted more austerity measures than had been rejected in the referendum he called for five days earlier. The prompt volte-face confounded negotiators

From RT

‘Issues of credibility & trust’: Eurogroup adjourns without reaching Greece deal

Eurogroup Meeting Ends Without Agreement: "Huge Problems", "Issue Of Greek Trust Very Difficult"

ZeroHedge,

11 July, 2015

Equity markets roared higher Thursday and Friday as they 'knew' a deal was imminent in Greece because Tsipras appeared to backpedal. However, after someone told Merkel the truth, and "everyone knows you can't believe" the Greeks, The Eurorgoup Meeting ends with zero agreement after 9 hours of rumor-mongering and escalating tensions. Local reporters noted the leaders could not even agree on what to disagree about as an increasing number of EU member states pushed for either a Grexit or considerably tougher sanctions austerity on the Greeks. 

End of #Eurogroup session. To be continued tomorrow.

— Alexander Stubb (@alexstubb) July 11, 2015

From the man himself...

• *DIJSSELBLOEM SAYS TALKS ARE STILL VERY DIFFICULT
• *DIJSSELBLOEM SAYS ISSUE OF GREEK TRUST VERY DIFFICULT
• *DIJSSELBLOEM: `WE DON'T HAVE A SOLUTION YET'
• *DIJSSELBLOEM SAYS `HUGE PROBLEMS' REMAIN IN GREEK TALKS
• *DIJSSELBLOEM: `FOR SURE IT WAS A DIFFICULT MEEETING'

Summing up the meeting perfectly...

"Is it a yes or a no," the Slovakian finmin @KazimirPeter is asked as he leaves. "No is the better answer," he replies #Greece

— Ed Conway (@EdConwaySky) July 11, 2015

As Reuters reports (rather more hopefully than many),

Euro zone finance ministers were trying to draft a joint statement on Saturday listing further measures they want Greece to take in order to launch negotiations on a bailout Athens has requested, an EU source said.

The Greek government has put forward a set of reform plans to meet conditions for a three-year loan from euro zone partners but finance ministers said they did not go far enough and several sources said the other 18 euro zone states want Athens to offer additional actions and guarantees of implementation.

*  *  *

Don't worry though:

• *MOSCOVICI SAYS THERE'S `ALWAYS HOPE' AND TALKS RESUME SUNDAY

Do these look like faces of hope?

There is no press conference and the meeting will resume tomorrow at 11am... shortly before FX markets open.

Putin's Latest Thoughts On Greece And A Greek Exit From The Euro

ZeroHedge,

11 July, 2015

Earlier today we showed one, less than official, interpretation of what may be going on in the Kremlin at this moment. And since a Grexit, despite Friday's relief rally, suddenly seems all too real (even if it is a "temporary" one, which by the way was first suggested by Hans-Werner Sinn back in 2012 which means that the "hard money" is now running the show in Europe) the topic of just what Putin thinks about Greece in European limbo (or rather its naval bases) becomes pertinent all over again.

Luckily, we know precisely how Putin feels about Greece and a potential Grexit, because it was just yesterday following the BRICS and Shanghai Cooperation Organisation summits in Ufa, the among many other things, Putin talked about precisely this issue. Here is the excerpt from the official transcript.

Question: Darya Stanislavets, RIA Novosti, Prime. Greece is going through a serious crisis. It has not yet reached an agreement with its creditors. You met with Mr Tsipras [Greek Prime Minister Alexis Tsipras] in St Petersburg and spoke to him on the telephone after the referendum. Did Athens ask Russia for financial assistance? Did Russia promise such assistance? Is Russia able and willing to provide such assistance given its own economic difficulties? Could such assistance be provided, for example, by the New Development Bank?

Also, what do you personally think about the Greek creditors’ proposals? If you were in Mr Tsipras’s shoes, would you accept or reject them?

Vladimir Putin: Russia of course can provide assistance to its partners no matter what. Despite Russia’s economic difficulties, the fundamentals of our economic situation today are such that we are in a position to do this. What’s more, we do provide it to certain countries.

Regarding Greece, we have a special relationship of spiritual kinship and religious and historical affinity with it. However, Greece is an EU country, and within the bounds of its obligations, it is conducting rather complicated negotiations with its partners in united Europe. Mr Tsipras has not asked us for any assistance. This is only natural, because the figures are too high.

We know what is on the table, and fundamental decisions have to be taken. This is not even a matter of money. It is a matter of economic development principles and the principles of resolving these problems with their partners in the foreseeable future. We have already said – I have said it in public – that of course the Greeks can be blamed for everything but if they committed violations, where was the European Commission? Why did it not correct the activity of previous Greek governments? Why did they grant bonuses and loans? Why did they allow it to keep such a low profile on taxation in certain sectors of the economy? Why were there such big subsidies for the islands? And so on and so forth. Where were they earlier? So, there is something to discuss, and the Greek government has something to argue about.

Furthermore, when one powerful currency is used in a number of countries with different levels of economic development, then the country is unable to regulate either its finances or its economic situation via currency mechanisms. Greece cannot devalue the euro, can it? It’s impossible.

It does not have this tool or the possibility of drawing more tourists, while tourism is one of Greece’s principal industries – in the context of its obligations within the Schengen zone. It has to limit its agricultural production because it has to stay within the quotas set by Brussels, and it has to limit fishing and many other things. In other words, there are limitations but there are also advantages in EU membership, related to soft loans, bonuses and so on. This, however, is the sovereign choice of the Greek leadership and the Greek people. This does not directly affect us but indirectly, of course, it affects all of Europe and Russia, despite the fact that we are not an EU member, because we have extensive trade and economic ties with Europe, while Europe is our number one trade and economic partner. Naturally, we are watching this very closely and with a certain measure of anxiety, but we still hope that the crisis will be resolved in the very near future.

Is most certainly will be, and as Putin will admit, Greece can export much more to Russia if its currency was far weaker. Say, for example, this one.