Monday, March 23, 2015

Greek 'endgame' approaches as Tsipris meets with Merkel

By Rick Moran 

A month ago, Greece was on the precipiece.  The EU was demanding that Greece come up with the outline of a plan to meet their obligations under the bailout negotiated three years ago.  The new far-left Greek prime minister, Alexis Tsipras, had promised during the campaign to remove the budget straitjacket imposed by the bail out partners in the EU but was finding out quickly that campaign rhetoric doesn't mean squat when it meets the reality of the EU's insistance that Greece abide by the deal.
So Tsipras was forced to back down and accepted a continuation of EU oversight on its spending.  They released a non-specific, nebulous series of proposals that the EU quickly accepted so that cash from the European Central Bank to prop up Greece's banking sector could be released.
But the next intsallment of bailout cash won't be delivered until Greece satisfies EU finance ministers that it has a specific plan to meet its debt obligations.  And time is running out.
The Greek prime minister is now demanding that the EU give in and send the next tranche of bailout money without specific proposals to fund its debt payments.  This has resulted in what observers are referring to as Greece's "endgame" this week, as Tsipras pays a visit to Chancellor Angela Merkel in Berlin.
Tsipras’s meeting with the leader of the biggest contributor to Greece’s stalled 240 billion-euro ($259 billion) bailout is a precursor to make-or-break decisions Tsipras faces as his country’s financial predicament becomes ever more parlous. His government needs to spell out economic measures it plans to undertake as early as this week to unlock long-withheld aid payments that will keep the country afloat.
“I hope there’ll be a U-turn on policies in Athens, but I maintain my view that if not, the Greek economy will collapse and they’ll slip out of the euro zone into chaos,” said Erik Nielsen, global chief economist at UniCredit AG. “The Greek government ought to recognize that this is ‘endgame stuff.’’
Greek stocks and bonds rose amid optimism that the second meeting in five days between Tsipras and Merkel may pave the way for aid payments. The Athens Stock Exchange index gained 2 percent to trade at 759.48, while government bonds were trading mostly higher, with the yield on the 3-year bond dropping 31 basis points to 21.06 percent at 14:24 p.m. in Athens.
Locked out of capital markets and with its coffers running dry, Greece is scraping the barrel to pay about 1.5 billion euros ($1.6 billion) in pensions and salaries by the end of this week.
Amid signs that Greece could run out of money by early next month, European leaders including Merkel, French President Francois Hollande and European Central Bank President Mario Draghi pressed Tsipras at a March 19 meeting in Brussels to make good on a February accord and ‘‘present a full list of specific reforms’’ in the coming days before any further aid can be disbursed.
ECB Executive Board member Benoit Coeure said that ‘‘the spirit on both sides was extremely positive’’ during last week’s talks, with both sides deciding to ‘‘step up efforts’’ to deliver results.
As Tsipras prepared for the meeting in Brussels, he wrote to Merkel that it will be ‘‘impossible’’ to service imminent debt obligations without short-term financial aid, the Financial Times reported Sunday, citing a March 15 letter seen by the newspaper. German government spokesman Steffen Seibert today confirmed Merkel received a letter from Tsipras this month but declined to comment on the content. The man who suggested that Merkel is some kind of latter-day Nazi who has threatened to seize German assets in Greece to pay off World War II reparations is coming hat in hand to Germany begging for more cash – no strings attached. He is not going to get it unless he surrenders completely – something he cannot do and survive politically.  It has been fascinating watching Tsipras as he's gone from being an arrogant, far-left rabble-rouser, demanding that the EU recognize his "mandate" and eliminate all the restrictions on the government's budget, to this pathetic leader coming to Germany for more cash after reality has hit him over the head.
The ECB and other European states who are recovering from their own financial meltdowns are in good enough shape to withstand a Greek exit from the euro.  If that happens, the markets will get skittish, but they will probably not collapse.
And the Greek left, who postured so arrogantly and were so sure that the rest of Europe would fund their massive welfare state forever, are going to get a firsthand look at bank runs, capital flight, and the collapse of the Greek banking system.
Long live the drachma!

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