Greece Debt Crisis - Après Oxi

Figured that we might attempt to 'pull' this topic back into the main forum from the café to try and keep the noise levels to a minimum.

Following the comprehensive and emphatic Oxi victory in yesterday's referendum;

• Tsipras (Greek Prime Minister) has said that this will give Greece a stronger mandate at the negotiation tables.
  
• Varoufakis (Greek Finance Minister) resigned this morning.
  
• Thus far, Juncker (EC President), Dijsselbloem (ESM President) and Merkel (German Chancellor) have all come out saying that the vote has made things more difficult for Greece.
  
• South American governments all professed their delight at the Oxi result.

The back drop in Greece and plans in the works;

• Greek banks are still shut, with a maximum withdrawal of €60 per account per day.
• Tsipras had guaranteed a deal within 48hours of referendum result (and banks being open)
• There is a EZ meeting tomorrow, with Alex Stubb (Finland's PM) preface of "All problems are solvable".

Inquitus

Nothing much has changed, the EU can't go much further than it already has, I can't see Syriza moving far from their position either, emboldened by the No vote, so ultimately I don't see any agreement possible unless the Greek's cave.

Expect the ELA to remain frozen, and a slow countdown with ongoing negotiations until they run out of money and the next major hard deadline is reached. In the meantime damage will continue to be done to the Greek economy which cannot really function with the current capital controls in force.

gandalf

Varoufakis had to go after his pronouncement of calling all the EU Finance Ministers "Terrorists". Otherwise any negotiations would be tainted from the start by him. Part of me wonders if he did that on purpose because he knows that ultimately the Greeks are going to take a major paddling no matter which way the negotiations go.

We have the backdrop of a Spanish election later on this year. If the Greeks get too good a deal then you will have the Spanish left parties quite rightly campaigning exactly the same way that Syriza did in Greece. For this reason alone I do not see the Greeks getting any major debt write-downs. Couple that with the fact Enda will rock up and start whinging for a better deal for Ireland as well along with the Portuguese and the Italians.

So what happens next. TBH that's up to Merkel and the Germans. Again I do not see any easy way out for the Greeks and I have a feeling that if the EU feel the currency can take it they may wave bye bye to Athens from the Euro.

Quin_Dub

At this point it is totally a Political problem to solve (as it has been for quite a while in truth) - The Financials won't be much different no matter what happens.

Can the EU/EZ get Greece to agree to a deal that gets them rolling again without that deal being seen as a victory for the Syriza "scorched earth" policy?

Giving Syriza a "win" would be very hard for governments to get approval for (those that have to) and would also run the risk of emboldening other countries to take a similar approach.

To be honest , I don't see a way that they can , Syriza will point to the referendum as validation of their position and will stick to their guns to the very end.

I think Grexit is still very much on the table due in fairly equal parts to Syriza intransigence and EU fears of the political contagion...

A breakdown of Greece's Exports & Imports

A breakdown of Greece's Exports & Imports

This might become very important very soon.

In the event of prolonged capital controls or the emergence of a new currency (and/or Grexit), the ability of the main export market (Refined Petroleum) to operate will be impaired by the reliance on the large dependence on imports of Crude.

Permabear

This post has been deleted.

LuckyLloyd

I think a deal is possible tbh, but it depends on both sides getting to claim victory. I think the terms of such a deal would likely be:

- significant debt restructuring;
- some write off at denoted future intervals if certain conditions are met (maybe things like tax reform could be factored in there);
- resumption of ELA, etc;
- language that highlights agreement to monitoring and access to Troika officials in an oversight capacity;

In such a scenario the Eurozone would have the former Finance Minister's head and commitments to Tax Reform and monitoring to trumpet as a "victory"; while Syrzia could point to potential write off down the line as a better deal for Greece than what was previously offered.

Ultimately I think there is still enough belief in the sanctity of the European "project" amongst EU (and particularly EZ) leaders to mean that a deal is still their preferred option by far. I see the arguments for how a Grexit probably strengthens the EU and Euro in the long term, but we do exist in times where a British referendum on membership and the likes of Podema on Spain are visible on the horizon. It isn't 'do a deal at all costs' territory mind.


One thing I'd note is that the previous threads on here have had a lot of posts discussing how rule technicalities may prevent this, that or the other. My belief would be that if some positive discussion can be achieved early in the week that ways to surmount technical hurdles will be pushed through.

^^I don't think those technicalities can be so easily overcome as you do. For Greece to get another bailout programme and disbursement of funds, some countries' parliaments, including Germany's Bundestag, have to vote not once, but twice.

First they have to vote to begin negotiations, but then they have to vote to agree to the new programme. This isn't a technicality like it is in Ireland; these European parliaments' approval of a more 'generous' package cannot be presumed.

Germany is not going to drop its constitutional rules or depart from its traditional fiscal conservatism overnight.

And to add complication, all of this must happen within 2 weeks, because Greece has a 3,5 billion bond redemption due to the ECB, a fortnight from today.

A political solution is possible but it would demand huge concessions on behalf of the Eurogroup.

Quin_Dub

Deleted User wrote: »

A breakdown of Greece's Exports & Imports

This might become very important very soon.

In the event of prolonged capital controls or the emergence of a new currency (and/or Grexit), the ability of the main export market (Refined Petroleum) to operate will be impaired by the reliance on the large dependence on imports of Crude.

Absolutely - This is why Grexit would be utterly catastrophic for Greece.

They import way more than they export and the majority of their exports are dependent on Imports!

Devalution kills them , It doesn't make them more competitive as it might do in other countries as they do not make/sell their own stuff - They buy in Crude oil , refine it and then sell it on..

So as the Drachma devalues they need to spend more and more of it to buy the raw materials, which means they need to charge more for it to just break even.. Therefore their export market collapses...

Tourism would benefit greatly , but would it be enough to offset the losses from their export economy?

Quin_Dub

A Tyrant Named Miltiades! wrote: »

For Greece to get another bailout programme and disbursement of funds, some countries' parliaments, including Germany's Bundestag, have to vote not once, but twice.

First they have to vote to begin negotiations, but then they have to vote to agree to the new programme. This isn't a technicality like it is in Ireland; these European parliaments' approval of a more 'generous' package cannot be presumed.

And to add complication, all of this must happen within 2 weeks, because Greece has a 3,5 billion bond redemption due to the ECB, a fortnight from today.

A political solution is possible but it would demand huge concessions on behalf of the Eurogroup.

Concessions I don't think they'll be willing to make given the risk of "political contagion"

The confrontational approach taken by Syriza has effectively painted both sides into a corner they don't want to be in....

bajer101

https://twitter.com/FGoria/status/618034847563546624

So yesterday's vote wasn't really a victory for democracy as it now looks like Syriza are going to ignore it and try to accept the offer retrospectively! Cowboys Ted, cowboys.

Inquitus

Quin_Dub wrote: »

Absolutely - This is why Grexit would be utterly catastrophic for Greece.

They import way more than they export and the majority of their exports are dependent on Imports!

Devalution kills them , It doesn't make them more competitive as it might do in other countries as they do not make/sell their own stuff - They buy in Crude oil , refine it and then sell it on..

So as the Drachma devalues they need to spend more and more of it to buy the raw materials, which means they need to charge more for it to just break even.. Therefore their export market collapses...

Tourism would benefit greatly , but would it be enough to offset the losses from their export economy?

It's hard to see given they have no foreign currency reserves of note how they would be able to afford to import even the basic necessities were they to revert to the Drachma in a chaotic Euro exit.

FreudianSlippers

I just don't see how the ECB can agree to any concessions that Greece ultimately wants. The Greek "negotiating position" boils down to debt forgiveness by the ECB at its core. I would imagine that this is just impossible for the ECB to agree to; I'd be livid with our government if Greece were given a debt haircut by the ECB and we weren't demanding a similar cut.

Bob24

A Tyrant Named Miltiades! wrote: »

For Greece to get another bailout programme and disbursement of funds, some countries' parliaments, including Germany's Bundestag, have to vote not once, but twice.

First they have to vote to begin negotiations, but then they have to vote to agree to the new programme. This isn't a technicality like it is in Ireland; these European parliaments' approval of a more 'generous' package cannot be presumed.

And to add complication, all of this must happen within 2 weeks, because Greece has a 3,5 billion bond redemption due to the ECB, a fortnight from today.

A political solution is possible but it would demand huge concessions on behalf of the Eurogroup.

Yes time is running out and fr many EU leaders even the deal that has been rejected by Greece would have bee difficult to pass through parliament (people always talk about Germany but some Northern and Eastern European countries could be more reluctant).

Apparently the latest is that Tsipras just talked to Merkel and they agreed he will present his new proposal tomorrow.

I am curious to see what he will come up with and what the reaction will be, if both sides don't come to an agreement this week it will likely be too late (and even if they do it doesn't mean things will work out as planned).

Jelle1880

bajer101 wrote: »

https://twitter.com/FGoria/status/618034847563546624

So yesterday's vote wasn't really a victory for democracy as it now looks like Syriza are going to ignore it and try to accept the offer retrospectively! Cowboys Ted, cowboys.

But... Democracy won I read on here.

I'm also interested in the talks with Putin, I wonder what those might be about.

gandalf

Jelle1880 wrote: »

But... Democracy won I read on here.

I don't believe it did. That referendum was a complete and utter farce. I have a feeling that the reality of situation is dawning on the Greek Government. Hence Varoufakis running before the going got really tough.

I'm also interested in the talks with Putin, I wonder what those might be about.

Putin is using the situation to stick a knife into the EU because of the sanctions against Russia.

Quin_Dub

Bob24 wrote: »

Yes time is running out and fr many EU leaders even the deal that has been rejected by Greece would have bee difficult to pass through parliament (people always talk about Germany but some Northern and Eastern European countries could be more reluctant).

Apparently the latest is that Tsipras just talked to Merkel and they agreed he will present his new proposal tomorrow.

I am curious to see what he will come up with and what the reaction will be, if both sides don't come to an agreement this week it will likely be too late (and even if they do it doesn't mean things will work out as planned).

By all accounts, it's a variant of the proposal that the Greek people just rejected....presumably with more "debt forgiveness" added in..

So , despite the no victory , they are going back to the table with a counter-offer based on the thing they've rejected...

Don't get it , just don't get it...

Bob24

bajer101 wrote: »

https://twitter.com/FGoria/status/618034847563546624

So yesterday's vote wasn't really a victory for democracy as it now looks like Syriza are going to ignore it and try to accept the offer retrospectively! Cowboys Ted, cowboys.

I guess it depends what "based on" means ... but if it is awfully close to the latest EU offer I don't see how Tsipras can hope to get the parliament to vote for it? (and face civil unrest as no voters feel betrayed)

Jelle1880

gandalf wrote: »

I don't believe it did. That referendum was a complete and utter farce. I have a feeling that the reality of situation is dawning on the Greek Government. Hence Varoufakis running before the going got really tough.

I know, I was joking about the optimism from some about how the Greeks bloodied the Eurozone.

Silly nonsense and if it's true that Tsipras' proposal will be nearly identical as the one they voted on then it's hilarious just how little they care about what their people want.

Putin is using the situation to stick a knife into the EU because of the sanctions against Russia.

No doubt, but I'm curious if this will be about giving them money (which Russia can't), a gasline or maybe some military bases.

CatInABox

FreudianSlippers wrote: »

I just don't see how the ECB can agree to any concessions that Greece ultimately wants. The Greek "negotiating position" boils down to debt forgiveness by the ECB at its core. I would imagine that this is just impossible for the ECB to agree to; I'd be livid with our government if Greece were given a debt haircut by the ECB and we weren't demanding a similar cut.

The ECB have already said that any debt restructuring would be against their rules, so they aren't going to allow it.

The IMF has also said that they're not willing to accept any write downs as well.

Essentially, the IMF and the ECB have passed the buck to the EU, with the partner nations footing the bill for any write down. It's a disaster all round really, there's no way that 18 governments will agree to any write down before the next deadline.

barry181091

Deleted User wrote: »

A breakdown of Greece's Exports & Imports

This might become very important very soon.

In the event of prolonged capital controls or the emergence of a new currency (and/or Grexit), the ability of the main export market (Refined Petroleum) to operate will be impaired by the reliance on the large dependence on imports of Crude.

Ah lads! Our exports are over 4 times theirs! And we are a t*t of a place!

Bob24

The Guardian wrote:

2m ago13:54
Greece threatened with insolvency, says Germany's Gabriel

The hard line from Germany continues.

Deputy chancellor and economy minister Sigmar Gabriel has said Greece is now threatened with insolvency. And if it wants to stay in the eurozone it has to present proposals that go beyond what it has offered before.

If this indeed is the position of Germany (could be posturing, at this stage who really knows), there is no hope of a deal.

QuinDixie

Greece wakes up after voting NO and the wheel keeps turning.
Supposedly the Greeks would have no food, no medicine and even no wine.
It was Dickens who whimsically wrote that people should not say dead as a door nail, a more adequate simile would be dead as a coffin nail.
The EURO is dead as a coffin nail. #loving it.

Synode

QuinDixie wrote: »

The EURO is dead as a coffin nail. #loving it.

Why are you loving it?

road_high

QuinDixie wrote: »

Greece wakes up after voting NO and the wheel keeps turning.
Supposedly the Greeks would have no food, no medicine and even no wine.
It was Dickens who whimsically wrote that people should not say dead as a door nail, a more adequate simile would be dead as a coffin nail.
The EURO is dead as a coffin nail. #loving it.

Give it a few days...once the ECB pulls backing for the Greek banks the above will be an avalanche. Food/medicine already running low in many parts according to news reports.

Permabear

This post has been deleted.

Drexel

QuinDixie wrote: »

The EURO is dead as a coffin nail. #loving it.

Can you elaborate on this a small bit?

Keep in mind reuters are reporting the banks (surprise, surprise) wont be opening tomorrow and not for a couple of days.

Grandpa Hassan

Quin_Dub wrote: »

By all accounts, it's a variant of the proposal that the Greek people just rejected....presumably with more "debt forgiveness" added in..

So , despite the no victory , they are going back to the table with a counter-offer based on the thing they've rejected...

Don't get it , just don't get it...

I get it. More of the same treatment by the Troika is absolutely not an option. The Greek aconomy is too far gone to generate anything on the revenue side. And cuts cannot make up the slack. Cuts to the extent required will lead to the economy going further down the plughole as it continues to contracts and revenues decline. No other country has got to this point of a downward spiral (how they got there is old news, and not relevant other its impact on individual emotions and a pointy finger blame game which is not productive). The Troika's models just cannot be applied at this stage....something that the IMF has recognised through their statements last week.

So it comes down to the agreement of a package of debt forgivness plus extension plus repayment breaks (linked to future performance targets). Or else Grexit. Through this referendum the government has made sure that it has a mandate to walk away from the status quo if necessary. A status quo which is unteneble in the long run and would just result in a Greece exit or a debt writedown a couple of years down the line. And instead it now has a mandate to leave only the options of debt write off or Grexit on the table. So I get why they went through with it.

The choice between those two things in the long run is surely inevitable. So why not just go through the negotiations and make the decision now, one way or the other, and get it over with.

Of the 3 options.....debt writedown package, Grexit and continuation of current bailouts, the 3rd is the worst for Greece IMO, and it is right to reject it.

Grandpa Hassan

Permabear wrote: »

This post had been deleted.

A third bailout without a debt writedown would be a disaster for Greece IMO and is only delaying the inevitable choice of debt writedown or exit

Inquitus

Grandpa Hassan wrote: »

A third bailout without a debt writedown would be a disaster for Greece IMO and is only delaying the inevitable choice of debt writedown or exit

The worst option is Grexit, they will be immeasurably worse off if that happens, far more so than if they took the current deal on the table. They don't have an economy suited to a return to the Drachma nor do they have anywhere near the required amount of Foreign currency reserves to successfully launch the New Drachma.

If Greece Exits the euro the Austerity, and GDP reduction they have seen to date will look like boomtimes in comparison to the adjustment Syriza will immediately be required to make in order to balance revenues with expenditure.

Jelle1880

http://live.reuters.com/Event/Greek_Debt_Crisis_4/172185430

So a few more days of closed banks, despite what Varoufakis said would probably happen if the people voted No.

http://www.cnbc.com/id/102808740

After months of wrangling,Greek voters rejected the proposals of the country's European creditors, a move that could ultimately lead to the long-rumored "Grexit" from the euro.

Speaking to CNBC, Greece's Finance Minister Yanis Varoufakis said that if there was a "no" result—which he has been campaigning for— the government would be able to get a deal with lenders in 24 hours.

I can see why he was asked to resign.