Utter Chaos Reigns In Greece Bailout Talks

BY Eleazar David Meléndez

Negotiations between the Greek government and its “troika” of international lenders appeared to be in a state of chaos Thursday, a day after Greece's finance minister had declared in parliament that talks had been successful -- only to be immediately humiliated with a rebuff from his European partners.

After weeks of negotiations with the three creditors to its two sovereign financial rescues -- discussions in which Greece asked those institutions to release the latest round of financing (despite the fact that the country has not been able to meet its side of the bailout deal) --  hour-by-hour leaks to various media outlets seemed to indicate that the top players in Athens, Brussels and Rome were now working against the clock to find a workable compromise.
At issue is a report that the “troika” is supposed to publish this week on the progress of Greece’s promised fiscal consolidation reforms. A positive report is a precondition for Greece to receive the next round of financing that the country needs to plug budget deficits and prop up its ailing banking system.

As it has been known for months that Greece would not be able to achieve promised fiscal consolidation, the government there was negotiating with its lenders for a two-year extension on deadlines -- and the disbursement of bailout funds now -- in exchange for billions more in austerity

Germany wants Greece to hand over more budget control

Masa Serdarevic

It looks like Germany has decided that Greece hasn’t given up quite enough of its sovereignty yet. We know that Wolfgang Schaeuble wants to set up an escrow account to make sure loan installments stay out of Athens’ reach (in order to guarantee that debt repayments are made to creditors). But it seems that Berlin also wants to put any money from a Greek primary surplus into that account as well.
That’s according to Kathimerini, which says it has seen the latest proposals from the German Finance Ministry, leaked to them by Pasok officials. From the docs (emphasis ours):

“A dedicated receipt (such as part of VAT income) in the volume of the requested GRC primary budget surplus could be transferred monthly to the trust account (as earmarking of GRC contribution to debt service),” the proposal says.
“The volume of the primary surplus is to be defined in the MoU. The trust account and the earmarking of revenue secure the delivery of the primary surplus and therefore the GRC contribution to the debt service.”

And if there’s no surplus? Germany wants Athens to be forced to decrease spending or increase

Unanswerable question is how far contagion would spread

http://video.ft.com/v/1638375966001 

Contagion. It is the word markets have feared throughout the eurozone debt crisis. And a Greek exit from the single currency would bring it to the fore in ways unimagined until now.
A “Grexit” would test the firewalls erected by policymakers, judged insufficient by many investors, and put the continent’s banking sector under extreme stress. But the concern for many in the market is less the immediate impact and more the example Greece would set for other struggling eurozone countries.
“The main worry about this in our opinion is not necessarily the first order effect but what it says about the unbreakable nature of the euro,” says Jim Reid, credit strategist at Deutsche Bank. “This would be especially relevant if in the future other countries continued to struggle. The full ramifications may not be felt immediately but a lot can happen over time and Greece leaving would remain a dangerous template if other economies continued to weaken.”

Μήπως τελικά οι Έλληνες γελάσουν τελευταίοι;

Η χρεοκοπία θα είναι καταστροφική για την Ελλάδα και η συνεπακόλουθη μετάδοση της κρίσης θα είναι ζημιογόνος για την Ευρώπη. Αυτή είναι η κοινή εκτίμηση. Η συζήτηση που διεξάγεται περιστρέφεται μόνο στο πόσο ισχυρή θα είναι η μετάδοση της κρίσης και ποιος θα πρέπει να είναι ο χειρισμός για τα υπερχρεωμένα κράτη αλλά και για τους μεγάλους χρηματοδότες της Ε.Ε.

Μήπως, όμως, η συζήτηση κινείται σε λάθος βάση; Εκτός ευρωζώνης η Ελλάδα θα μπορούσε να αποδειχθεί πολύ πιο επικίνδυνη για το σύστημα στο οποίο πραγματικά ποτέ δεν ανήκε… Μπορεί να αποτελέσει παράδειγμα επιτυχούς ανάκαμψης!

Υπάρχει ένα σενάριο που παραγνωρίζεται, βάσει του οποίου η χρεοκοπία δεν καταλήγει σε καταστροφή για την Ελλάδα. Σε αυτήν την περίπτωση, η πραγματική και πιο υπαρξιακή απειλή για την ευρωζώνη είναι πολύ διαφορετική. Σε αυτό το σενάριο εκείνοι που γελούν τελευταίοι είναι οι Έλληνες.

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