BREAKING….Disaster for Athens as Troika advises EWG to reject austerity plans

Major eurozone crisis as Athens denied access to Nov 16th tranche

CRUNCH TIME

Surprise, surprise – the meeting that the EU flatly denied would happen today just wound up. The output is the biggest bombshell to hit the eurozone in a long time: Greece is to be denied access to the next bailout tranche….unless more cuts and reforms beyond those ‘agreed’ last Sunday are forthcoming.

In what looks to me like a pretty serious case of stabbing Antonis Samaras in the front, news is breaking in Athens as I write that an anonymous EU official has confirmed the International Monetary Fund (IMF) report to the
Eurogroup Working Group (EWG) is damning about the cuts ‘agreed’ by Athens last Sunday. This is a direct quote from the document: (my emphasis)

“It is clear that Greece is off track and there is no chance they will cut the debt to 120 percent of GDP in 2020 as envisaged. It will be rather 136%. New prior actions will be needed, on top of the existing [ones] before any new tranches of eurozone and IMF emergency loans to Greece can be paid.

Shortly after leaving the EWG meeting to leak its entire contents, the eurocrat noted in addition that the costs of a two year extension (the one Schäuble yesterday dismissed as “pure media speculation”) to the Greek repayment schedule “are now seen at around 30 billion euros”.

As per the long-hold Slog view that some disguised debt foregiveness would, in the end, be involved, the report also notes that ‘[debt] restructuring could take the form of a further reduction of the interest rate on existing loans to Greece and an extension of their maturities, but while that would reduce financing costs, alone it would not fill the funding gap’.

So, the good news is that a deal is on the table. The bad news is, Greece hasn’t fulfilled its side of the bargain….assuming anyone in Athens was ever clear WTF that abrgain was in the first place.

I cannot emphasise too much how significant a piece of news this is….so significant in fact, that it’s been leaked just as most European financial and media executives were drifting off for the Friday lunch followed by another weekend of quiet denial in which to recover from reality.

These are the immediate ramifications that occur to me:

1. The Samaras Coalition is dead in the water.

2. There will almost certainly have to be another election in Greece.

3. Allegedly, Greece will run out of money in ten days time. If it isn’t going to get its next tranche of bailout monies, then direct funding for Greece from eurozone member-states looks inevitable. This would have to come from the eurozone’s
permanent bailout fund, the European Stability Mechanism. It will face stiff opposition, especially from countries such as Finland, the Netherlands and Germany.

4. Today’s leaker added that further bank liquidity is also a major urgency. No doubt Mario at the ECB can muddle some more paper around to fudge it, but his options are becoming limited.

5. French officials and bankers will be confined in order to deliver large numbers of kittens about the possibility of Greek default….and the subsequent high possibility of French State bankruptcy.

There is to be another emergency EWG meeting about Greece on Monday. Doubtless Wolfie Schäuble will dismiss this one as ‘a fantasy’ too.

Meanwhile, the world – and I mean THE WORLD this time – waits to hear what the Merkeschäuble version of reality actually is.

109 thoughts on “BREAKING….Disaster for Athens as Troika advises EWG to reject austerity plans

  1. They are really taking the piss with Greece.. it will only end up making the fascist GoldenShowers party more popular.

      • I like to think of it as somewhat Wagnarian as in;
        Der Ring des Nobailout
        An opera in 4 acts over four years
        Das Eurheingold (The piss poor Rhine Gold)
        Die Worküre (The Workfare or else)
        Siegheil
        Götterdämmerung (Twilight of the Greek Gods)

  2. Bigger things at stake here, we all know that they cannot afford not to give Greece the next tranche, particularly before the US elections, I wonder would this be linked to the US holdings of German gold? Or come to that the lack of gold belonging to Germany held in the US?

  3. Pingback: John Ward – Breaking.. Disaster For Athens As Troika Advises EWG To Reject Austerity Plans – | Lucas 2012 Infos

  4. I think the majority of Greeks have enough sense to not go with Golden Dawn. I hope to goodness that they grasp this opportunity to get their economic and political house in order, outside the euro. Syriza had better be quite a bit better than the last lot.

    • David
      With all due respect, I think the ramifications here go just a tad beyond Greek Parties. Eg, French banks, ECB resources, Greek strategic importance vis a vis N Africa, default swaps, US Med strategy, Berlin’s Euro commitment…and of course, debt contagion heading Stateside.
      Berlin is playing games here with very hot inflammable nasty things…just before a US election.

      • Precisely… we have been circling the plughole for some time now. It isn’t going to take much of a shove and we’ll all be on the way down the drain.

    • The problem in this context, is that there is no ‘majority’ of Greeks. Their political system is deeply fragmented. Golden Dawn are now one of the bigger supported parties along with the far Left.

      To such an extent that on current opinion polling, it is impossible to form a centre right coalition without including Golden Dawn, and impossible to form a centre-left coalition without including the far Left.

      However the demands of both are unacceptable to the centre (and also the EU but for differing reasons).

      An election will produce a catastrophic result as things stand, because it will be impossible to form a government.

  5. I don’t believe this ‘out of cash’ thing. As ever, it’s a negotiation and both sides are predicting dire consequences should their position not prevail. There was another of these ‘out of cash’ threats about a year ago and the date passed and, guess what? Nothing happened. I also suspect that the Greek government has a contingency fund to pay their costs for several months. A fund they are keeping very quiet about.

    The Greeks need to collect substantial taxes from those in their society with money. The Troika presumably thinks that can’t be done, but in extremis it will be, though harder times may yet be needed before real reforms take place. In a sense all the southern countries are being asked to wind back their living standards to around 2000. That might be possible if the winding back were not confined to the lower middle classes and the poor. It won’t work if the richer sectors are exempt, and that’s the problem. In effect, they are. Come on Troika, gloves off, let’s see a report as to how a fair distribution of pain around Greek society would work. The politicians will hate it, but so what? What is there to lose at this stage?

  6. I feel this is being set up dramatically for another huge “beneficial crisis”
    for a great extension of EU power.

    Sheriff Draghi and a posse of the willing will somehow ride to the rescue at the last minute,even if they only have the equivalent of Confederate bonds (which they’ve been trading on for some time already)

  7. What more is left to take from the poor greek citizen ? They should have baled out of the euro ages ago and now its necessary more than ever.

    Default on everyone, dear Greece, and start your nation afresh with a new Drachma. Then at least the holidaymakers will return

  8. No wonder Geli kept saying “Wait for the Troika Report”. Perhaps, to her, there was a simple choice, either she shafted Obama by defaulting the Greeks right at the most sensitive point of his election or the Greeks went pear shaped next summer (possibly with some US collusion) and brought Europe’s finances down a couple of weeks before her election…….we know for sure that there is no love lost between Geli and Barry, so IMHO, she has decided that a grateful Romney might be preferable and this may be doing a ‘lil bit of Kingmaking.

    If so, I cannot think of a more dangerous game to play for all of us …………Geli and Woolfie may well be thinking that the removal of one of the keystones in the EZ House of Cards is better sooner rather than later to be to their advantage. Scary ! Time to default on everyone dear Greek friends and let us all try to help and support you while the Sprouts and their Bankers take the serious hit.

    • The Greeks clearly decided to force the issue by announcing that a deal had been done as they know the Troika report is going to be very bad.

      The Greek announcement left the Germans with no choice but to respond with a big fat “nein”, I think the answer was always going to be “nein” but the Germans wanted to wait until after the US election and the release of the report to give themselves some political cover.

      Everyone knows that the Greeks have not even come close to hitting their targets, in my opinion they had been set an impossible goal from the start and should have just defaulted 3 years ago.

      A Greek default has already been priced in by the markets but some of the French banks are still vulnerable.

      If the Greeks dont bring the whole house down then the Spanish will.

      • Responding to kfc1404 below.

        Spain cant print and that is the problem, if Spain had its own currency they would have printed their way out of trouble by now.

        The Germans wont stand for it and would be forced to leave if they were strong armed by France, Spain and Italy.

  9. A bit of interrogation of that 120% fantasy vs 136% reality by 2020 seems to suggest that even the higher of the two numbers has a whiff of Hans Christian Andersen about it; Reuters is quoting an anonymous EZ source whose contention is that the debt figure of 136% by 2020 assumes “a positive scenario of a primary budget surplus, a return to economic growth and privatisation”. Seemingly the ‘revised’ estimate prices in an unlikely concatenation of miracles.
    I’m laying a 2008 vintage hat down now for consumption in 2020 when the Greek target is met, all welcome!

  10. The German decision to check all of its gold stocks in the US, UK and France speaks volumes, I think the Germans are planning on either leaving themselves or forcing out Greece and are willing to take action and let the dice fall where they may.

    You only do something like that when you know something unpleasant is about to happen… or when you are about to cause something unpleasant to happen.

    Bail-outs never solve anything and just increase the debt burden on countries that are already crippled, sooner or later you have to let them go because the cost of propping them up forever will inevitably be greater than the cost of letting them go.

      • With the amount of cash that has already been spent propping up bankrupt countries not too mention the target2 imbalances thet tipping point is rapidly approaching.

        Germany is already on the line for well over 1 trilion euros (some say it is closer to 2 trillion altogether), the Germans will not allow printing and will have to cut their losses and leave.

        I have seen some discussion that state if Germany left and the target2 debt it is owed remained in euros (rather than changed into new DMarks) then Germany would not have to take the hit at all, which is just another good reason why they should leave now.

        A German exit is the only hope for Spain and Greece to remain in the euro.

        It boils down to this:

        Germany walks away from the euro via the back door.

        or

        Greece/Spain/Portugal leave the euro via the 3rd floor window.

        Its one or the other, the fact that Germany is know checking its gold reserves makes me think they are seriously considering an exit (if they were staying in it would not be necessary).

        It would be the best option all round and the least destructive as Germany is a net creditor and there would not need to be any defaults.

    • Mark
      Excuse the pun, bit I think you are right on the money here. This is game-playing of the most reprehensible kind…with the lives of ordinary innocent people at stake.
      It disgusts me.

      • Hi John

        The Germans have been doing the same thing all along, weighing the cost of staying in against the cost of leaving and the summoning of gold back to Germany at this time can only mean one of two things.

        1. When a new currency is introduced (new Dmark) it is always better to have the option of backing it with gold (not a gold standard), strangely enough this works better than backing it with bullshit which has been the approach used for the euro up to now.

        2. Germany may be planning to force out Greece and then immediately go “all in” for the euro to stabilise the situation once the deed is done (the gold will be used as a guarantee), the only problem with this option is that if Greece leaves then it will be clear to everyone that the euro is not “forever” after all.

        The least destructive option that would give the euro the best chance of survival is a German exit (probably FInland and Austria as well), which will result in a north and south euro or two tier eurozone by proxy.

        If Germany does force Greece out and go “all in” they will be accepting responsibility for the debts of the entire eurozone as the last remaining core AAA member, I cant see the German Bundestag or Bundesbank agreeing to that not to mention the German people.

  11. You have to calm my friend…
    This article title of yours is TOTALLY wrong !
    Yes IMF knows that there must be more cuts and reforms, but Europe knows that this is the wrong way for the country to “walk through” the crisis.
    It doesnt mean that Greece is out of Eurozone!!!
    And finally some european politicians believe that “cuts” are not the answer for Greece’s financially problems…
    In a way, i see that a new conversation begins, and this time (IMF and Europe) must see where did they go wrong…

  12. In this times of crisis, local press and media have taken a very big hit. Traditional newspapers in particular – some have been shut down already – others are with one foot in the grave.
    Meanwhile, a new startup newspaper, to come out daily (6 days a week), starting 12th November.. (6 days after the presidential halloween – eh sorry – elections).
    This new paper claims to ambition to become the “Liberacion” of Greece and express “the whole Left”. For all i understand it will mainly be pro-Syriza.
    50 journalists will staff the paper. Quite a big number, at times when competitors are laying-off en-mass. So, some Cult is putting (some of?) their money on Syriza….
    Cake redistribution. Sorry Benny, no more – it’s obvious you ‘ve had big portions….
    Mr Kouvelis and other small “European Left” forces – you’d better start talking to Mr Tsipras if you want a share of the new cake.
    Mr Samaras and friends – you have to make it on wurst-mit-kartoffeln soldaten rations for the next….weeks? months? Looks like Wendy’s on the other side of the pond decided to stop sending burgers to you. And Santa will not stop by this year – you’ve been naughty boys repeatedly since 2005.

    • If Germany left then the Finns and Austrians would probably follow them.

      The euro would experience a sharp devaluation of up to 50%, once everything has settled down the southern members would find themselves in a much better position.

      A German exit would be manageable and a deal would be done on the target2 debt owed to Germany without difficulty.

      Its the political aspect that is the biggest question, the exit of any member could trigger a chain reaction that would bring the euro to its knees, if that happened the knock on effect it would have on the EU/ Brussels should not be underestimated.

      In my opinion all roads lead to an exit of one or more euro members, the question is whether that exit is controlled or explosive.

      • For the UK it would be business as usual.

        Why do you think the UK government has been avoiding a referendum on the EU, whats the point of having an argument about the EU when it may not exist in its current form in a years time.

        It is for the europeans to decide how they want this crisis to end, unfortunately the politicians dont like any of the options as all of them will at best severely weaken the euro and at worst crack the foundations of the EU itself.

        Too much political capital has been spent creating and propping up the euro/EU for them to be able to stop now, if they stick to their current path all they will do is drive the euro and by extension the EU into the ground.

        They dont know what else to do, economics always trumps politics in the end.

      • One day, it will be interesting to go back and look for the exact ‘tipping point’ when most sane, non evangalistic regular folks in Europe realised that the Euro was not going to survive intact. ( I tend to think of it like General Custer’s “oh s**t” moment on Little Big Horn ! ) As much as I enjoy speculation, as do other Sloggers, precisely how the Euro will disintegrate and which countries, if anyone, will be left in the system….or whether the EZ takes the EU down with it, seems to me to be a bridge too far to predict right now.

        Your last line Mark hits the nail on the head…..IF anyone started making plans or contingencies for the various Scenarios of the end of the Eurozone as we know it, I would feel much more confident about a controlled break up…….but while the Sprouts plans get ever more desperate and the North/South Nationalistic arguments become ever more disingenuous, I am afraid my money is on ‘Explosive’….

        Will it hit the UK ? Of Course……maybe not as bad as any poor sod in the EZ…but our own savings and pensions, our kids jobs, our grandchildrens education, our own health support in old age etc. are all very much on the line in the next few weeks and months

  13. But the US election is Nov 6th – who cares about 16th? The US voters will have re-elected Barry by then, thinking that the economic problems are far behind.

  14. Friday morning,11.00am.Anonymous EU official leaves meeting,contacts broker, shorts the Euro,Athens,Madrid ,Paris indices.11.30am returns to meeting.Midday ,leaves meeting and leaks story.1.00pm EU official departs for well earned lunch.

  15. I´m an admirer of Frank Stronach who is a self made Austrian business man. Frank claims that Greeks can´t be turned into Germans. This seems to me to be pretty much a given and though I seem to swim against the tide here, I do know that Greeks are not Germans and germans will only be Greeks as long as the summer holidays last. Frank reckons that the EU is a good idea but knows that Germany will continue to work hard and produce loadsa stuff while the Greeks will continue to lie in the hammock while the olive trees grow. Both me and Frank see no reason to alter the staus quo.

    • DB: “while the Greeks will continue to lie in the hammock ”

      Stop peddling that horseshit that Greeks don’t work or don’t want to work.

      Greece is bankrupt because the Greek elite are better at evading taxes than the elites in any other EZ country, and, because the Greek government over borrowed and cooked the books.

      Stop blaming ordinary Greek workers.

    • The problems with Greece is that it is a poorly functioning state. It always has been since it gained independence. The UK, and especially England, has been a strong and efficient state which is one of the reasons William of Normandy wanted it so badly – its treasury was brimming with gold.

      Knowing Greece well I doubt that it can be transformed into an efficient functioning state, not without a dose of dictatorship. And no one would wish for that.

  16. The country to watch is France. Nothing is going right for F. Hollande. More & more unemployment announcements every day. If Greece defaults, some big French banks will go bust, France will go bankrupt, so then that will be game over for the pet project.

    • Second that. And that’s why i think the Greek can will be kicked down the road a bit more. There’s one more factor. France is totally aligned with Middle East Obama/Hillary plans. The Americans want them happy as much as possible.

    • But, thinking positively, if France does go under maybe M. Hollande will be replaced by a GS technocrat before he does any more damage.

      • Don’t know about France. Here in Greece, the “technocrat government” scenario is under active/serious discussion (if not preparation).
        The present 3-party coalition is the analogy of “Kerensky provisional government”. Will not last.

      • @Nick: The French – when pushed – have form when it comes to cobbling as the CRS discovered. Barring random factors, the end game would seem to revolve around currency debasement and public confidence in that medium of exchange. Everything else can be managed, albeit badly.

      • Nick, oui. In UK we talk of ‘throwing a wobbly’ which is mainly theatrical and often only rhetorical; in France they throw a cobbly which is considerably more persuasive.

  17. From my perspective (an American with somewhat limited knowledge of daily European matters), Europe seems to have a problem similar to America in that, 1) the governments spend more than they take in (while promising the world), and the people expect more from their governments than they pay through taxes, and 2) corrupt banks collude with corrupt politicians to worsen matters.

    I’m trying to reduce this global economic problem down to its lowest denominator.

  18. And berlusconi just got 4 years in the can! There’ll be a whole different sort of bunga-bunga party in there. Bunga-bugger perhaps?

    • There are two appeals before he goes to prison.
      These could take a long time, and i dont believe he will be sharing a cell with a homicidal transvestite, or slopping out,,
      His cell (if he ever gets one) would probably have its own infinity pool and acres of land for him to exercise in.

      • At least someone in Italy got some sentence , but lets don’t make too much noise about this , might put pressure on the greeks to do something too.

      • Mo lol! I met a cabinet officer with those initials in Manila in the 1990s. Best described as a fat slob. He traveled to South East Asia between Xmas and the early part of the New Year, obviously wanted to get away from the cold and dark of the UK. Nevertheless, I thought the timing a little strange and asked an Embassy officer whether he was here for the girls. I was told no, the rather homely Mrs C was in tow, he was combining business with his hobby, twitching. I was never completely convinced.

  19. @Mark Gamble, sorry I didn’t mean Spain is to print it’s own money, although Greece seems to be! I was suggesting that the ECB might push out few billion their way!

  20. All the greek news don’t seem to worry about anything , most of them report that Europe is in the process of approving extra billions and 2 year extension for Greece.

  21. Almost half a century ago, with a newly minted Ph.D in economics from a good US university, I worked for Canada’s federal treasury department. Over the years I got some useful insights into what makes the economic and financial world tick. This helped me analyse a couple of years ago the problem of a faultily designed currency and what were, in broad brush terms, possible outcomes. Now, 2 years on, I am even less clear in my mind as to the most likely outcome : countries A & B leaving, countries X & Y leaving, making the eurozone a proper unit fit for a currency etc. My strategy? Stay as fit as possible so that I live long enough to see the end game.

  22. 29 October,Euro 5.3 bn Spanish govt bond redemption.31 October,Euro15.0 bn,Spanish government bond redemption.31 October, Italian government bond auction.

  23. Is it cos its Friday? Greek news tonight is upbeat about solving the problems before next Wednesday EWG meeting, ie only the question of labour rights left to be settled.
    OK….
    Scheuble latest threat is reported and brushed off. Reuters (“greek debt unsustainable”) is brushed off.
    OK….

    The surprising news is:
    Samaras (in Thessaloniki to celebrate the feast day of its patron saint Dimitris, and 100th anniversary of its liberation) spoke out forcefully against Chrysi Avgi [Golden Dawn] – “they are not Greek, they are cowardly, and anything but patriotic”.

    Archbishop Ieronomos of the Greek Orthodox Church today convened the Bishops to make a public statement against Chrysi Avgi – ie any group engaged in violence and racism can not claim that they are Christian; further, the Church has no need of protection from any political party, and refuses it.

    His third announcement was that the Church has set up a medical system to help all people without insurance or money, and greek doctors 100% support this.

    This was followed by an announcement by the police that the high % of Chrysi Avgites among its ranks has led to clear unprofessional behaviour and dismissals. As of today they are setting up a citizen’s line to report incidences.

    Hmm.

    Finally, back to Samaras, who quoted the poet Elytis:
    “If you reduce Greece, you would still have a vine, an olive tree and a ship. With these 3 things you can rebuild everything.

  24. Somebody above said that economics (narrowly, money) always trumps politics in the end. Makes sense, after all to be a politician you have to buy votes, allegedly. As far as fiat money is concerned, it is only trumped by public confidence.

  25. The Greeks don’t have the tools to solve the current problems – a trustworthy and efficient civil service backed up by an incorruptible legal system and political system.

    They have to leave.

    • I wish i could disagree with Walrus
      Hieronismusb , maybe others do not have a good public service but you can not understand in what extent things do not work in Greece.Example : our constitution forbids the judges to strike .They are on strike for the last few weeks .Nothing anyone can do about it .We have twisted , by-pass , overstepped ,ignored and ridiculed EVERY single law and rule in the country for too many years .I have the fortune and misfortune to live in greece and an other dozen countries as well .When you talk to the greeks about all this they do not get it .My own family – they are educated and clever people – they do not understand that the rest of the world does not function this way .If they do then they are called Nigeria or Indonesia – though in the last one huge improvement has been achieved .We have lost out common sense completely .Common sense can not be exported form the Germans to us ,in the same way democracy was not exported to Iraq or equality and freedom to Afganistan .

      • @Yana: Fair comment, everything is relative. Greece is certainly starting (or needs to start?) from an unenviable position but even those states which have achieved a high degree of societal organisation risk seeing it eclipsed by their dogged stupidity. Already, what was reasonably transparent has become more opaque and there is currently no sign of reversal.

  26. I just wonder how long it will take for the French, Spaniards & Italians to say enough is enough. They must pull their heads out of the sand and see what is really all about.German domination is still living memory for so many people that there is no excuse to let it happen again. Look how the VolkswagenAudiGroup is expanding and you can see the logic behind the German vision of Europe….Sad? Yes. Inevitable? Hope not.

  27. It can’t be any worse than this. I guess it’s time poor Greeks rushed to their banks and withdrawn their deposits….Tomorrow it might be too late…

    • Yeap, that should do it…”Hey Greeks give us all your money and we will lend them back to you.promise”. An honest sign of European solidarity.

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