Mystery of next Troika tranche deepens

Update 12.55 pm BST: Athens introduces domestic payments freeze after Ordinary budget revenue fell to 31.1 billion euros from 32.8 billion while spending rose to 47.8 billion euros from 43.5 billion.

Southern Europe-based sources familiar with the ClubMed debt crisis alleged to The Slog this lunchtime that Italy wants out of contributing to the next tranche of Greek bailout monies. Spain is also thought likely to follow suit. As of now (given the mystery and debate over Greek compliance, or not) it is unclear whether the Italian Government means this month’s tranche, or the one due in December.

If confirmed, the news will send shock-waves through the eurozone’s credit markets, signalling as it would that the default dominoes are wobbling, and Greece is more likely to be the first than the last.

“It is partly the Berlusconi government being unable to see the point of keeping Greece alive, but primarily the belief that Italy needs the money and may still be salvageable,” said the Slog’s informant. “There are also well-founded rumours that the Spanish government will follow suit.”

The news is highly likely to be denied vociferously by all concerned, so it is difficult to say much more until other off the record sources can substantiate the claim. But as and when the German public gets wind of it, all their worst fears will be realised…and the non-Schauble anti-Athens group in the CDU will be impossible for Angela Merkel to control.

Meanwhile, the vibes coming out of Berlin are that Chancellor Angela Merkel is throwing her support behind Finance Minister Wolfgang Schauble’s ‘keep Greece afloat in the eurozone’ strategy reported in last Sunday’s Slog and elsewhere. The hope seems to be that emergency pocket-money out of the public  eye will be fed to Athens, and then the new powers being given to the EFSF at the end of September will weigh in alongside the Troika after that. But with or without full eurozone involvement in the bailout, the numbers still do not, in my view, work. The CDU rebels are right: it is good money after bad.

“The idea that disaster must follow the default of one eurozone member is political bullshit,” said a London-based lending source yesterday, “It’s just that the Germans and eurocrats have always insisted it’s true, so they feel that they can’t U-turn now.”

Giving an interview to German radio today, Frau Merkel told her audience, “The top priority is to avoid an uncontrolled insolvency, because that wouldn’t just hit Greece, and the danger that it hits everyone, or at least a number of other countries, is very big. I have made my position very clear: that everything must be done to keep the euro area together politically, otherwise we would very quickly face a domino effect….Everybody should weigh their words very carefully. What we don’t need is unrest in the financial markets.”

It’s a curious perspective that sees market unrest as something still lying in the future; but then equally odd is the disappearing Greek austerity compliance decision due last Sunday. This from the Bloomberg site (my italics):

‘…..a delegation from the European Commission, European Central Bank and International Monetary Fund [The Troika] suspended a report on progress made in Athens in meeting the terms of its rescue program. The delay threatened to derail the next payment to Greece due next month...’

This is bollocks: the next tranche was due mid September. The Troika team walked away in disgust at the almost complete lack of progress, and debriefed the situation to key EU personnel last Sunday. Last Sunday was to be decision time. Umpteen websites and news sources stated clearly ‘the next tranche of bailout to be delivered mid September’. As predicted here last week, Angela Merkel has broken her pledge to CDU colleagues: she’s simply done it by pretending that September 12th had never been judgement day.

But Dutch Finance Minister Jan Kees de Jager put it succinctly last week when he said that the next tranche of money can’t be paid out to Greece unless the Greek government complies with the terms of its aid package.“What’s holding up everything in the present situation is Greece and whether or not they are compliant in the current programme. The most urgent matter is the issue of compliance,” he told a Berlin press conference.

Well, Greece didn’t comply, so I have to assume Athens didn’t get any more from the Troika. And in fact, this was quietly confirmed to the Wall Street Journal yesterday: the Greeks will, however, get more money – the ‘excuse’ for letting the next tranche be paid ‘some time later this month’ being its decision to levy an immediate tax on electricity bills. It seems highly unlikely that many Greeks will pay it. Either way, Greece didn’t comply, but it did get the money. Just fancy that.

Stay close to the newswires: if this assertion from sources gets further substantiation, it will be more than a game-changer: it will be the final whistle.