Crisis Hour: Europe May Withhold Half Of €12 Billion Greek Aid As No Emergency Meeting Decision Reached

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EUR longs sure are missing Paulson's bazooka, as currency sell orders may flood the tape as soon as trading resumes at 5pm following the latest one-two knockout pair of news about Greece, which just went through the eye of the hurricane on Friday, and is about to be rocked all over again. According to Bloomberg, the math of the Greek bailout, which as we already discussed is highly impossible, is about to be made even more ridiculous, after European finance ministers have decided they may only authorize half the critical €12 billion rescue payment: "Euro-area finance ministers may authorize only a 6 billion- euro loan to
tide Greece through bond redemptions in July, while further aid hinges
on Greek budget cuts, Belgian Finance Minister Didier Reynders said. “We will in any case try to release the necessary funds for the short
term,” Reynders told reporters before a meeting of euro-area finance
ministers in Luxembourg tonight." What's worse is that any hope Europe may have finally reached a consensus on how to proceed with Greece, has once again crumbled after "Dutch Finance Minister Jan Kees de Jager said he doesn’t think euro area finance ministers will agree on a new rescue package for Greece at talks in Luxembourg today." In other words the "we'll make it up as we go along" bailout continues although any faith a credible settlement will be reached is by now completely gone.

From Bloomberg:

European governments weighed withholding half of Greece’s next 12 billion-euro ($17.2 billion) aid payment, seeking to keep the country solvent while maintaining pressure on the government to slash the debt that pitched the euro area into crisis.

“We will in any case try to release the necessary funds for the short term,” Reynders told reporters before a meeting of euro-area finance ministers in Luxembourg tonight.

Europe’s financial brinksmanship ran in parallel with Greek Prime Minister George Papandreou’s effort to save his government from collapse and win parliamentary backing for spending cuts, tax increases and state-asset sales needed to keep bailout funds flowing.

Tonight’s euro-area finance ministers’ meeting coincided with the start of a three-day Greek parliamentary debate in Athens over a confidence vote in a new cabinet at what Papandreou called a “critical crossroads.” Papandreou has 155 seats in the 300-seat parliament.

Papandreou said he planned to hold a referendum later in the year for changes to the constitution that would reform the political system in the country. The prime minister said his goal was to tackle the root causes of the country’s debt and deficits that are “symptoms of the illness, not the cause.”

On the table are incentives for bondholders to maintain their exposure to Greece, said Luxembourg Prime Minister Jean- Claude Juncker, chairman of the talks. He ruled out an agreement tonight on a new three-year package for Greece, pointing to July for a “final and overall answer.”

And adding insult to injury is the news that this critical weekend, which many had expected would solidify a European consensus over Greece, has just proven to be yet another failoure.

Dutch Finance Minister Jan Kees de Jager said he doesn’t think euro area finance ministers will agree on a new rescue package for Greece at talks in Luxembourg today.

“You have the fifth tranche, which depends on the Greek implementation of austerity measures and the IMF assessment of that,” De Jager said. “But the real discussion at the moment is about the possible second program and there lies the real discussion today. We are going to debate on that and that will be a very heavy debate.”

De Jager said he sees no need to expand the European Financial Stability Facility.

“The net value of 750 billion euros is enough, so we should stick with it,” he said. “Coming out of this crisis, the most important thing is more austerity measures, more economic reforms and of course if Greece will perform, will implement all those measures. Then we will be there, if also the private sector is participating.”

In the meantime, nothing has changed on Syntagma square, where indignant Greeks continue to ask the logical question: just how will the Greek economy grow if everyone is on strike for the next several years?

And below is Max Keiser doing his best to rile up the troops: