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Spiegel Greek Hit Piece #2: Bailout Troika Finds "Greece Missed All Fiscal Targets" - Next Steps: Game Over?
Germany's Der Spiegel seems hell bent on getting sued to hell and back by Greece. After a few weeks ago it "broke" the news of a secret meeting that would consider the expulsion of the country from the Eurozone, it is once again stirring passions with an article claiming that Greece has missed all fiscal targets agreed under its bailout plan, according to a mission from an international inspection team, putting further funding for Athens at risk, Reuters summarizes. "The troika (aka the International Monetary Fund, the European Commission and the European Central Bank) asserts in its report to be presented next week that Greece had missed all its agreed fiscal targets," weekly Spiegel magazine reported in a prerelease. In other words, this could be the political game over for Greece, whose fate as has been disclosed recently, is intimately tied with the perception that it is following the troika's demands for fiscal change. If the three key bailout institutions are already leaking that Greece is done, next week could well be the beginning of the end for the €. In about 48 hours, even as America is enjoying a Monday off (or precisely because to that, to avoid a market panic), the European market could be digesting a very bitter pill of testing just how well pre-provisioned all those German, French and Dutch banks really are.
From Reuters:
The mission will be holding meetings next week before an expected finalisation of the report.
"The deficit in the public budget was higher than expected," the magazine said, referring to the report's findings.
"The reason is that the Greek government still spends more than agreed in the aid programme. On top of that tax income is still lower than demanded."
The IMF has already said it cannot release its part of a 12 billion euro aid tranche to Greece next month if fiscal conditions underpinning the bailout are not met and the European Commission's top economic official was quoted as saying the EU was setting the same conditions.
"We Europeans have the same conditions as the IMF," EU Economic Affairs Commissioner Olli Rehn was quoted as saying in the same prerelease for Monday's Spiegel magazine.
"We will decide on the next tranche after the troika's report. The situation is very serious," Rehn added.
There is, however, one possible last ditch rescue: a firesale, pardon privatization, of Greek assets.
EU officials have asked Athens to step up
privatisations urgently and suggested setting up a trustee institution
to help oversee the process, similar to the body that privatised East
German companies after the fall of communism. Spiegel magazine also
said the troika's experts estimated Greece had assets worth 300 billion
euros, which it could sell off to meet its targets.
That said, good luck selling the idea that Greece has to sell the Cyclades only to provide another year or so of banker bail outs, now that virtually everyone knows who the only benefactors from the can kicking exercise are.
And not even an hour has passed since the article that Greece has already had to issue a formal lie:
Greek Finance Minister George Papaconstantinou on Saturday denied a German magazine report that an international inspection team had concluded Greece had missed all its fiscal targets.
"Reports such as the one in Spiegel have no relation to reality. Negotiations continue and will be completed in the next few days. We have every reason to believe the report will be positive for the country," he told Greek Mega TV.
Wrong again. And confirming that it is basically game over should the troika wash its hands, is the latest note from Goldman's Dirk Schumacher:
Eurogroup head Juncker said yesterday that the IMF would probably not be able to make the next disbursement disbursement, as the re-financing of Greece over the next 12 months is not secured (the €26.7 billion Greece was supposed to get from private investors in 2012). By August 20 the Greek government has to redeem €7 billion in debt falling due, though there are of course other payments the Greek government has to make, implying that Euro-zone governments need to come up with a solution fast.
There are two issues Euro-zone governments have to deal with. First, whether (and how) to bridge the funding hole that will open up over the next couple of months if the IMF does not disburse its tranche. Second, what to do about 2012, ie, should there be a second package and under what conditions?
There are in principle several options available for how to replace the IMF money for the next tranche if governments were to deem the risk for the financial system of any early debt restructuring too big – the ECB has been vocal over the last couple of weeks with respect to these risks. Stepping up the current bilateral loans would be one option, though politically difficult as this would need to be approved by parliaments, at least in some cases. Also, several countries will find it rather unattractive to fund these loans right now in the market. Tapping either the EFSF or the EFSM to replace the missing IMF money would be easier, as – with the exception of Finland – parliaments would not need to be asked. One open question, however, is whether an end of IMF money flows, even temporarily, means that access to EFSF money also needs to be declined, as the EFSF should only provide money together with the IMF.
Whichever option is chosen, this will create some noise in several countries and the official explanation for why the IMF is no longer funding will be crucial in that respect. If it is indeed only the question of guaranteed funding over the next twelve months, Euro-zone governments may argue that the IMF will return once an agreement has been found over the second package. However, if the troika’s assessment states that debt sustainability is not given and/or the slippage in terms of implementing the reforms has been too big, it will be difficult even to come up with bridge financing for the next months.
With respect to the second package, a necessary, though not sufficient, condition, seems to be that the troika will still conclude that Greece can “make it” in principle and the slippage has not been too big – and that the Greek government will intensify its efforts. The question in that case, however, is still what the second package should look like, i.e. to what extent should the private sector participate? It is noteworthy in that respect that the German finance minister has backpedalled from his earlier calls for a soft-restructuring in conjunction with a second program for Greece, stressing the risks associated with this, though he also said that once the ESM is in place, private sector participation will be necessary.
It is difficult to say at this stage how important it will be to have the participation of the private sector in order to overcome public resistance in some creditor countries to another aid package. In any case, without more credible efforts from the Greek government to reform/privatise, this hurdle could be too high to overcome, and there might be not a second package.
The first task at hand for Euro-zone governments is to find a replacement for the IMF money if the IMF does decide it is not in a position to disburse the next tranche.
Otherwise, we may get a Greek debt restructuring much faster than previously thought.
Conclusion: for those who did not sell in May, selling in June may be the next best option, or at least until Jon Hilsenrath reports QE3 is imminent (October/November).
P.S. we continue to hold our breath for Handelsblatt to issue an apology for fooling millions of its readers into buying Greek bonds.
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Germany's Der Spiegel...
Man, it's almost like Der Spiegel is acting like journalists, or something - can they DO that? Can you imagine a US MSM news weekly that wasn't kissing the asses of the powers-that-be?
Don't know about other european countries, but germany's media is a mixed bag. It originally (up to about 1990) had a lot of inhouse journalism (instead of just buying news)... while the gov certainly did introduce their own stories, and the media of course was biased against telling people things they do not want to know, media still had a lot of selfautonomy.
From the 90's onwards, the media became more and more americanized. By now, at minimum 80% of the program is similiar crap to what the USA has. However, especially among magazines and newspapers, there are still a handful of autonomous and investigative reports.
So, its not like german media is the inverse of the USA.... it's just lagging a little bit behind in terms of crappification.
> So, its not like german media is the inverse of the USA.... it's just lagging a little bit behind in terms of crappification.
That seems to be true in so many countries. I've had New Zealanders say the same thing about their country: "Oh, were just 20 years behind you guys".
Sad. (I guess..., maybe it's correlated with population growth. Who knows...)
Hmm, i really hate to throw around those cheesy generalizations, but in this case, i think the reason quite simply is:
Globalization.
When economically, politically and culturally giant mergers and synchronization happens, you just end up with one big pile of grey homogenity.... and it will for maximized profits by geared to preserve itself and appeal to the lowest common denominator.... add to this that those attributes also maximize it's efficiency for propaganda, and you arrive at today.
Like I've posted before, it'll be China showing up for all the "cheap" feta, gold, and port cities that the IMF and (fuck)EU can't/won't provide for in euro's.......
I like that (fuck)EU part. Nice touch. lulz
If the Bloomberg article quoted is correct and Greece has a variety of options to avoid triggering the CDS's, how long do you think it'll be before the counterparties to these lose faith in their worth and 1: Stop paying on them, and 2: hedge their investments by naked shorts ? Whoops
One way to avoid triggering the CDS's is for the Eurozone to BAN THEM.
All you need is a delete button.
If the Bloomberg article quoted is correct and Greece has a variety of options to avoid triggering the CDS's, how long do you think it'll be before the counterparties to these lose faith in their worth and 1: Stop paying on them, and 2: hedge their investments by naked shorts ? Whoops
The tag team disintegration of the Ponzi schemes known as the USD and the EUR is a beautiful thing to behold.
well, october/november is a long time away and further qe would be predicated on where things like oil were at the time. No chance you get a qe3 with oil at 100 bucks or more. SPX 900, eurusd 1.20 between now and then is not out of the question.
Simple, no default no forced fired sale of state assets. Mucho bucks can be made from instability and it is the best way to grab more assets at a very low price is to scream default. Now you have your cake and can eat it too. It is a good time to be a debt merchant.
IMF says reports on troika review of Greece untrue
By Frankfurt Bureau
FRANKFURT (MarketWatch) -- The International Monetary Fund said Sunday that a media report claiming to know the results of its mission to Greece with the European Union and the European central Bank are untrue.
The comments were in response to an article in Germany's Der Spiegel that said the Troika report from the three organizations will find Greece has missed all its fiscal targets.
"Our discussions with the authorities continue, are making good progress, and are expected to conclude soon," the IMF said in a statement emailed to Dow Jones Newswires by the ECB.
The ECB said it has nothing to add to the IMF's statement.
Until next week, maybe?
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