Greece Kicks The Can For The Third Time - SocGen's Take: "More Will Be Needed"

Tyler Durden's picture

It took the charming three tries for Greece to get its third "bailout", which incidentally does not bail out anyone except the hedge funds who went long GGBs because the only actual winners resulting from yesterday's transaction - those benefiting from Europe's AAA club fund flows are hedge funds as explained previously. As for Greece, what the "deal" did was buy it more time to get its hockeystick GDP forecast in order as the only thing that may win the country some future debt forgiveness is hitting an unbelievable 4%+ current account surplus and GDP growth of a ridiculous 4.5% per year. That said, of the cash proceeds going to Greece, to be released in three tranches, totaling €43.7 billion, only a de minimis €10.6bn for budgetary financing, i.e., the Greek population (read government corruption) and €23.8bn in EFSF bonds for bank recapitalisation, read keeping German and French banks solvent. Once the €10.6 billion runs out in a few months, the strikes will resume. So what does this third, latest, greatest and certainly not last can kicking exercise mean? Simple: in the words of SocGen, a short-term reprieve has been hard bought, nothing has been fixed, and "more will be likely."

But before we present SocGen's take, here, again, is the only chart that matters: this is what Greece has to achieve in order for the the 2020 124% debt/GDP target to be hit. No comment necessary.

From SocGen's Aneta Markowska:

Greek Bailout III agreed; more will be needed

In the early hours of Tuesday, Eurogroup President Junker announced that a political agreement had been reached on Greece, offering a new paradigm of confidence, growth and debt sustainability. Combining several measures, the agreement targets Greek public debt at 122% of GDP in 2020 and below 110% in 2022. The plan did not include any outright debt forgiveness, but the door was left open for further adjustments down the road. The next step now is ratification by national parliaments with the aim to allow disbursement of the next tranche to be formally finalised on 13 December. In our opinion, this agreement should suffice to keep the Greek issue off the table until after the German election in autumn 2013, but more will likely be required to make Greek public finances sustainable.

The main measures announced at today’s Eurogroup meeting can be summarised as follows. We have drawn upon the formal Eurogroup statement on Greece and comments from the press conference.

Postponement of the target: The target to reach a primary surplus of 4.5% of GDP has been postponed from 2014 to 2016.

Enhancing Greek debt sustainability: To ensure that Greece can reach debt-to-GDP of 175% in 2016, 124% in 2020 and “substantially lower” than 110% in 2022, the eurogroup agreed the following measures. In total, the measures adopted should allow debt to be reduced by 20% of GDP, with 17pp specifically identified upfront and 3pp contingent very shortly thereafter.

1. Lower interest rate: A 100bp interest rate reduction on loans provided under the Greek Loan Facility (i.e. the bilateral loans). Member states under a full assistance programme are not required to participate (i.e. Portugal and Ireland).

2. 15 yr maturity extension and interest payment deferral: A 15 year extension on both bilateral and EFSF loans (i.e. extended from the current 15 years to 30 years) with a deferral of interest rate payments for 10 years. Combined with lower interest rates, this should save €44bn (just over 20% of GDP) according to Klaus Regling. Our own back of the envelop calculation finds a lower number, but we need to see more details.

3. Lower EFSF fee: A 10bp reduction in the guarantee fee paid by Greece on EFSF loans.  This should allow savings of €600-700mln or 0.5% of GDP by 2020.

4. Passing-on SMP profits: Member states will pass on an amount equivalent to the income from the SMP (Greek bonds purchased under the ECB’s Securities Market Programme) as from budget year 2013. Member states under a full assistance programme are not required to participate (i.e. Portugal and Ireland). This should be worth just under €10bn euros or 5% of GDP.

5. Debt buybacks: Greece is considering a programme of debt buybacks. A conservative estimate suggests that this could deliver as much as a 10pp reduction of the debt-to-GDP ratio by 2020.

Conditionality stays, enhanced by automatic correction mechanisms: Strict conditionality remains a cornerstone of the new programme and the measures to ensure debt sustainability will be delivered in a phased manner and under full conditionality. One new development is the establishment of a new toolbox of automatic correction mechanisms. The example given during the press conference was that any privatisation shortfall must be offset by an increase in the primary surplus equivalent to 50% of the shortfall amount through current expenditure cuts. Moreover, the segregated account will be enhanced for debt servicing.

Subordinated bank debt to participate in Greek bank recapitalisation process: As part of the recapitalisation of Greek banks, remaining subordinated bank debt will be asked to participate to ensure fair burden sharing.

Next steps: National procedures will now be launched and successful completion should allow the next trance of €43.7bn to be paid out with €10.6bn for budgetary financing, and €23.8bn in EFSF bonds for bank recapitalisation. The remainder will be disbursed in three sub-tranches in 1Q13 linked to the implementation of the conditionality agreed with the Troika.

The Eurogroup expect to be able to offer final approval on 13 December following review of a possible debt buy-back operation by Greece.

A positive step, but more needed

At this stage, we have yet to see the detailed numbers behind the new agreement, but are encouraged that the measures announced mark an additional step in the right direction. Our concern remains that this will not suffice to make Greek public finances sustainable and allow Greece to return to market financing in 2017. The potential for shortfalls on implementation of austerity and structural reform are one risk, but our real concern is economic growth. To date, weaker-than-expected growth outcomes explain a 37% of GDP debt overshoot. Consequently, while this plan should buy time up to the German election in the autumn of 2013, we expect additional measures to help Greek debt sustainability will be required beyond this date.

It was encouraging in this context to see the door left open at the press conference for further measures once Greece reaches a primary surplus. Also under review is the possibility to lower the Greek financing share of European structural funds. This latter measure could be a positive for growth in unlocking funds for different measures. In our opinion, something more substantial will be required, with official sector debt forgiveness a very real, but politically challenging, possibility.

Comment viewing options

Select your preferred way to display the comments and click "Save settings" to activate your changes.
Orly's picture



Did you see the reporters at the end of the announcement trying to clarify when Greece was actually going to get the money?  Ms. LaGarde basically said she wasn't going to talk about that...then allowed that the shell game happens all the time.

If the poor reporters were confused and the Euro-elites tried their hand at obvious obfuscation, how can anyone have any faith in these markets at all?  I guess they don't see that this makes things worse, not better, though they talked a good game...until you thought about it.

What a crazy woild!


resurger's picture

I clearly remember that ISDA announced a "Credit Event" on Greece not long ago, now suddenly everything is fixed, i dont even think 47bn of money is enuff! But when money has no value who cares, they can print it ne way, sometimes i wonder why the fuck am saving money, how about i do as they do! i.e borrow/spend and worry about the future later.

expect a Debt/GDP of 300% in 2020, Japan will be at the 700% mark ... they know this is not working and it will never ever work..

Let's enjy the ponzi, as you said "It's a crazy fucking world"

Ajas's picture

nah, without that PSI (read: ECB in diguise) "credit event" CAC can-kick (I swear it'll never happen again), none of the current can-kicking would even be possible.  "Default as a solution" is the best way to up your sovereign credit score... 

the PROBLEM here is-- remember when those south african miners got their strike demands met?  Every single other SA miner went on strike for the same benefits...  now that greece has a sweetheart deal, what are the other PIIS gonna do?

GetZeeGold's picture



There must be more.......The Rocking Horse Winner.


LMAOLORI's picture



Pony up U.S. SUCKERS err I mean Taxpayers

Your tax money is about to be blown in Greece

Skateboarder's picture

"It's cool guys, we're gonna Nike our way back to keeping the Ponzi alive, and everything will be back to normal. This time it'll be okay!"

The hopium in that graph is made out of fairy dust and fecal particles. Yuck.

Peter Pan's picture

How far does Europe have to sink before they admit to drowning?

This is all just an exercise in denial in the hope that it is all just a bad dream that will go away.

When it blows up some people will have nowhere to hide.

EscapeKey's picture

some people?


when greece goes (not, if - when), local banks are next. these will then in turn drag down other european banks, which will progressively pull down even bigger banks, until the entire system crashes.

and the us banks have all these underwritten via credit default swaps.

meanwhile, china and japan lose their primary export zones, and these in turn take down suppliers from australia and africa.

we're all in this together. if it crashes, we all suffer.

Sudden Debt's picture

It's called "the Mike Jordan Basketball Effect".

Time is running out...

Money is on the sidelines...

and 5 second before the bell...

Angela tries to block him while Hollandes is pulling on his T-shirt...


HE JUMPS.......








laozi's picture

Long time no hear, you should post more often! This was priceless:





Seer's picture

Not in defense of this criminal class, but... They cannot telegraph timeframes lest they're front-run'd, fucking things up even worse.

Of course, if things are this sensitive then it really doesn't matter, as it will all implode anyway.

poldark's picture

Zero Hedge just gets better and better. Where else could we go to find out what is really happening in the financial world?

Sudden Debt's picture

on the streets of the real world.

poldark's picture

It reflects what is happening on my street!

laozi's picture

On the streets of the real world you will get a very disturbed view of things. On the peak of a bubble, the street is busy and people are happy, only by looking at the numbers one would understand that all is not well.

NooooB's picture

Well, with all the horseshit, there has to be a pony in here once in a while... It's worth wading through.. Thanks ZH!

wandstrasse's picture

poor little ponzi can.. being kicked all the time..

Skateboarder's picture

Ponzi cans have feelings too. =\

GetZeeGold's picture



All the money.....not just part of it. Now get back out there and make daddy some money.

Dre4dwolf's picture

LOl a reversal at the end of 2014? the only way that happens is if this chart projects that Greece will leave the Euro in 2014.

The system is inherently flawed in its design (perhaps intentionally) to perpetuate debt > Gdp in perpetuity, any country that does not have a Debt>GDP eventually WILL under such a system , and if it eventually WONT that means that it is the government or bank that is actually the primary LENDER of the currency (owns the printing press).

The system is designed to enrich one country at the expense of all the others.

Its a debt enslavement system.... all Fiat currencies owned and operated by central banks are, its their entire purpose, to strip nations of their property and freedom.


I just hope we have either a debt free currency by 2020 or atleast a government printed currency ( no national debt ) but a marketable exchange rate and interest rate (time value of money).


There is no other way to return to prosperity, if it doesn't happen most of the world will be de-industrialized and the population will drop by 1/3rd by 2030, and probably 2/3's by 2045, assuming we dont discover the secrets to nuclear fusion or zero point , because only such discoveries could make up for the damage these Fiat currencies are inflicting on the economy.



To deny this is foolish, and anyone who denies this is out to de-populate the world.... which is NOT over-populated by any-stretch, under current technology the globe could easily sustain a population of over 20 BILLION.



I can easily refute the chart based on population and job growth.

Lower job growth, decreases the birth rate while increasing the suicide and murder rate (crime will rise and cause murder).

Lower population and suicide and depression causes drinking and smoking to deal with the anxiety, this leads to declining health of the remaining population, which leads to higher health care COSTS, which leads to more social pressure and demands from things of government handouts, which increases the national debt which loops back and causes all the things that you are trying to combat, at which point the producers of the country start to flee, leaving the countries infrastructure failing, which drives prices up for essentials which decreases the standard of living which increases the the need for more poison.

Eventually the host dies and leaves all its assets to the lender, who at this point is so-over leveraged their economy starts to suffer and this huge injection of toxic "wealth" and forced "delevaraging" will spread like a virus into the "lenders economy" forcing it to print (devaluating its currency) causing it to borrow money from other still standing nations, which in-turn causes ITS debt > gdp to sky rocket which in turn causes it to die.... just like the nation it robbed (greece).


So....... uh yea the Euro is DOOMED by all measures, its only a question of time.... 5 years? 10 years? 20 years? the sooner the better because the longer it takes , the more people will die and the lower the standard of living for the entire globe will get.


The only solution for individuals in the end that will remain is Anarchy, it wont end well.

Seer's picture

"To deny this is foolish, and anyone who denies this is out to de-populate the world.... which is NOT over-populated by any-stretch, under current technology the globe could easily sustain a population of over 20 BILLION."

I'm not seeing that your thinking is any better than the crack-head "leaders" you're blasting.

Tossing out "20 Billion," where the fuck does this number come from?  Further, yeah, Guinness has records for the number of people that can be crammed into a phone booth, but this isn't the same as having them actually LIVE there, and do so for any reasonable amount of time.

Please note that TECHNOLOGY is a PROCESS, it does NOT create resources (matter cannot be created or destroyed, it can only be altered [at the cost of energy]).

"The only solution for individuals in the end that will remain is Anarchy, it wont end well."

I see absolutely no reason for any negativity here lest one is trying to hang on to the status quo.  "Anarchy" is free-form, it's what nature does.  And, there really isn't anything that is a "solution," as the very word denotes permanence, and we know that nothing is permanent (three states: expansion, stasis, contraction- stasis is only a moment between expansion and contraction; I think we all know that we are shifting away from expansion).

Dre4dwolf's picture

Technology does indeed create resources, or in a sense allows us to realize waste and correct it.

Who knows, maybe one-day we will invent a new element (much like iron-mans "Vibranium" ) that could give us access to clean energy.... you can't just dismiss the idea.

Before the gasoline engine, gasoline was a waste-product, the invention of gasoline engines allowed us to tap that resource.

Today many things are considered waste products, take for one example Thorium, Thorium has the potential to be a clean safe and abundant nuclear fuel for reactors, yet today its completely discarded / considered a waste product, the technology to use it as a fuel is there, the technology is fairly "low-tech" and even easier to build than say a normal uranium based reactor.

What I am getting at is, technology has the ability to let us use things we otherwise would discard as a valuable and marketable resource.

Think forward to "Mr. Fusion" on the back of a Delorian! ^^ a bit of a stretch, but technology has the potential to turn waste into energy one-day, and historically like with the gasoline engine it has always been the case! 

Technology and the human brain is humanities greatest resource, given a lack of a material resource, the human brain will always find a way to compensate given enough time.


The number 20 billion was arbitrary, and SPACE TO PUT PEOPLE is hardly the issue, the issue is resource acquisition, utilization and the logistics of efficiently transporting the resources we have.

And in regards to Anarchy, its inevitable, when a government refuses to do whats in its peoples best interest, the only outcome is that the government dissolves, anarchy takes place for a while and then the country restructures and rebuilds.


Hmm, yea I am satisfied with that "hits save".


Hmm Edit: Im not sure what the element Iron Man invented was called, I may be mistaken about the Vibranium uh, but regardless ....

BlackholeDivestment's picture

Awe, Europa just needs a Lord and Savior like the Vote 2 Party 666 Soul Train people have. Yeeeah, Scro.

f16hoser's picture

One more hit of free Crack and we (Banksters) own everything! YIPEE

No Euros please we're British's picture

"In our opinion, this agreement should suffice to keep the Greek issue off the table until after the German election in autumn 2013"

I guess that qualifies as a successfully kicked can.

WaEver's picture

Me no comprendo. All these jokers failed twice before yet the MSM are hailing this solution as a fix. Instead of kicking the can, the clowns should get the boot.

Blackfox's picture

Offtopic sorry.

According to newly released flight logs, Russia has been helping out embattled Syrian leader Bashar al-Assad by literally sending him planeloads of cash.

The logs, obtained by the investigative journalism body ProPublica, show that an Ilyushin 76 cargo plane belonging to the Syrian Air Force made eight round trips between Moscow’s Vnukovo Airport and Damascus over three months this summer, each time carrying a stated cargo of 30 tonnes of banknotes.

This would suggest that a total of 240 tonnes of currency, equivalent to roughly 240m notes, made its way from Russia to Syria over the summer.

Seer's picture

Lowering the boom on higher education?

I'm thinking that the economy down under will soon be seeing charts that look like that dropping boom.

awakening's picture

I'm wondering why it hasn't dropped already, can kicking from all corners of the globe is giving me a headache :(

fredquimby's picture

Looks like my #nogrexit bet is going to pay off.




MyBrothersKeeper's picture

What none of these folks understand is you cannot have growth without a structure for's like planting a flower in concrete.  The structural issues remain: overpaid, overbenefited, underworked public employees; convoluted tax and tax collection system; little to no incentive to create or grow a business and on and on.  And don't expect the old reliable tourisn industry to keep the heartbeat going for long as not many people see vacationing in an area where it's workforce regularly strikes as a good option. Things will continue to get worse until the powers that be realize that until they become more private sector growth friendly (ie more capitalistic) there is zero chance that the quality of life in Greece improves.

It's exactly why the central planners in the US are still scratching their heads about why stimulus hasn't effected unemployment.  They have increased the speed limit to 90 mph but put roadbloacks all over the road (Obamacare, regulation, taxes, poor immigration policy, poor energy policy, etc).

Without a structure for growth, there is no growth.

Seer's picture

Um... might that "structure" require a bit of PHYSICAL, as in earthly resources?

Aren't people fucking getting it yet?  It doesn't matter how you push/program the buttons, "growth" ain't going to be happening unless there are sufficient PHYSICAL inputs.  Our world growth levels have hit the wall.  The "least of us" is now being spotted as faltering, and in an effort to continue to NOT recognize what the REAL issue is we'll blame them for laziness, incompetence etc.  OK, fine, they're shitty players in the game, BUT... the GAME ITSELF IS SHIT, and it's a certainty that it'll collapse/fold.

Until you (or anyone else) can defend the idea that we can have perpetual growth on a finite planet, that we can somehow violate the laws of physics, you have NO position to criticize others (as blatantly lame as they may be).

luckylongshot's picture

Why is it that whenever I read about a Greek bailout the unwritten headline that jumps out at me is.."The Rothschild zionists have shafted you yet again"?

Kiwi Pete's picture

Ha Ha. Hockeystick. Ha Ha Ha.

More likely to be a Baumgarten Dive!

Dre4dwolf's picture

HA! Baumgarten Dive clever!, except you forgot one thing, Baumgarten had a parachute, I dont think the EuroGreek landing will be quite as soft as his. HA!

PaperBear's picture

Greece will be lucky to get GDP growth above negative 4.5% per year. No, scratch that. Below negative 4.5% is a 100% certainty.

Seer's picture

"Below negative 4.5% is a 100% certainty."

Below negative 4.5% is a 120% certainty!

Be sure to adjust for inflation!

youngman's picture

Listening to Junker speak this TV started to stink...even they know they are lying now....I give this 4 hours until Greece needs ANOTHER bailout...why not...they keep giving it to them...keep asking

Seer's picture

The exponential function guarantees that the trajectory will only be MORE and MORE and FASTER and FASTER until...  The "MORE" part is very hard for most to fathom, as much is hid in all sorts of black boxes (though we know it's BIG); "FASTER" on the other hand, is about Time, and since it's in ever-decreasing time duration slices (need for "bailouts" coming faster and faster) it's a lot easier to see; but, make no mistake about it, this is ALL a function of exponential growth.



fonzannoon's picture

I am so jealous of Greece. They must feel like one big collective Raymond K. Hessel this am. The sun must be shining brighter, the food must tatse better (I'm assuming new, wonderful tasting food that is not beyond expiration was shipped in overnight). To finally see the light at the end of the tunnell and emerge from it with a fresh wow. I can't wat to see the once formally riot cams today showing us the people in thes streets, arm in arm, cheering.

youngman's picture

So lets say you are a Greek Business.....from this great big you go out and buy new equipment...hire more inventory for the increase in business/demand that is about to happen....all the new business from this bailout since Greece is you??????  NOT....

smacker's picture

Ha-Ha. For this latest and greatest Greek debt plan to materialize, Greece will have to achieve an economic turnaround that follows a virtually impossible J-curve, including a foundations-upwards implementation of internal productivity/efficiency measures and a strong global economic recovery to raise demand for Greek output. Too bad the global economy is heading in the opposite direction.

This solution is simply to get the sh1tstorm off the table for Merky's 2013 electoral benefit.

quasimodo's picture

This horse carcass is really starting to stink. Someone remind me, how many times will we beat this again?

Anymore when I read the headlines like these all I can think to myself is..........meh.........sigh