Greece Gets Three-Day Ultimatum From Europe To Fix Itself, Or Else

Tyler Durden's picture

Yesterday it was the Egyptian military giving president Morsi a two day ultimatum before things "deteriorate", now it is the Eurozone giving Greece a three day ultimatum to "deliver on the conditions attached to its international bailout in order to receive the next tranche of aid" or else.

 This links back to the FT report from June 20 that the IMF told Greece it has until the end of July to plug its budget holes, or else. In other words, simple escalation. Of course, maybe it should have been made apparent to Greece back in May 2010 at the time of the first (of many) bailouts that all those tens of billions in sunk costs are actually supposed to lead to economic reforms instead of perpetuating a broken and corrupt political system in which all in efficiencies and failures are blamed on evil (f)austerity.

From Reuters:

Greece has three days to reassure Europe and the International Monetary Fund it can deliver on conditions attached to its international bailout in order to receive the next tranche of aid, four euro zone officials said on Tuesday.

 

The lenders are unhappy with progress Greece has made towards reforming its public sector, a senior euro zone official involved in the negotiations said, while another said they might suspend an inspection visit they resumed on Monday.

 

Athens, which has about 2.2 billion euros of bonds to redeem in August, needs the talks to conclude successfully. If they fail, the International Monetary Fund might have to withdraw from the 240-billion-euro bailout to avoid violating its own rules, which require a borrower to be financed a year ahead.

 

That would heighten the risk that concerted efforts by policymakers over the past nine months to keep a lid on the euro zone crisis could unravel, at a time when tensions are rising in other countries on the region's periphery.

 

Portugal's Finance Minister Vitor Gaspar, the architect of its austerity drive under an EU/IMF bailout, resigned on Monday in a potential blow to his country's planned exit from an EU-IMF rescue program.

 

Political tension has also increased in Italy, where Prime Minister Enrico Letta called a government meeting after a coalition partner threatened to withdraw.

 

Athens and its creditors resumed talks on Monday to unlock 8.1 billion euros ($10.6 billion) of rescue loans, after a two-week break during which the government almost collapsed over redundancies at state broadcaster ERT.

 

"All agreed that Greece has to deliver (pledges) before the Eurogroup on Monday. That's why they must present again on Friday," a second source told Reuters.

 

Euro zone finance ministers are scheduled to meet on July 8 and discuss the situation in Greece, which is in its sixth year of recession and has seen unemployment surge to record highs.

It almost appears as if the Troika is actually set on being serious this time:

"It is a very difficult negotiation," a senior Greek official participating in the talks said. "We're moving fast to wrap up as many issues as possible a soon as possible."

 

But Greece's financial overseers - the IMF, the euro zone and the European Central Bank - were unlikely to be able to conclude their review in July and might need to suspend the visit and resume it in September, a senior euro zone official said on condition of anonymity.

 

Representatives of the EU-IMF-ECB "troika" have been holding serial meetings with government ministers in Athens, struggling to agree on a host of outstanding issues.

 

If talks are not concluded by the middle of month, Athens risked missing the installment, the Greek official added.

 

Athens has missed a June deadline to place 12,500 state workers into a "mobility scheme", under which they are transferred or dismissed within a year.

If indeed the Troika is set on purging Greece, it can only mean one thing: Cyprus part 2, and this time it will be Greek depositors who are to be impaired (since there is no more deleveraging that can be executed in the sovereign realm, either via a PSI or OSI). And with the Cyprus bail-in failing to lead to epic chaos and a financial collapse, the Troika's confidence appears raised that what worked in Cyprus can work just as well in Greece, as the depositor confiscation "template" moves one step ever closer to its ultimate goals: Spain and, finally, Italy.

If we were Greek depositors, we would make prudent use of the 'mattress alternative' right about now...