Forget "Grexit", "Grimbo" Has Arrived

Tyler Durden's picture

If you didn’t know any better you might think “Grimbo” was a new Sesame Street character. Far from being the name of something that brings smiles to the faces of young children however, it’s actually the latest one-word take on the likely outcome of Greece’s protracted, painful negotiations with creditors, which will continue tomorrow in Riga where progress is, according to pretty much everyone that will be involved, unlikely. The new term follows in the footsteps of the classic (but now tired) “Grexit” and its underrated predecessor “Graccident,” and refers to two of the four outcomes Citi imagines are possible in the unfolding Greek drama. Here, via Citi, are the scenarios that would constitute Grimbo:

A new programme agreed, but only after capital controls were imposed and/or a Greek government default

 

In this scenario, current negotiations would fail to produce an agreement until a major event (or shock) occurs. Such an event could be that i) the ECB limits access for Greek banks to ELA (as it either runs out of patience about the lack of negotiations, or Greek banks face a large increase in funding outflows), ii) PM Tsipras calls a referendum (on the new programme or Eurozone membership) or snap elections, or iii) the Greek government misses a payment/defaults. In these cases, the shock could provide an extra push on both sides to conclude the negotiations and encourage leaders to take on potential domestic detractors and opponents to push through a deal. The timing of such a shock is uncertain and hard to predict. In theory a run on banks could trigger capital controls tomorrow. Equally, the government may not run out of money or the ECB out of patience until the summer…

 

No new programme, government default, capital controls and yet no Grexit.

 

In our view, it is by no means certain that the two sides can agree on a new programme in the coming months, even with capital controls in place, given the wide gap between the negotiating positions, the mutual lack of trust and the undercurrent of personal animosity. Without a new agreement, a Greek government default at some point is very likely, in our view, due to the shortage of other funding options. The lack of an agreement would also at some point be associated with capital controls and binding limits on ELA access. Compared to the previous scenario, the capital controls (a mix of bank holidays, deposit withdrawal restrictions, restrictions on external transactions) are likely to be more extensive and longer-lived...

 

The lack of liquidity for the sovereign would induce it to issue more IOUs (scrip) in lieu of payments in euro, increasingly for salaries and pensions in addition to payments to suppliers. Such IOUs are likely to gradually be traded and thereby develop into a parallel currency.

 

This scenario may well be triggered by a negative outcome to a referendum on a proposed bailout agreement without necessarily providing a mandate to exit the Eurozone. Over time, the stressed liquidity situation, and notably deposit withdrawal restrictions for banks, would significantly increase pressure on the Greek government, making fresh elections likely.

 

Those could produce a mandate for a new bailout agreement with the Eurozone or pave the way for an eventual Grexit, but this could still leave Greece in limbo for an extended period of time - Such a ‘Grimbo’ scenario can, but need not end in, Grexit. Grexit is not a well-defined legal or Treaty base step.

Meanwhile, the doublespeak continues from all sides and it’s starting to appear as though no one really has a good read on what’s going on even as the situation in Greece has grown increasingly desperate and now includes the seizure of local government deposits by the central bank (which claims it needs the cash to pay salaries and pensions) and rumors that Greece may need to tap Gazprom for an advance on the Turkish Stream pipeline project in order to stay afloat. 

The good (via Bloomberg)...

Agreement on whole reform package needs to be reached first, Dutch Finance Minister Jeroen Dijsselbloem tells lawmakers in The Hague. Says payments in tranches after partial implementation of reforms “imaginable”

 

"I’m very opposed to a Grexit,” European Union Economic and Monetary Commissioner Pierre Moscovici says.

 

“Greece has its place within the euro. And it’s what the Greek people want,” Moscovici says at conference in Brussels

 

GREEK GOVT OFFICIAL SAYS DEAL WITH CREDITORS VERY CLOSE

 

Provided “Brussels Group” of officials keeps pace of progress, an agreement for bailout disbursement is possible by end-April

 

Greek govt expects a positive signal at Friday’s Eurogroup so that a deal can be reached by end-April

 

Creditors haven’t discussed any sort of plan B with Greek govt, including default, arrears on IMF payments, or exit from euro area

 

Greece wants a solution, not a rupture

The bad...

“The Greek government has got to show some backbone in its reform efforts,” Moscovici says

 

Need to “make Greece more attractive to investors. Investors have to come back to Greece. What Greece really needs is growth and employment creation,” Moscovici says

 

Pacific Investment Management Co. sees 30% chance of an accident that would force Greece to leave the euro, says Mihir Worah, Co.’s chief investment officer of asset allocation and real return, at briefing Thursday in Sydney.

 

European Commission Vice President Valdis Dombrovskis says “we do not expect any major breakthroughs” on Greece at Riga meeting starting Friday “because technical negotiations are ongoing.” 

 

“These technical negotiations will need to continue after tomorrow because progress so far is not sufficient. There is still a lot of work to be done”

And the Schaeuble…

German Finance Minister Wolfgang Schaeuble to attend informal EU finance ministers’s meeting in Riga, Latvia, with “very limited expectations,” spokesman Martin Jaeger tells reporters at govt press conference in Berlin.

 

Germany doesn’t expect a comprehensive package of reform measures can be agreed on in Riga

 

Germany sees stock-taking of progress toward reform list

 

Not easy to imagine what new facts Greece will present

 

Germany seeks Greek explanation of lack of progress on a comprehensive reform list

 

Can’t say whether Greek govt will submit such a list by end of April

There’s also some hope that sideline talks between Tsipras and Merkel at today’s EU Summit will bear some fruit. Here’s kathimerini:

Prime Minister Alexis Tsipras is to meet with German Chancellor Angela Merkel Thursday in Brussels in a bid to secure a statement of political support from Berlin amid tough negotiations with creditors and dwindling finances.

 

The meeting, which is to take place on the sidelines of a European Union leaders’ emergency meeting on immigration, was announced in a brief statement from Tsipras’s office. The move came amid reports that negotiations taking place in Paris between Greek government officials and representatives of the creditors had made some small progress but remained far from securing a deal that could unlock crucial rescue funding.

The arrival:

Against this backdrop the market is still struggling to determine the extent of the contagion risk to the EU periphery should Grexit or Grimbo become reality. While we contend that redenomination risk will ultimately be the deciding factor when it comes to whether events in Greece cause crises in the likes of Spain, Italy, or Portugal, focus has shifted to sovereign spreads over the past week despite the fact that ECB asset purchases make it difficult to determine exactly what’s being priced in. Here’s Citi with a bit of color on contagion via EGBs:

As shown in Figure 1, (severe) corrections in Greece to higher yields have also tended to coincide with periphery sell-offs within the general bullish trend. We would also note that although 10yr Portugal, Spain and Italy are 10bp-30bp wider over April, contagion remains relatively limited and spreads remain near historic tights when considering a longer-term context (Figure 2).

We think the level of near-term event risk and the pick-up in volatility in Greece is such that further episodes of periphery spread weakness cannot be ruled out. Although spreads are likely ultimately to end the year tighter largely thanks to QE, near-term headline risk is likely to weigh on market sentiment and with it, the EMU spread environment. This may dominate otherwise supportive technicals such as the net cash flows.

*  *  *

Finally, here’s a table from Bloomberg which outlines the list of reforms and where negotiations currently stand (for our part, we think this is a bit optimistic):

Comment viewing options

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

Zzzzzzzzzzzz.  Just default already.

mvsjcl's picture

Just another name for can-kicking.

Haus-Targaryen's picture

And they'll kick the can again.  

Which is good.  Gives me more time for emergency stacking.  

pods's picture

I don't know about y'all, but I'm Grexasperated.  Shit or get off the pot.

This is like a slow motion video of a python suffocating a rabbit, where the fuckhead narrating keeps rewinding the scene.  We know what happens.

Anyone associated with this answer me this question:
If Greece cannot afford the debts it has now, how the fuck is more loans going to fix this?

pods 

asteroids's picture

Notice how happy he was delivering his speech to the media?

Wolferl's picture

Throw the Greeks out of Europe already. It´s just a worthless third world country that doesn´t belong to Europe.

HenryHall's picture

There will be no capital controls. For the same reasons that Russia did not impose capital controls a few months back, which reasons include:

1. They don't work because money you might want to stop from leaving has already left.

2. They don't work because people find ways around them.

3. They have lots of disadvantages.

4. The US and EU want capital controls to be imposed.

A consequence is that banks will fail - so let them fail, this is raw capitalism.

AGuy's picture

"Throw the Greeks out of Europe already. It´s just a worthless third world country that doesn´t belong to Europe."

  Not so simple. Greece's Financial troubles were caused by Bankers (aka a Mario Draghi Pres of Goldman Saks), and corrupt Greek politicians. Not all Greeks are bad people, there are a lot of hardworking people that try their best to be productive. Consider that the US has far bigger debt and far more liabilities than Greece does.

Smegley Wanxalot's picture

when the greeks punt, it is called a Grunt ... so in effect the greeks are continually shitting, but failing to get off the pot, because the EU is so full of shit that there is always more to flow.

Luckhasit's picture

greece it's not going to and you know that pods, you have to realize that this shit is purely theater.  the BIS, IMF, WB, and EU CB know what they are going to do with greece, the issue is making it palatable.

this is them making it palatable.

MonetaryApostate's picture

That's the entire point, waylay the inevitible until they are ready to collapse the whole shebang (Read currencies & markets), and then of course we will move into cashless societies where the elite can manipulate everything with even greater ease (Algos FTW?), for they won't have to pay the useless banking employees (& many other jobs will go away as well)...  If you think the end isn't near, then your understanding isn't clear, and those "In the know" definitely understand what I'm talking about here.

NoDebt's picture

They aren't ready for that yet.  And this whole Greece thing has popped up at an inopportune time for them.

Controlling the entire world is messy business sometimes.  

NoDebt's picture

Master-Blaster run Bartertown.

Janet Yellen is "Master"- the little troll who rides on top of "Blaster".

Please don't start me on Mad Max movie quotes.  Once I start, I find it difficult to stop.

 

BoredRoom's picture

berg-stein-man last I checked

jonytk's picture

You can draw all the funny memes you want williambanzai, but it looks like Eur is not going to reach parity any time soon.

Dubaibanker's picture

Talking of dictatorship....

DOD has released videos of marines training in the US....

Welcome to America! Where you can be tasered, kicked, or killed! and now you have the 4th option....face the marines on the civilian streets of ....Philadelphia!

After 154 years of relative peace.....Back to 1861? Are we?

DOD Releases Footage Of Marines Preparing for Riot Control in America

 

LasVegasDave's picture

I would be ok with it if they were headed to the NYTimes, the IRS, Hollywood and congress to arrest the traitors to the republic.

oh well, a man can dream......

conscious being's picture

Wow LVD, you're not such a bad guy after all. You did leave off the Fed though.

rsnoble's picture

Of course no mention of all the bastards starving to death.

MonetaryApostate's picture

Naturally, the MSM would never talk about reality under the weight of all this austerity being imposed, and that's so that their plans aren't laid bare to the masses...

MFL8240's picture

They forgot to metion higher US equity prices after default!

BeaverCream's picture

This is basically the story of Happy Gilmore trying to figure out a way to get his Grandmother's house back. 

Seasmoke's picture

Easy there. I don't think all Sesame Street characters bring smiles to children's faces. Pedophilia and all. 

MonetaryApostate's picture

Love your handle, sentiments too, and the sarcasm to boot. ^.^

samcontrol's picture

the pic kind of looks like the volcano that blew its load last night in my back yard ',, again " fuck!

of course if i move to yucatan form patagonia i'll first hit by a hurricane and then a shit loads of americans running away when TSHTF.

what to do....?

Seasmoke's picture

I'm just trying to figure out how they will spin that this is bad for Gold. 

taketheredpill's picture

 

 

Love the Dealer "analysis", which boils down to "here are some of the ways that this could be bad, but ultimately at the end of the year, things will be better".  So buy credit, buy equities?  Thanks.

 

And leave it to the Dealers to create a new scenario (Limbo!) to try to keep people in the game just...a...little..bit...longer.

 

spanish inquisition's picture

There is still too much on the plate for a Grexit at this point. We are still in GREBIAS (not to be confused with grabass) - Greek bail ins and asset stripping.

semperfi's picture

Graccident
Grexit
Grimbo
Gumbo
Rambo
Rimjob

who cares anymore?

fEUdalism is what it is and will be for a long time - done deal - the new middle ages

can we get on with something new ?

gwar5's picture

I completely agree with your sentiment but it matters who pays and how it unfolds because eventually you and I are going to pay since the banks refuse to take their lumps from their bad bets and the Greeks, and everybody else, are broke and don't have it.

joak's picture

The most funny part, in this tragedy, is how the FinMins of other states that are as indebted as Greece or even more feel like they can give advices or guidance to Greece. 

shovelhead's picture

Jimmy the Chooch's loansharking business has it's share of unhappy customers too.

"We know they're friggin' bums...That's why they come to see Jimmy".

CHX's picture

Greece is bankrupt for good. NOW. It seems, some people still cannot face this reality and try to talk more lipstick onto this piG. No easy out from here, at the end of the road. 

vegas's picture

So, Greek Gov't IOU's are now a new de facto derivative on a derivative and thus traded? By fucking who? Let me guess; The Squid & JPM make a "clean and honest" market for everyone who wants to play. Yes, by all means. let's have the assholes that did everything they could to create the problem be the ones who are delegated by Draghi et al to solve the problem. What a fucking joke.

 

www.traderzoo.mobi

WTFUD's picture

Skonto Riga, Paris, Brussels , meetings about possible future meetings and tax-payer money well spent.

Niall Of The Nine Hostages's picture

Greek limbo? Ah.

Pity. I hoped it meant Greek bimbo and I would get cheesecake for breakfast.

Speaking of, what are the last known co-ordinates of Danae Stratou? Nowhere in Greece, I hope.

DontFollowMyAdviceImaDummy's picture

wtf is so hard to understand?  THEY AINT GOTS NO MONEY HONEY!  if you are holding collateral greece gave you for a loan you made them, SELL THAT COLLATERAL NOW... lolz @ those who gave those chronic collective tax cheaters a loan without taking any collateral that you can liquidate.

Iam Yue2's picture

These idiots are like Gross, they keep needing to invent things, to make themselves seem relevant.

q99x2's picture

Banker giving free information. Something doesn't sound right.

Motasaurus's picture

The Grexit won't happen until the Red Shield owned banks have left Greece. When the Bankers run it's time to take notice. 

Blopper's picture

So many distractions that clearly show Grexit is simply impossible.

It's all just a drama.

Hey, Greece. You wanna exit? You really wanna? Then I DARE YOU! I FUCKING DARE YOU!!!