Germany Gives Greece Grexit Referendum Greenlight

Tyler Durden's picture

Headline risk surrounding Greece will likely weigh heavily on investors’ minds throughout the week as Syriza faces one of its biggest tests yet when a €750 million payment to the IMF comes due on Tuesday. Despite rampant skepticism and a warning from Germany’s Schaeuble that countries can “accidentally” become insolvent, FinMin Varoufakis claims Greece will make the payment and thus avert an imminent default. This comes as finance ministers from across the currency bloc meet to discuss Greece’s future with the consensus being that there almost certainly will be no definitive deal on Monday, but there look to be conflicting reports as to whether an interim solution to address the country’s immediate liquidity needs can be fashioned. 

Via Reuters:

A 750 million euro debt repayment to the IMF falls due on Tuesday but Varoufakis said a deal that would provide some liquidity relief for Greece was more likely in the coming days…


Euro zone officials have ruled out a deal with Greece at Monday's meeting and said any statement they make is unlikely to be enough to allow the European Central Bank to raise the limit on short-term Treasury bills that Greek banks can buy - a move Athens has sought as a way to avert a national bankruptcy.


In a sign of growing pressures within the ruling Syriza party against backing down to lenders, the parliament speaker Nikos Filis suggested on Monday that the IMF debt repayment would depend on the Eurogroup outcome…

The stance of Filis, a hardliner within Syriza, is different from that of the government, which says it will make the payment on Tuesday.


"It is clear that any move by one side affects the other side. The next moves will be shaped by today's developments, we are seeking an agreement," Filis told Mega TV.


"The decision (on the IMF repayment) will be taken today. It depends on the Eurogroup," he said. 

Regardless of whether some stopgap measure is found for tomorrow’s IMF payment, Athens faces five more payments to the IMF over the course of the next two months, and given the seemingly intractable character of the negotiations, it’s worth considering what happens in the event of an “accident”. Barclays has taken a look at the country’s liability stack to determine where there is potential for cross-acceleration of payment rights.

In other words: assuming Greece defaults on an obligation to a given creditor, what are the implications for other creditors in terms of their right to demand immediate payment? Below is a matrix which outlines the universe of possibilities.

For their part, UBS is out with “four scenarios for Greece and the Eurozone.” Here’s more:

Scenario 1: Eventually positive outcome, default and Grexit avoided Under this scenario, the negotiations between Greece and the Troika remain protracted, but they will eventually make sufficient progress for the Troika to sign off the conclusion of the stalled fifth review. This would lead to the payout of €7.2bn, but parts of the disbursement (for example the ECB's €1.9bn in SMP profits on Greek bonds) might be paid out earlier (for example, after reformrelated legislation had been passed by the Greek parliament) in order to help the Greek government to avoid a default in May/June…


The key to a breakthrough would be that the Greek government, amid increasingly precarious public finances and ongoing deposit outflows from the banking sector, would eventually be forced to make more comprehensive concessions in crucial areas of structural reform, such as pension and labour market reform, taxation, and privatisation – measures that would go against vested interests in Greece. In return, to soften the political resistance to these measures and allow for somewhat greater social spending, the Troika would allow the Syriza government to run a lower than previously targeted primary surplus…


Scenario 2: Default, but no Grexit Under this scenario, negotiations would continue to proceed very slowly, with the Syriza government remaining reluctant to give in to Troika demands related to unpopular structural reforms and fiscal targets. Amid an increasingly difficult budget situation, the government's ability to service its debt while at the same time paying wages and pensions would decline further and the government would eventually default on (parts of) its debt.4 In the event of a default, the risk of Grexit would clearly rise, but it would not be inevitable. In our view, it would depend crucially on: 

  • what sort of debt the government would default on; 
  • whether this would trigger cross-default on other debt; 
  • how the default would affect the stability of the Greek banking system; 
  • how the ECB would react to a default; and 
  • how long the default would last

And as we argued yesterday, the ECB’s handling of an adverse scenario will prove crucial:

A crucial question would then be how the ECB would react. As we argued above, the ECB's rules on the provision of Emergency Liquidity Assistance (ELA) are neither detailed nor very transparent; and although they clearly stipulate that ELA can only be provided to solvent financial institutions, the ECB would probably have some room to exercise judgement and discretion. We would regard it as likely that the ECB would at least tighten the collateral requirement (haircut) it applies on ELA. However, the ECB might not necessarily cut off ELA immediately, particularly if negotiations between the Greek government and the Troika were still ongoing and a positive eventual outcome were still conceivable. (In the case of Cyprus in late 2012/early 2013 the ECB continued to provide ELA despite widespread concerns about the solvency of the Cypriot banking system.)


Scenario 3: Default, quick Grexit Should Greece fail to strike a deal with its international creditors over the coming months, the fiscal situation would deteriorate so far that a default might become inevitable; this could happen as early as May or June, but the risk would certainly rise dramatically in July and August. Default would seriously worsen the situation of the Greek banks, given losses on their bond/T-bill exposure, a reduction in eligible collateral for ELA operations, and likely deposit runs. If an official, political understanding is reached at the European level that talks have finally collapsed – a crucial difference towards Scenario 2 – the ECB would not be able to "pretend and extend", but would have to cut off ELA to Greek banks. The Greek government would be forced to impose capital controls, but the liquidity situation of the banking sector would nevertheless worsen so dramatically that, in order to avoid a collapse of the banking system, the government would have no choice but to introduce its own currency. The launch of a "New Drachma" would be a huge logistical challenge.


Scenario 4: IOUs to become a parallel currency, eventual default, Grexit Under this scenario, the increasingly desperate budget situation would force the Greek government to issue IOUs for domestic payments. By now the government might have already started to pay corporate suppliers using IOUs of some sort (as happened in Greece and other peripheral countries earlier in the Eurozone crisis), but the approach could be formalised much more and extended to public sector salaries and pensions, which make up a large part of public spending. 

Here’s a probability distribution…

...and here’s a look at what GGBs are saying about the risk of Grexit

As you can see from the above, the notion of a "parallel currency" (which is a polite name for an IOU issued by the Greek government) is increasingly seen as a very real possibility and could have dire consequences for the monetary union because as we've noted in the past, it is redenomination risk that threatens to break the euro, not spiking periphery spreads. Put more simply: If there is a Greek default and suddenly it becomes clear to everyone that the unbreakable monetary union is quite, well, breakable, the IMF will have to worry not about bank runs in Bulgaria et al, but the countries in Europe's periphery. Consider the following as well which underscores the degree to which a return to the drachma is under serious consideration (via Bloomberg):

Ex-Deutsche Bank Chief Economist Thomas Mayer discussed his proposal for a parallel currency with Greek Finance Minister Yanis Varoufakis and Prime Minister Alexis Tsipras at April 28 meeting in Athens, Handelsblatt reports, citing Mayer.


Mayer’s proposal from 2012 gaining traction as ECB, IMF also considering scenarios whereby pensions, government workers could be paid in IOUs: Handelsblatt, citing unidentified German govt official.

Meanwhile, Germany has suggested that Greece should consider letting its citizens decide if they are prepared to dial back their anti-austerity expectations in exchange for funding that would keep the country in the euro and avert a catastrophic default. 

Via WSJ:

A referendum in Greece on the country’s international bailout program may be a good idea, Germany’s finance minister said Monday.


“It may even be a right measure to ask the Greek people to decide whether it’s ready to accept what is necessary or whether it wants the alternative,”said Wolfgang Schäuble said as he arrived for a meeting with his eurozone counterparts in Brussels.


Calling a referendum on the bailout would be a risky move for both the government in Athens and the rest of the eurozone, adding further unpredictability to a tense situation. A negative vote would likely herald Greece’s exit from the eurozone.


Several of the overhaul measures demanded by Greece’s international creditors—including pension cuts and new laws that make it easier to lay off workers—clash with the promises the new left-wing government made when it was elected in January.


The last time a Greek government proposed a referendum on its bailout—in 2011—the idea was vehemently opposed by German Chancellor Angela Merkel. Her opposition pushed the then-government to scrap the plan.

Of course, as we've noted on several occasions, Greeks aren't keen on the referendum idea even as they prefer, on balance, to remain in the euro. 

Via Protothema:

A day after Greek Radical Left Coalition (SYRIZA) Prime Minister Alexis Tsipras overhauled his negotiating team in an effort to speed up debt talks and unlock bailout funds benchmarked for Greece, the prime minister said he might resort to calling a public referendum on any deal with international creditors. He said that a package that goes beyond the political mandate that resulted in his party’s victory on January 25 could result in a referendum.


Citizens polled by Marc for private ALPHA TV and by GPO for private MEGA TV state that Greeks do not want to go to the polls on the issue.


GPO saw that a resounding “No” to a referendum is given by 62% of Greeks. 

Or, summing up:

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Newsboy's picture

"Death or gang-rape? You get to decide your fate."

SickDollar's picture

Indeed , either way, you are royally fucked

Latina Lover's picture

False Dilemma:  just say no to the banksters and default.  Fuck them and their law!

pods's picture

Greek Reply:  I think we will default, stay in your system, and go on about our ways using the Euro.

And if you have a problem with that, well, suck eggs!


Haus-Targaryen's picture

Yawn!  This shit again? 

DeadFred's picture

Every time they trot out a conflict like this the market drops 1% in concern then it gets temporaily resolved and the rebound takes us to another all time high. Some day it won't get reslved and the drop will be bigger than expected. Buy straddled options to reflect this reality.

Marco's picture

I don't think you have an accurate view of the flow of capital. There is talk of default, but on the net money and goods are flowing into Greece (they are being still being bailed out, the money just shifted to their banks instead of government, they're just looking a gift horse in the mouth). Or at least into Greek hands, not a lot of the money is stored in Greek banks obviously.

So if they default and don't have the ability to devalue (staying in the Euro) they'll just be forced into austerity any way AND on top of that their banking system falls over. That's a bit of a loss/loss.

pods's picture

Greece is going to default anyways, which will force austerity.

Why not at least get the advantage of staying in the union to achieve better trade deals, instead of having to deal with repercussions of trade wars.

Denninger did a good piece on this.
Greece can default and scale down government, but for their people, not for the bankers in Brussels.

They are toast either way. One way involves being a perpetual debt slave to Brussels, one does not.


Ghordius's picture

oh, what the hell. I think I do have to go a bit against the stream, here

first, pod's comment is quite good. the only thing I'd mention there is that it's not "Brussels", it's "Berlin" and "Den Haag", etc. etc. And it's not bankers anymore, it's countries

second, no, "Greece is going to default anyway" is not a given. Still not. Likely, perhaps, but not a given

third, Tyler's "re-denomination risk" is also not a given. meanwhile... Q€ is still trying to fly, that mad bird. It would be champagne and fireworks time in Frankfurt if "re-denomination risk" would rear it's head while Q€ is still running. the EuroSystem national banks would have someone that sells them what they want at a cheaper price

fourth: "Austerity" is a negatively connotated word, mainly used in the UK and in Greece. The better word is balanced budgets

one thing that most here forget is that no country ever pays more then 20% of what it taxes, the "unwritten rule" of the IMF "consensus". a club that the current Greek government does not want to leave, btw, hence the payments this year

balanced budgets is much, much easier to explain and stick to then "Austerity" (which is often a weasel word). and it's more honest, to boot. simple and clear and honest. I know, three seldom encountered qualities

Marco's picture

The problem is that balancing your budget purely through internal deflation is so much more painful than combining it with devaluation.

PS. yeah yeah, I know ... "lost decades" and all that, but Japan seemed to do pretty well for it's citizens in those decades in my opinion. What exactly was lost?

Ghordius's picture

"opportunities". particularly for megabanks, of course

Marco's picture

If they exit while they are being bailed out (either directly, or through the ECB providing a back stop to their banks) they are cutting their own wrists.

If they really want to default, they should do it after SRM is ratified and there is enough money in the SRF ...

I think the EU would find some way to carve out it's pound of meat if they tried though. When all is said and done Greece has gotten an awful lot of bail out money and massive haircuts on their debt, 180% is high but within the EU it's not that high. The costs of simply paying interest on the debts is probably worth it simply to avoid a lot of hassle.

flapdoodle's picture

flapdoodle's prediction - Greece will not make *any* of these payments but will allow the EU to claim that they did!

That keeps the illusion going a bit longer...

TahoeBilly2012's picture

What if men got around in rooms and developed financial systems that were as equitable as possible for as many people as possible, versus one designed to screw as many as possible by the few....would shit drag on like this in Greece? It's obvious to any sound mind this system isn't about being equitable but about financial slavery and they have the heuvos to discuss it forever like it's some grand "care package".

jdtexas's picture

Germany gives the green light to Russian computer tech too.....Dude you're gett'n a Putin


Russia and Germany Collaberate on Supercomputer Tech As Russia Releases Its Intel Clone CPU

Oh regional Indian's picture

Okay, esoteric off-track.

Show runners knwo and understand that we are in the starting shadow phase of a powerfully aspected mercury retrograde (

Don't dismiss this lightly, Old JPM had said, millionaires don't use astrology, billionaires do.

So, from now through June 11 (and a week or so to exit the out-going shadow), nothing will get sorted, only unsorted. But this befuddling haranguing will continue.

Some skirmishes (like Yemen) will get worse. We are also entering high summer in the northern climes. 

The air is one of flint and tinder so to speak.

No big moves personally, no contracts if you can help it. Forgive people because all communication is jumbled, be extra explainy and patient.

And clear some cob webs...

Eggshells, till June 3rd week ;-)


Sequence 19

CarpetShag's picture

and don't get into a taxi before Jun11 - you'll never arrive!

Cpl Hicks's picture

You are the master of befuddling, for sure...

WillyGroper's picture

One sentence brought me back to center.

new game's picture

debt hangover and nowhere to hide. disgusting nation of beggers, dirrect result of the human dilema - something for nothing with bankers preying on the situation. bankers loose as this nation can't even service the usery. admit defeat already and take it up the ass as you deserve.

greece is the template of all western gutted for banker profit til the crumble becomes collapse.

just fucking sad as it can be prevented. something for nothing-damn the future...

gimme-gimme-gimme's picture

Why is that Greeces only 3 choices?  


4) EU does proper sctructural reform

5) Greece does nothing and lets Germany/EU be the bad guys


Guess 5) is kinda like 3) but the brainwashed fuck stick who wrote that is too diluted to tell the truth.

Fun Facts's picture

"Indeed , either way, you are royally fucked"

May need to call the IMF's expert donkey fucker DSK.

Freddie's picture

A message from Mr. Panos to Germany, the IMF, EU and Troika.

Fu*k You Mallacka!

junction's picture

Reminds me of Babu in the Seinfeld episode "The Visa."(S04E17, January 27, 1993)

". . .he said the wheels were in motion, but there was no motion.  There was nothing."

Nothing is what the Greeks can expect from Brussels.

doctor10's picture

"economic malaise" -such whimpering BS. 

One of the principle industries in Greece-and that brings in real currency-is tourism. It will SMOKE when the drachma returns.

Fahque Imuhnutjahb's picture

"Very good, death by gang-rape it is, pass the Ouzo."

Tom_Pain's picture

The sentence is BUNGA-BUNGA!

BoPeople's picture
BoPeople (not verified) May 11, 2015 8:16 AM

Great ... when can we start exiting from the Fed? When can we get rid of the jailor/babysitter and create our own world?

Creepy A. Cracker's picture

Get out.

And get a job.

Keep voting for the statists and you'll just repeat the same f*cked up scenario - your government spending yourselves into oblivion - over and over.

Antifaschistische's picture

I continue to believe that an exit will create massive disruptions to Accounts Receivables and Accounts Payables for both Greek companies and all non-Greek companies doing business in Greek.   No one will accept a devalued Drachma receivable, so Greek companies will still be forced to pay in Euro's....but if their products are being sold in Drachma or even particially in will the Euro Denominated Payble be satified.

I project the hotest new job in Greek will be Accountants.   This will be a nightmare.

Dewey Cheatum Howe's picture

Of course they gave them okay. Have you ever known a junkie to voluntarily walk away if there is a chance they can still get another fix. The fix is in because of the way a junkie will behave when given a choice between less drugs or no drugs. If you force a democracy aka mob rules to make a unanimous choice they are going to make that choice based on emotion not logic. That is how junkies rationalize their addictions. It is all about the next fix, nothing more complicated than that.

The only way this backfires is if another drug dealer is quietly lined up (Russia/China) to keep feeding their debt fix.

The only way Greece gets fixed is if the world cuts them off but that won't happen because EU and such are addicts also, they are addicted to power...

It is one giant junkie circle jerk, just different drugs for each party involved in this particular shitshow.

IndianaJohn's picture

Junkies and their shitshow is a great summary.

ebworthen's picture

ZeroHedge summary:  priceless!

Why can't Greece create money from nothing the way the FED does, no nukes?

Arius.'s picture
Arius. (not verified) May 11, 2015 8:27 AM

does Germany gives a greenlight for not paying 750 million Euros tomorrow? 


central bank doesnt have that money.  since august they have gathered all available to pay IMF and ECB.


the money in question has been previously allocated previously to local government and hospitals and public utility companies, the government issued a decree to gather the money hoping on a deal today.


now things have changed it seems ... what does Dieselbloom states about this? 


Is DiesselBloom going to squeeze avery penny befire leaving it alone?

Seasmoke's picture

Didn't Gold Drop $100 last few months because Grexit was solved. Surely Gold deserves THAT $100 back plus $3000. 

NoWayJose's picture

The only hope for Greece is to default on all of its debt and leave the Euro - then impose its own austerity and taxes on order to achieve a balanced budget such that it does not have to borrow from the banksters. It will be much easier to balance your budget if you do not have to shell out billions to the banksters. And the severity of cuts will be less too!

Cpl Hicks's picture

Now that you put it that way, it sounds very reasonable and practical.

So, then it won't happen.

Panic Mode's picture

It won't happen. They will use scare tactic and special power to manipulate the vote results. The ECB is not worrying about Greece, the major problem is that Italy, Spain and Portugal will follow suit after Greece defaults.

Greece is tiny comparing to Italy + Spain + Portugal.

Multi's picture

I agree with you. Whatever the decision dealing with Greece, they are NOT thinking about Greece, they are thinking about the bigger PIIGS.

FrankDieter's picture

They do a special loan for just the IMF 750 euro pyment due tomorrow.  Maybe extend 150M per year next 5 years.

During these 5 years the Greeks sell body parts to rich European and Chinese oligarts for funds.

SpanishGoop's picture

"...its biggest tests yet when a €750 million payment to the IMF comes due on Tuesday."

Just keep that money in your pocket (if it is there) and let them send a debt collector.


williambanzai7's picture

In situations such as this, it would be wise and prudent for Greece ti libe up it's Dipshit In Possession financing...

SpanishGoop's picture

"Germany Gives Greece Grexit Referendum Greenlight"

Only the title of this article already gives me the creeps, and not because of the many G's.

Greece still occupied ?

One sentence to determine the real ruler of the EU.

Soon we will all be eating tulipbulps again.



HowdyDoody's picture

Germany Gives Greece Grexit Gropearoundum Greenlight

Ghordius's picture

agree with the sentiment, but this is only a matter of "journalistic liberties". Tyler wrote the header of the article like that

further down, you read "Germany has suggested that Greece should consider letting its citizens decide if they are prepared to dial back their anti-austerity expectations in exchange for funding that would keep the country in the euro and avert a catastrophic default"

and further down, you read that in fact it was only Schäuble suggesting such a thing, and... well, the man has a lot of grumpiness to spread around. nevertheless, he said that as a private citizen and a minister, not as someone that has a say on what Greeks do in the matter of referenda or not

so much for the "real ruler of the EU". thanks, but no, thanks

btw, if you understand German, this oldtimer video on the financial crisis is still a little gem of German humour: "Finanzkrise verständlich erklärt

SpanishGoop's picture

So you still think that "Germany suggested" means something else than "Germany allows" or "Germany dictated" whithin the Eurozone ?

That's a bit naïve.

And yes, i can read and write German but i will never understand them. :-)




Ghordius's picture

yes, it means something else. we have here a lot of discussions because of european ministers that talk... and mass media, particularly some of it... portraying it as official statements with the full weight of a nation behind it. there are shades of "said as minister" and "said as private person". and official statements are clearly marked as such, btw. though reuters is less interested in them, of course

the dear German FinMin is "taking a lot of stones out of his shoes". As a private person. Remember one thing: we are in a bazaar, and those guys are still haggling. and having a few jabs at each other

SpanishGoop's picture

"the dear German FinMin is "taking a lot of stones out of his shoes"."

Who isn't at the moment ?

But who is the puppeteer that does know where all of this is going ?


SpanishGoop's picture

"Finanzkrise verständlich erklärt

Brought (laughing) tears to my eyes, thanks.

SpanishGoop's picture

If i were Greece i would ask the IMF for a monthley payment plan.