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IMF Bolsters Greek "No" Vote, Says Country Needs Much Bigger Debt Haircut
If the IMF were a Greek citizen, it would vote "No" in this weekend's referendum.
According to a report prepared prior to capital controls and the banking sector meltdown, any deal that included creditor concessions on fiscal reforms would mean Greece's debt load would have to be written down, as the country would need at least €60 billion in new financing.
This should not come as a surprise to our readers because long before Greece returned to the spotlight we reported last October, citing an S&P report, that by the end of 2015 Greek financing would be at least €43 billion. What we said then: "As for Greece, it appears that suddenly the idyllic image of its recovery is about to be torn to shreds and the Syntagma riotcam will have to come out of hibernation."
We were right about the former, still waiting for the riotcam. We were also right about this:
In other words, Greece will default the second the people start protesting the crushing, and very simple math, and they decide they have had enough of the technocrat and appoint another president. Because, you see, it is not that Greece implemented zero reform, and rooted out the pervasive cooruption that saw billions in foreign "aid" end up in offshore bank accounts of the political oligarchy, or the simple math of sources and uses of funds: it is the danger of the Greek people returning to what they did best in those days of 2010 and 2011 when every other day saw a riot in the center of Athens, that will be the straw that finally breaks the camel's back.
And thus we go back to square one, as we always said we would, when only timing was a matter of debate. Well, we now know the timing: T minus 15 months and counting to yet another Eurozone collapse.
Actually the collapse may have come earlier than that: some 6 months so, depending on what the vote in Sunday's referendum is.
But back to the IMF's report which underscores the Fund's long-standing position that EU creditors will ultimately need to write down their holdings if Greece has any hope of returning to a situation where the country's debt-to-GDP ratio is "sustainable," and suggests Syriza is indeed making a smart move by holding out.
- COMPREHENSIVE DEBT OPERATION IS REQUIRED TO RETURN GREECE TO ECONOMIC HEALTH
- GREECE NEEDS EITHER A DEBT WRITE-DOWN OR MATURITY EXTENSIONS UNDER LATEST CREDITOR PROPOSAL
- GREECE'S ADDITIONAL FINANCING NEEDS THROUGH 2018 TOTAL ABOVE EUR60 BILLION
- GREECE'S YEAR-AHEAD FINANCING NEEDS ALONE TOTAL EUR29 BILLION
- CAPITAL CONTROLS ARE LIKELY TO PUSH UP FINANCING AND DEBT RELIEF NEEDS
- "IMPERATIVE" EUROZONE COVERS AT LEASE EUR36 BILLION IN FINANCE UNDER HIGHLY CONCESSIONAL TERMS
- IMF PROPOSES EXTENDING GREECE'S DEBT MATURITY TO 40 YEARS FROM 20 YEARS CURRENTLY
- TO MEET THE 2012 DEBT-SUSTAINABILITY TARGETS FOR GREECE, EUROPE WOULD HAVE TO WRITE DOWN DEBT BY 30% GDP
- GREECE'S DEBT IS UNSUSTAINABLE WITHOUT DEBT RELIEF UNDER EUROZONE'S LAST GREEK BAILOUT OFFER
- EUROZONE MUST PROVIDE DEBT MATURITY EXTENSION "AT A MINIMUM"
- GREEK DEBT-SUSTAINABILITY REVIEW ASSUMES LONG-TERM AVERAGE REAL GDP GROWTH OF 1%
- LONG-TERM AVERAGE REAL GDP GROWTH OF 1% FOR GREECE MAY BE OPTIMISTIC
- A LOWER BUDGET TARGET THAN LAST GREEK CREDITOR OFFER WOULD REQUIRE EUR50 BILLION DEBT WRITE-DOWN
- A LOWER BUDGET TARGET THAN LAST GREEK CREDITOR OFFER WOULD ALSO NEED CONCESSIONAL FINANCING THROUGH 2020
- EVEN WITH DEBT RELIEF, LAST CREDITOR BAILOUT OFFER WOULD STILL SEE GREECE'S DEBT RATIO AT 142% GDP THROUGH 2022
- IMF ASSUMES GREEK GDP GROWTH OF 0% IN 2015, 2% IN 2016 AND 3% IN 2017
- A GROWTH SHOCK WOULD SPIKE GREECE'S DEBT RATIO TO 200% OF GDP IN 2017
What this means is that the Troika "joint" position just fractured, and the Greek demands for more debt writedowns, so vociferously rejected by the Eurogroup, were actually valid.
Here's more, via MNI:
The report was drafted before the shutdown of the Greek banking sector and is dated June 26. Although the report has "not been approved (by the) IMF's Executive Board" it concludes that Greece has "substantial financing needs" which would render the debt dynamics unsustainable.
The report argued that any agreement for a softer reforms package such as lower primary surpluses, weaker structural reforms or lower than expected privatization revenues would make the haircuts on the debt "necessary."
"Using the thresholds agreed in November 2012, a haircut that yields a reduction in debt of over 30% of GDP would be required to meet the November 2012 debt targets," it added.
And the punchline from the IMF's report (attached below), which may be just the push the Oxi vote needs to win on Sunday (and why stocks are suddenly swooning following this report):
Even with concessional financing through 2018, debt would remain very high for decades and highly vulnerable to shocks. Assuming official (concessional) financing through end–2018, the debt-to-GDP ratio is projected at about 150 percent in 2020, and close to 140 percent in 2022 (see Figure 4ii). Using the thresholds agreed in November 2012, a haircut that yields a reduction in debt of over 30 percent of GDP would be required to meet the November 2012 debt targets. With debt remaining very high, any further deterioration in growth rates or in the mediumterm primary surplus relative to the revised baseline scenario discussed here would result in significant increases in debt and gross financing needs (see robustness tests in the next section below). This points to the high vulnerability of the debt dynamics.
It gets better:
A lower medium-term primary surplus of 2½ percent of GDP and lower real GDP growth of 1 percent per year would require not only concessional financing with fixed interest rates through 2020 to cover gaps as well as doubling of grace and maturities on existing debt but also a significant haircut of debt, for instance, full write-off of the stock outstanding in the GLF facility (€53.1 billion) or any other similar operation. The debt-to-GDP ratio would decline immediately, but “flattens” afterwards amid low economic growth and reduced primary surpluses. The stock and flow treatment, nevertheless, are able to bring the GFN-to-GDP trajectory back to safe ranges for the next three decades (Figure 8)
Well, yes. As we can't tire of showing:
Also recall that in 2011, Citi estimated that if Athens waited until 2015, a haircut of 94% would be necessary to bring the debt-to-GDP ratio down to 60%:
What happens next? All the other peripheral nations - Spain, Italy, Portugal, show up at the IMF's door and ask if their debt, shown below, is also now deemed unsustainable.
Full IMF report:
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I'm sure Portugal , Italy and Spain are anxiously awaiting this decision. If there is any debt write down they will be demanding the same thing by the end of the year. The house of cards is getting pretty flimsy.
The plot thickens.
Writing down the debt in Greece will be unaffordable for the EU and EMZ.
Seems like we might have some IMF-EU infighting. IMF wants to collapse the system, while the people running the EU are actually in a fight for survival.
IMF and World Bank have destroyed every nation they have ‘helped’
Servicing foreign debt has led to more bad decisions and death in the past several hundred years than is normally acknowledged.
Debt that can’t be repaid, won’t be repaid. The question is who is dependent on debt for retirement or whatever else. Not just on Greek Debt but Spanish, Italian, American, Japanese. There are two sides to this coin. If the answer is just to forgive the central bank held debt, that is pure debt monetization and they would lose the use of the so called monetary incinerator, highly inflationary.
The end-game is a crisis severe enough to force European fiscal integration. No "Federal States of Europe" without it. This has been the plan of euro architects all along (see here).
So the TPTB/NWO/Americans want (need) a crisis severe enough to force this impopular "new Europe" through. The IMF is hence making sure it happens. That's why it seemed to be sabotaging a deal when Greece and the EU seemed close a few weeks back. And now a coherent and overt support from both the IMF and the White House for the Greeks to vote NO.
Pretty simple, really.
I'm not saying a NO vote is necessarily a wrong choice. IMHO however the moral Greek will refrain from participating in this charade on Sunday, any anyhow will have saved all his life, already withdrawn everything from the banking system, and will have gone Galt and thus minimized the effects this hegelian game can have upon his life.
Quote from Varoufakis' book "The Global Minotaur" (p. 227):
A second, even brighter, scenario would be for the West to have an epiphany and, at long last, embrace John Maynard Keynes’ suggestion of an International Currency Union – the very suggestion that America rejected at the Bretton Woods conference of 1944.
For the months preceding his nomination as Greek finance minister, he often appeared as guest analyst for news media like the BBC, CNN, Sky News, Russia Today and Bloomberg TV among others. Since January 2013 he was teaching at the Lyndon B. Johnson School of Public Affairs at the University of Texas at Austin.
The IMF Itself Is a Criminal Organization
"I'm sure Portugal , Italy and Spain are anxiously awaiting this decision. If there is any debt write down they will be demanding the same thing by the end of the year. The house of cards is getting pretty flimsy."
The slow motion train wreck that is the EU and the Euro. The light at the end of the tunnel is that oncoming train.
have you heard Desaparecidos new album, Payola? It has songs like this as its theme:
4. Golden ParachutesServices that don’t exist
Swapping the derivatives
When you’re betting on both red and black
It’s dealer’s choice the deck is always stacked
Now he runs the company
Cable news celebrity
They put him on the front of Forbes
He parades the bull like he’s a matador
It’s a frat house full of silver spoons
Watching pornography of busts and booms
It’s a locker room of CEOs
Telling dirty jokes
They’re all betting men who never lose
And float away on golden parachutes
It’s a bonus not a shake down
And they’re worth every penny
in my bank account
Now that you’re too big to fail
You’ll never have to go to jail
When you own it you can rob the bank
A bloated Dillinger a spray-tanned Jesse James
It’s a frat house full of silver spoons
Watching pornography of busts and booms
It’s a locker room of CFOs
Telling racist jokes
They’re all betting men who never lose
And float away on golden parachutes
And if Main Street wants a hand out
In their underwater houses let them drown
And the real world is jumping up and down, screaming "no shit Sherlock". It has finally occured to the IMF that there might be, possibly, kinda, maybe be a problem.....
All Euro debt should be haircutted to 60% of individual countries GDP
Importantly, this should have been done in 2010, when these losses would have still been borne by the private sector, whereas today they are borne by the taxpayers of the EU.
It would not have mattered when it was done, the taxpayer would be still footing the bill. See U.S. bailout for template. In fact the U.S. taxpayer is on the hook for some of the Euro trash banks right now. I mean they wouldn't want your social experiment shitting the bed (inevitable) before they get it going full swing here when now would they?
As of now the IMF is the Greece's best friend; after Sunday the whole Troika will be :-)
Total farce. Neocons apparently cannot endure the danger of Greece's exit and they know well why. Greece already grasped it too and may well turn the development upside down in their favour.
The smart will get paid the fools will pay.
IMF: Debt must be written down, as long as it's the debt is not owed to us, it's all good.
Nixon has a secret plan to win the war........
I think they all really want Greece to default so that Draghi has his excuse to go full-retard with QE to the moon. And whatever happens after that when they fail they will all just blame Greece for it.
The constant barrage of endlessly confusing and contradictory horsesh** continues. THIS is their system. Keep everyone confused so they give up following it and thereby give up control. http://www.thetruthaboutthelaw.com/non-linear-disinformation-makes-it-im...
You’re right. “Nobody’s fault”.
The reaction would be much different if the fine Greek citizens starting nailing the bank tellers who opened up their accounts.
Start at the bottom and work up. Let the Gods sort ‘em!
.
By: @blumaberlin
P is for penny-loafers ...
Drachma-loafers. Dual meaning
G is for Guillotine...what a haircut!
a haircut that yields a reduction in debt of over 30% of GDP would be required
does this mean to a balance of 30% of GDP - or - a 30% reduction from present Debt / GDP?
if its just 30% reduction from todays balance - it isnt enough
more importantly this should open the floodgates for Spain / Portugal / Italy / France - they cant chin the bar either - if EU is to come out of this sometime in this Century
The Germans got a free ride in 1953 - why not have them make the payments for "everyone" now that they can afford it as deferred compensation to everyone else for WWII - what goes around comes around !
Banksters not willing to print. Unheard of. Must be a problem in the reality universe.
Young Greeks are fleeing the country. The Elder Greeks will starve because of their decisions made 50 years ago.
Poetic.
Good..they are good restauranteurs...I love Greek food....and they make a killer pizza too..
The IMF isn't going to reduce the number of chains on their slave.
Once a slave, always a slave, until the slave says NO.
I would not believe any single word these mother fuckers are saying. The always lie! And of course they need to, because the whole idea of IMF is a big scam.
They poured $ billions into Ukraine civil war even it's against their own rules. They just don't fucking care about anyone else beside their filthy banksters asses.
No shit, Sherlock! Of course some or a lot of it has to be written off.
This is to perpetuate the Debt Ponzi, by having Unfavorable banks take the hit, to open them up for hostile takeovers. From nice people like those at GS, "God's Servants", doing God's work.
Well, DUH!
Nice set of IMF shears will take care of it.
Then the rest of the PIIGS will be demanding it.
Once you give one crying kid an ice cream cone they'll all start crying for one.
Why now IMF? Now that the hair has grown and you have started to look ugly did the investors realize that they need a haircut. IMF, why are you were only worried about the investors money? What about the Greek's lost GDP when they were standing in the ATM queue?
Greek PM, you are holding your fort well against the TROIKA... (read not against the citizens of Eurozone)
You know, LaGarde has a prehensile clitoris.
True story.
Thought LaGarde had a gender change.
To female?
The Greek GDP changes every minute....going down down down...and does it include the black market GDP...that is growing growing growing...
To be fair, they were saying this back in 2013. The IMF have never loved Greece, or its prospects, it is just that the last time they caved in, they did so in the interests of the "global economy." This time, such concerns do not apply.
https://www.imf.org/external/pubs/ft/scr/2013/cr13156.pdf
Just like Bill Gates and the rest of those population trimmer scumbags. Okay, you first buddy. Forgive their debt to you first you ugly witch hag.
"This underscores the IMF's long-standing position that EU creditors will ultimately need to write down their holdings if Greece has any hope of returning to a situation where the country's debt-to-GDP ratio is "sustainable," and suggests that Syriza is indeed making a smart move by holding out."
Duh! No sh*t, Sherlock? Besides Mike "Mish" Shedlock, are there any analysts with IQs over 50 out there? Here's one that's beginning to get a clue at this late date:
Explaining The Game Theory Of The Greek Debt Negotiations (MAY 31, 2015)
http://www.forbes.com/sites/timworstall/2015/05/31/explaining-the-game-t...
Hans-Werner Sinn Warns Europe - Don't Underestimate Varoufakis
How much money has Mish lost shorting the market and gold over the last 7 years?
Let me know when mish figures out how guns work, until then the lesbian looking analyst is not my cupa'tea
When socialists don't agree...
Kinda looks like a setup. First Greece can't pay, then Spain can't pay, then Italy can't pay, then Canada can't pay, then no one can pay, so might as well use the opportunity to dump US debt as well.
1,2,3 red button please.
Push the EASY button.
This is the U.S. talking its NATO book - Russia focused
Tyler, do you have a way of gathering metrics on withdrawals at the other PIIG banks? You know they'll never bring it up.
The first rule of ECB club is you do not talk about PIIG bank runs?
Someone sing me a love song. Something like breaking up is hard to do, yes, it's over.
“The problem is all inside your head”
My accountant said to me
“The answer is easy if you
Take it logically
I’d like to help you in your struggle
To be free
There must be fifty ways
To leave your creditor”
He said, “It really is my habit to intrude
Furthermore, I hope my meaning
Won’t be lost or misconstrued
But I’ll repeat myself
At the risk of being crude
There must be fifty ways
To leave your creditor
Fifty ways to leave your creditor”
You just get out yo' lease, Greece
Make a new plan, Iran
It don't have to be wittily, Italy
Just get yourself free
Refuse to pay, USA
You don’t need to discuss much
Just get out of pain, Spain
And get yourself free
Perfect! Thanks!
So when are the Greeks going to go all ISIS and burn up another three bank employees?
http://www.cnn.com/2010/WORLD/europe/05/05/greece.strikes/index.html
Why stop at three?
2043 will reallly suck for Greece.
This is a great article says it all.
http://russia-insider.com/en/politics/care-and-feeding-financial-black-h...
Well worth the read.
The banking system is a blatant fraud.
Think about the concept of fractional reserve banking: Banks loan out more money than they have in deposits. In essence, they're creating money out of thin air.
Meanwhile, the bankers cross their fingers and hope that all the depositors won't want their money back at the same time. Greece is a classic example of fractional reserve banking crashing into the wall of reality.
If the core constituency is in fact pensioners and government workers then a yes vote is all but assured. That would be the real Greek tradegy.
It will be in the best interest of Greece to tell the ECB to go to hell, default on its loans, exit the Euro and follow Iceland to the path of economic recovery having borne the short term pain of its currency being devaulated. The other option for Greece is to kneel to ECBs terms and follow the path of Financial Slavery for the foreseeable future. ECB is representing the banks who have lent money to Greece without due diligence and now want their loans with interest back by imposing financial hardships on the working class in Greece.
http://www.marketoracle.co.uk/Article40231.html
Interesting to see the muppets at Paddy Power, who having already paid out to those who voted YES in the Greek Referendum, have been forced back into the market. They are now currently pricing up YES at 8/15 (65% Implied Probability), after a weight of money has been seen across the board for a No vote, following on from the IMF statement.
Great PR stunt lads!!!
About Greece:
This little PIIGSy was marked to market...
This little PIIGSy had a bank run...
This little PIIGSy had hosted a thief...
This little PIIGSy came undone...
This little PIIGSy cried "My country is debris, debris, debris!"
All through the Euro zone...
The truth is the EU is a middle layer and Europeans are squatters, central banks are private and they keep treasury books for some countries. Questionable is any political power, the real question is whether bankers will succeed in zeroing their liabilities to depositors' and end up with beneficial right to properties. Varoufakis should be talking to the Swiss owners of the Bank if he wants Treasury control. But that concept would be weird in the world of central banks, Government owning central banks and controlling their treasuries, what a joke.
So we have political charade as a distraction to underhanded foolery.