Greece Is In Trouble Again: Bonds, Stocks Plunge As Bailout Talks Collapse; IMF Sees "Explosive" Debt

Tyler Durden's picture

It may - or may not - shock readers to learn that Greece is once again on the verge of collapse.

10-year bond yields shot up and stocks tumbled on Friday, a day after euro zone finance ministers acknowledged the country's fiscal progress but once again failed to break an impasse with the IMF over the country's future bailout targets. Early on Friday morning, the greatest Greek nemesis alive, and surely in the afterlife, German Finance Minister Wolfgang Schaeuble said that Greece’s creditors won’t unlock further financial aid to the country unless the government meets its reform promises, which he said it hasn't done yet.

Two years after its third bailout, Athens and the Troika, or is that Quadriga, i.e., its European and IMF creditors, are still at odds over the fiscal goals Greece can achieve after 2018, when its third rescue programme ends. According to Reuters, the talks have dragged on for months, hindering the conclusion of a bailout review that would help Athens qualify for inclusion in the ECB's much desied bond-monetization programme and return to bond markets as early as this year.

And, yes, the ongoing disagreements have rekindled fears of a new crisis in Greece, which never really emerged from any of the previous ones, which was forced to sign up to another bailout in July 2015 in order to stay in the euro zone.

Worse, hinting that there may not be a 4th bailout simply because the Greek people will snap by then, the Greek parliament's budgetary office warned on Friday that "the fiscal cost of the delays may prove bigger than the benefit of a deal".

Greek 10-year bond yields rose by 21 basis points on Friday, while stocks were 3 percent down. Which means that in the Greek market where an occasional trade takes place once a week, someone sold an oddlot.

"The outcome was tougher than what the market had hoped for," Beta Securities analysts Takis Zamanis told Reuters.

There was some good news for Greece, now in its 7th years of economic depression, when European Commission Vice President Valdis Dombrovskis said that Greece outperformed its fiscal targets last year and was on track to meet its 2018 primary surplus target of 3.5 percent of economic output. But he added that more discussions were needed on the fiscal trajectory thereafter and on measures which might be needed and would be implemented only if Greece missed its targets.

In other words, back to square one.

The IMF, which participated in two Greek bailout programmes but is so far only an observer in the current one, says Athens can only achieve a surplus of 1.5 percent of gross domestic product in 2018 unless it adopts more measures now and is granted more debt relief.

The IMF also was the source of bad news, reporting that Greece’s debt is “highly unsustainable” and will reach 275% of GDP - this is after it has been "reprofiled" three times already - by 2060 unless the country’s loans are significantly restructured, according to a draft confidential review of the country’s economy. Without prior bailouts, Greek debt/GDP would be between 400% and 500% as of this moment.

The assessment, prepared ahead of an IMF board meeting on Feb. 6  and seen by The Wall Street Journal, was significantly more pessimistic than that of Greece’s eurozone creditors and underscores the difficulty of the fund moving ahead with a new bailout for Greece in the near future.

Under the draft review, which comes as Athens and its creditors once again failed to find an "austerity" solution, debt is projected to reach around 160% of GDP by 2030 but “become explosive thereafter.” Under the same scenario, debt is seen reaching as much as 275% of GDP in 2060.

The assessment presents a contrast with the eurozone’s own forecasts. An official eurozone analysis in May projected debt-to-GDP of 104.9% in 2060, under a baseline scenario in which Greece fully implements its bailout program. Eurozone governments are resisting the IMF’s push for more debt forgiveness that will come largely at their expense.


“Greece cannot be expected to grow out of its debt problem, even with full implementation of reforms,” the IMF says, adding that the country needs significant debt relief from its European partners to ensure the debt load is sustainable.


The draft review says that measures agreed by the eurozone in May to ease Greece’s debt load need to be further specified, and that “ambitious extensions of grace and maturity periods, a full deferral of interest on European loans, as well as a locking in of the interest rate will be needed” to put debt on a sustainable path.

Meanwhile, "The pressure is on for the Greek government following yesterday's Eurogroup meeting, since it did not receive substantial support, not even by the supportive EU Commission," Axia Ventures Group said in a morning note. Greece's leftist-led government, which is sagging in opinion polls, is refusing to adopt more austerity measures, saying the country is delivering on its bailout promises.

And so, the impasse will go on until Greece either runs out of money again leading to the next social crisis and bailout, or until either China or Russia acquires it in bankruptcy auction, or the Turks invade.

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SpanishGoop's picture

'Again' ?

They have never been out of it, just ask the Greeks.


Theta_Burn's picture

Not true... last week eveything was just fine..

NoPension's picture

Beat me to it! 


Vageling's picture

And they should demand an explanation from... Well Germany is a good start why! 

But hey! I was wondering what our Eurogruppefuhrer was up to. AFM making a boo-boo of Soros's shorts. Belastingdienst (Dutch IRS) is completely screwed by fuck-ups that will cost over 100 mln €.

 How great to know he's more concerned screwing the Greek.

Placerville's picture

My Big Fat Greek Debt Part 4.

The same debt you love to hate, just Bigger and Fatter!

OregonGrown's picture

This HAS TO BE bullish for the EURO..... as well as EU high yield bonds / bunds...... /s


Hyperinflation in 3.....2.......

CompassionateConservative's picture

Well, whatever they do they'd better not put Golden Dawn in power because they're evil nazis and as history clearly shows nazis don't know how to restore an economy.  They just need to be put in hock to the Jews, God's Chosen, even more.  Pay the Jews you filthy Greek goyim!  You owe them!

Shitler's picture

Golden dawn golden dawn golden dawn!

Hohum's picture

Don't worry.  The problem will either be "fixed," or the media will just stop talking about it.

Son of Captain Nemo's picture

WOW!!! Who saw this coming?!!!

roadhazard's picture

It sure takes those people a long time to starve to death.

peippe's picture

it's those damn goats & the milk & cheese they produce. 

Greece may outlast us all.

Cradle of Mediterranean Civilization.

whatamaroon's picture

Sad the Greeks have been in a depression for 7 years, unlike here in the US that has been depressed for 8 years.

SpanishGoop's picture

"that Greece outperformed its fiscal targets last year and was on track to meet its 2018"

Nonsense, by 2018 no Greeks will have an euro left to pay taxes.

It will only go downhill from here.


CompassionateConservative's picture

They need more loans to buy the poor downtrodden rapists from subhuman Africa nice cars and homes that they so richly deserve just because they hopped on a shitty raft with their fellow niggers and crossed the sea.  Of course if common working class Greeks balk at that then they are fucking racists and nazis worse than Donald Trump!  REFUGEES AND ISRAEL FIRST!

hotrod's picture

Where is Varoufuckedus.  He seems to get alot of attention for nothing.

Vigilante's picture

He made a royal mess then he buggered off

Note to all...Never elect  a leftie uni perfesser to run economic policy

Esp one that never had a real job outside academia.


Chuckster's picture

There seems to be a lot of countries for sale these days.  Donald is a business man.  Can Greece become Trump Nation?

gatorengineer's picture

Heard there was a shortage of Greek diners in NYC... Good fit...

Vigilante's picture

GR is the polar opposite of a Trump nation.

As harsh as it sounds, the muslim rapefugees washing on our shores are more likely to like capitalism/entrepreneurship than most Greeks


are we there yet's picture

No rational investor would buy Greek bonds at any interest rate, unless they are guaranteed by some solvent third party. Buying bonds from Greece is like loaning money to a man in bankruptcy, going through a divorce, who is out of work and living in an elderly care facility. The payback math just does no work.

Antifaschistische's picture

unless, you have a prenegotiated, under the table bail-out guarantee from your friends at Davos. (via someone elses tax dollars, or fiat cb counterfeiting)

FX223's picture

Reverse mortgage could work in that situation but get it signed before the divorce is final and take the cash to Vagas DOUBLE ZERO baby!

itstippy's picture

The European Central Bank is buying every sovereign bond issued in the Eurozone with their QE initiative, BUT you gotta be in the club (Italy, Germany, France, Spain).  The Greeks NEED to get back into the club.  That's what the fuss is.  

Greece needs to be able to return to the bond market so they can issue bonds that the ECB will buy; then they can use the fresh Euros to pay their German bank creditors the interest on their old debts.

The Greek horse's picture

As a Greek American I have been for years fighting with my brothers and sisters down there! Golden Dawn is a nationalist movement that has been smeared like the way Donald trump was over here.. Imagine if the GREXIT happened when they had a chance the momentum with the BREXIT and Donald TRUMP would have been HUGE..BUT braindead people over there remind me of the Snowflakes here in the USA..  

FreedomGuy's picture

I do not know Golden Dawn, but I know that everyone who is not a commie type leftist is automatically, far-right, alt-right, fascist. It has no meaning or bite any more. In fact, I suggest that when they throw on the usual labels it makes them worth looking at. It was kind of like a lecture I heard from a Soviet refugee. If Pravda and the Soviet State did not like you, you were probably a good guy.

Yog Soggoth's picture

It would surprise most in the case of a semi gold backed Drachma. I would imagine that the same group oppressing the country with usary would also realize that. Logical conlusion is they bet on both horses in a two horse race.

Vigilante's picture

Do you believe the socialist loons that run GR are capable of exiting the union and re-introducing a new currency?   LMAO

Keystone cops one n' all.

Greece if farked big time

Re: Golden Dawn....they are stuck at 7% and going nowhere fast.

I also doubt thei abilities to do anything.

Did I say GR is farked?


Actually a Turkish takeover is not a bad idea.

We should never have become an independent state.


insanelysane's picture

Only the new lib ZH-ers will be shocked to hear this news.

Mr. Schmilkies's picture

serfdom, too bad for Greeks

insanelysane's picture

IMF and Merkel hard at work trying to figure out how to blame this on the Trump Train.

angry_dad's picture
angry_dad (not verified) insanelysane Jan 27, 2017 3:09 PM

The TRUMP train will run over them all

Yog Soggoth's picture

What? I thought we were still working for Putin! What boogeyman is ZH working for now? I have to make contact.

silverer's picture

Dear Greeks,

We all love you guys. You're good people. But holy hey-zeus, how long you going to let this go on? The hole is only getting deeper.

brooklinite8's picture

Silverer, There are so many lessons in the past and the on going greek crisis. There is even a saying something of sort Greece has been in Debt forever. Debt Debt Debt its simple. Greeks are probably not very good at manipulating debt. Lots of EU nations have similar debt. Every country is different in its own. You gotta leave them alone. Brits were very smart. They got out of EU. Greeks not so much. They are the other end. They are lazy and want to bleed EU as long as they can. 

dizzyfingers's picture

It's working for at least some of them...

Vageling's picture

Look... Greece could kick the can much longer if they were not suckered into the EURozone. That destroyed them. As expected. Italy the same. Fuck the whole PIIGS... It's not like Greece don't want out - the entire EU has been an nightmare to them - they won't let Greece leave. It's like a milk cow, they want every drop they can get before the creature dies. Then they rush with more debt offers. 

Creative_Destruct's picture

Biggest non-surprise of the last 10 minutes.

Eventual return of the Drachma OR , as a sure to fail  intermediate step, an ATTEMPT at financial integration with MASSIVE transfer payments from Germany (who will then collapse under that weight) is virtually inevitable. But financial integratrion is a no-go because of political opposition.

OR MASSIVE resructuring (haircuts) on Greek Debt as another intermediate step.

There is NO PAINLESS WAY out of this shit.

The end of the Euro and an eventual return to national currencies (Drachma. et al) that preserve sovereignty, local choice, and naturally correct trade imbalances is the most likely (and probably best) end-game.

dizzyfingers's picture

Bad pain now, but worse pain later....

Salsa Verde's picture

Wow, what, a shock.  

Lemme guess:  "This is the last time.  It will be different this time..."

insanelysane's picture

Merkel and the MSM keep saying that the key to financial success for countries is to let in 1 million migrants per year.

angry_dad's picture
angry_dad (not verified) insanelysane Jan 27, 2017 3:09 PM

The greeks have the buses going to the EU lined up alredy


angry_dad's picture
angry_dad (not verified) Jan 27, 2017 3:08 PM

No problemo!

The greeks will happily send another million refugees to the EU central bankers

keep up the good work 

kw2012's picture

Exactly, The Greeks agreed to a major cog in the Muslim immigration pipeline as long as the EU financed their debt. But with no debt relief, Greece will lock down it's borders.

Yog Soggoth's picture

How will they ship them out later? Greece could let them do it with a fee. Trans-atlantic. So much for that global warming crap.

two hoots's picture

They should build a wall the keep the EU out.

logicalman's picture

Look how much difference the last election made!

What's the point of another.

Any Greek who votes in the next one has to be insane.