One day after Greek 2Y bond yields tumbled following press reports that for the first time in the latest Greek mini-crisis, the IMF and Eurozone creditors finally agreed on a "common stance" regarding what the Greek fiscal surplus and debt profile would look like, despite talks between Greece and its creditors ending in Brussels with no breakthrough, Greek PM Alexis Tsipras on Saturday warned the IMF and German Finance Minister Wolfgang Schaeuble to "stop playing with fire" in handling his country's debt.
Nonetheless, striking a positive tone, Tsipras opened a meeting of his Syriza party by saying he was confident a solution would be found, and urged a change of course from the IMF. "We expect as soon as possible that the IMF revise its forecast so that discussions can continue at the technical level", AFP reported, suggesting that contrary to initial reports, the bid-ask between the Troika and Greece still remains irreconcilable .
Tsipras also attacked Greek nemesis Wolfgang Schauble - who earlier in the week ruled out a Greek debt cut, saying "for that Greece would have to exit the currency area"- and called for German Chancellor Angela Merkel to "encourage her finance minister to end his permanent aggressiveness" towards Greece.
As documented before, ongoing feuding with the IMF has raised fears of a new debt crisis. Greece, whose economic collapse is now worse than the US Great Depression - remains embroiled in a row with its eurozone paymasters and the IMF over debt relief and budget targets that has rattled markets and revived talk of its place in the euro.
A silver lining emerged on Friday, when Eurogroup chief Jeroen Dijsselbloem said progress had been made in the Brussels talks with Greek Finance Minister Euclid Tsakalotos and other EU and IMF officials. But he provided few details.“Today the Greek minister of Finance, the institutions (European Commission, ECB, ESM and IMF) and I had a constructive meeting on the state of play of the second review,” Dijsselbloem said in statement sent by text message to Bloomberg. “There is a clear understanding that a timely finalization of the second review is in everybody’s interest" and added that "we made substantial progress today and are close to common ground for the mission to return to Athens the coming week."
Judging by the latest comments from Tsipras - who now badly lags behind New Democracy in the polls, and may have no choice but to stand strong on his anti-austerity promises or else lose risking control - that may have been an optimistic assessment.
— Ioannis E Kolovos (@ioannisekolovos) January 29, 2017
Then again, with Greece nothing happens until the last minute, and conveniently that particular deadline once again coincides with a major debt repayment deadline: the Athens government faces €7 billion in maturities this summer that it cannot afford without conceding to Troika demands which are holding up new loans from Greece's 86 billion euro bailout.
However, Greece does not have much time. Breaking the stalemate in the coming weeks is seen as paramount with elections in the Netherlands on March 15 and France in April through June threatening to make a resolution even more difficult. Dijsselbloem also warned Friday that the next meeting of eurozone ministers on February 20, seen as an unofficial deadline ahead of the votes, would still be too early for a breakthrough.
"We will take stock of the further progress (during that meeting)", said Dijsselbloem, who is also the Dutch finance minister.
With a barrage of European political risk events in the coming months, including elections in France, the Netherlands and Germany, a potential undiffused Greek time bomb lurking in the background could be just the catalyst that breaks the record low volatility doldrums that the market has found itself in in recent months.