Greece Calls Crisis Meeting As Debt Talks Stall

Tyler Durden's picture


No sooner have the supposedly close (and yet so far away) Greek debt negotiations increased haircuts but added desperate incentives such as GDP Warrants, then The Guardian is reporting that Greek PM Papademos is calling crisis meetings with Greek political party leaders as tensions are clearly growing between Greeks and their EU overlords/partners. The 'increasingly intransigent' negotiating team sent by Brussels is demanding even more severe austerity measures before sanctioning the new bailout funds. The incredulity at the complete mis-communication and increasing bifurcation is nowhere more clear than the divergence between FinMin Venizelos saying "We are one step [away]. I would say it is a formality away from finalizing (the debt relief agreement)," and the disbelief by Greek MPs that "The troika doesn't appear to be willing to accept any concessions whatsoever on reducing the minimum wage and scrapping bonuses," said the government aide. "No political party is willing to move either, saying wage cuts are a red line they are simply not going to cross. You tell me how this is going to be resolved. We have no idea and we're very

Greek Officials Attack EU and IMF As Debt Talks Stall

Greek officials launched a vociferous behind the scenes attack on European Union and International Monetary Fund negotiators as talks in Athens over the country's mounting debts appeared to stall.


Prime minister Lucas Papademos told aides that a crisis meeting of party leaders would be called as early as Thursday to thrash out a response to an increasingly intransigent negotiating team sent by Brussels, which is demanding severe austerity measures before sanctioning a further €130bn (£109bn) of bailout funds.




"We understand how difficult it is for MPs who are now faced with the hard option of voting through another round of austerity measures but the stakes are very high and one of our greatest concerns is that they don't understand just how high they are."




However, finance minister Evangelos Venizelos put on a brave face publicly and said that he believed an agreement on the debt swap was close. "We are one step [away]. I would say it is a formality away from finalizing (the debt relief agreement)," Venizelos told a news conference...


"The troika doesn't appear to be willing to accept any concessions whatsoever on reducing the minimum wage and scrapping bonuses," said the government aide. "No political party is willing to move either, saying wage cuts are a red line they are simply not going to cross. You tell me how this is going to be resolved. We have no idea and we're very worried."


The deadlock in Athens followed poor unemployment data for the eurozone that revealed a widening split between the continent's rich north and indebted south.



For more on GDP warrants and their lack of market acceptance (and concerns), there is an interesting article here on GDP-index bonds (albeit perhaps a little naive in its trust of government statistics) and here on valuation of GDP warrants - not that it matters as these incentivization schemes are simply bound to fail given the dispersion of bondholders and everything we have said before.


The literature has claimed that GDP-Linked-Warrants (GLWs) would provide opportunities to share growth risks between the issuer and the holder; however, the literature has also suggested that there might be moral hazard issues in the context of debt overhang, where the issuer country may lose incentives for promoting growth policies.

Despite these moral hazard problems, some have argued that, under asymmetric information, debt payments should be linked to the issuer’s GDP in order to facilitate debt-service relief. Experience has shown that the poor design and low quality of statistics have been major problems in the history of GLWs.


GDP Warrants and GDP-Index Bonds - Investors’ concerns
In this section, we discuss potential obstacles (real and perceived) to a wider introduction of GDP-indexed bonds and examine these obstacles and the ways in which they could be overcome.

To understand the main obstacles, we rely on the existing literature,13 on interviews with investors and other market actors,14 and on discussions in the expert group meeting held at the United Nations in October 2005 (United Nations, 2005a).

The three main concerns identified were:

  • Uncertainty about potential misreporting of GDP data.
  • Uncertainty about sufficient liquidity of GDP-linked bonds.
  • Concerns regarding the difficulties in pricing GDP-linked bonds.

The main issue in this case would be the first - Accurate reporting of GDP growth data
Not only is this a relatively important concern for market participants and investors, it is also one which international institutions and national Governments can do much to overcome. The concern can be decomposed into (a) inaccuracies in measurement of relevant variables, such as nominal GDP and the GDP deflator; and (b) deliberate tampering by debtor country authorities with a view to lowering debt servicing.

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Tue, 01/31/2012 - 16:16 | 2113877 GolfHatesMe
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Crisis meeting?  This is a job for the Super Committee!

Tue, 01/31/2012 - 16:34 | 2113989 mattu13048
mattu13048's picture

Greece should sell EURUSD short with a 1:500 margin at Armada Markets and tell everybody that they, Portugal and Spain will leave eurozone this weekend. Germany will likely join the clowns.

Tue, 01/31/2012 - 16:41 | 2114035 PicassoInActions
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i will be very suprised if close sources are nto doing exactly that.

I bet greece trough 3d party is playing  huge option on greek default and they will even make profit.

Tue, 01/31/2012 - 17:06 | 2114177 SilverIsKing
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Commercials are long EURUSD up the ying yang while large specs are on the opposite side of that trade.

Don't be distracted by the "news" out of Europe.  The EUR will fly soon.

Tue, 01/31/2012 - 17:57 | 2114381 CrashisOptimistic
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Greece leaving the Euro and taking the burden they represent with them would be about as bullish an event for the Euro as can be imagined.


There is no way Greece will do this because it would be suicidal.  They could not borrow money thereafter to pay for oil to transport food, and there would no bailout mechanism for them at all.  So they stay.

And there is no mechanism in the EU treaty with which to kick someone out.

The Greece is leaving scenario looks weak.

Tue, 01/31/2012 - 18:34 | 2114530 SilverIsKing
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I'm not saying I know what the eventual outcome is going to be.  What I am saying is that because the commercials are lined up on the long side, whatever happens will be bullish for the EUR.

Wed, 02/01/2012 - 07:25 | 2115798 fajensen
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Of course they can borrow. At higher rates but I happen to be old enough to remember 20% interest rates and guess what: Everybody survived!

Everybody knows that the bailout mechanism is for German and French banks, which the Greeks presently do not give a shit about - because when they do, they *will* firebomb them!

Everybody also knows that the EU will prefer to render every citizen down to biodiesel and sell it to Iran for gold in order to pay for further bank bailouts rather than let the Euro fail. This means the Greeks really do not have to take any lip from Merkozy, they just have to pass most of the bailout money back to Germany and France.

Oh - and the Greek army can whup Bundeswehr any day of the week!

Wed, 02/01/2012 - 09:25 | 2115914 UberBoot
UberBoot's picture

What you expect is compliance: no deals, no tricks, no greek style fraud.

It's a simple test. The Greek government has to change its attitude. Everything they are suffering from is a result of their own policies. If they want help they have to stick to the letter of the contract, not try any more tricks, because no one would trust them.

It is not that the EU states are after Greece. They misbehaved and suffer the consequences.

Tue, 01/31/2012 - 18:12 | 2114457 Nobody special
Nobody special's picture

There is a solution. Ask Iceland. Not only would it be better for Greece, it would be better for Greece's creditors.

1. It would be a credit default, so CDS would have to pay out. Much better for creditors than a 70% haircut where default insurance is void.

2. Greece would regain fiscal sovereignty.There would be plenty of pain, but less than the forced austerity Germany suggested.

3. The IMF would not be securing against Greece's assets. This is a win for the Greek people, as the current bailouts don't help them.

I could go on and on... but no need. Iceland showed the way. Greece need only follow.

Tue, 01/31/2012 - 21:56 | 2115110 fockewulf190
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Nah, Greece needs to get radical. Eye bursting, bowl moving, hyenia laughing radical.

1) Abandon the €. Bring back Drachma. Peg it to the Swiss Franc. Giggles. Shits.

2) Withdraw from the EU, treaties be damned. National Security and all that jazz.

3) Declare neutrality and leave NATO. Slashes armed forces, sells subs, frigates.

4) All banks are nationalized and one new one emerges with a clean slate.

5) Greece's new national strategy is to become a giant Cayman Islands.

6) Greece turns itself into the ultimate Sin City, slashes corporate tax rates to the lowest north of the equator and encourages coorporate, casino and resort development, one page tax returns, secrecy laws for investors, the works. Ireland wimpers.

7) Greece gets to be a real cool place, real quick.

Wed, 02/01/2012 - 01:14 | 2115560 walküre
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You are forgetting one important cultural aspect. Greek are corrupt and don't trust each other.

Greece w/o Eurozone is Albania with better museums.

Wed, 02/01/2012 - 08:38 | 2115839 fockewulf190
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May be the case, but that won't stop the Europeans, and especially the Germans, from booking their vacations there and diving into the ouzo.

Wed, 02/01/2012 - 06:18 | 2115766 StychoKiller
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Surely the Wermacht would then let the Panzers roll...:>D

Wed, 02/01/2012 - 08:59 | 2115860 fajensen
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Good ideas - except slashing the armed forces: Greece will need an effective deterrent to keep Turkey and/or NATO away.

Remember, NATO is Obamas and the Banksters Foreign Legion and the Turks always, always wanted Europe and will forever try to grab something whenever they can!!

Tue, 01/31/2012 - 17:07 | 2114178 johnu1978
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"Only losers pay their debts!" -Ben Bernanke




Tue, 01/31/2012 - 18:04 | 2114415 CrashisOptimistic
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The real outrage here is the abuse of the banks -- not an entity to be lightly defended here on ZH -- but look at what's happening.

Okay, they made a bad investment.  They are going to lose money.  But what's happening is they are not just losing money invested . . . they are being FORCED to take 3.6% 30 year bonds at 1/2 the value of present bonds and then lose that too.

That means they are forced to lend more money.  If they lose their present loan portfolio, well, so it goes.  But the government array is FORCING them to lend more money for 30 years to fund the bullshit extend and pretend ponzi.

No one should be forced to make a losing investment at gun point.  Not even banks.

Tue, 01/31/2012 - 18:13 | 2114464 zanza
zanza's picture

I don't think Greece is asking for more money from the banks, just their current bonds will be devalued by a hefty portion.

Tue, 01/31/2012 - 20:06 | 2114814 Buck Johnson
Buck Johnson's picture

You're totally righ.

Tue, 01/31/2012 - 16:35 | 2113995 azzhatter
azzhatter's picture

Has anyone called Harry Reid?

Tue, 01/31/2012 - 16:39 | 2114022 battle axe
battle axe's picture

We need Timmy to the rescue...

Tue, 01/31/2012 - 16:48 | 2114079 HardlyZero
HardlyZero's picture

Maybe a timeshare or workshare...I could live with that.  When this thing falls apart there is a 50/50 chance he won't be able to get back in time before he gets stuck over there.

Tue, 01/31/2012 - 17:22 | 2114244 JPM Hater001
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Edited for functionality:

Xerxes the banker: "There will be no glory in your sacrifice. I will erase even the memory of Greece from the histories! Every piece of Greek debt shall be burned. Every Greek historian, and every scribe shall have their eyes pulled out, and their tongues cut from their mouths. Why, uttering the very name of Greek soviergn Debt, or Papadidimousus, will be punishable by death! The world will never know you existed at all!
King Leonidas: The world will know that free men stood against the banks, that few stood against many, and before this battle was over, we walked away with all of your money.

Tue, 01/31/2012 - 17:50 | 2114329 Captain Kink
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The Greeks will fold... They have no choice.  Wake up to the reality.  Even if they say no, it won't matter.  What choice does the Greek govt have? the Greek people?  AND WHAT DO THEY KNOW ABOUT THEIR LONG TERM INTERESTS? Moreover, Where are they guaranteed a referendum?    There is no escape (from the EU) mechanism.  It is already one govt.  Much to the German people's peril, this is the way it is.  They will be forced to soak up the profligacy forever.  The Greeks think they have something to bitch about...why is no one asking the German citizens?  Fukking Greeks should be laughing, 30 cents on the dollar. Seriously? "Hey, we got away with it this time!  We can sign now, do it again later!"  This is precedent setting.  It will never change.  The Germans are Fukked.  Short EU forever.  it will stay together and it will be horrible.  Talk about slavery. PITY THE GERMANS.

Tue, 01/31/2012 - 21:23 | 2115044 stocktivity
stocktivity's picture

Obama sends Timmy over there every other week. They just laugh at him, give him a spanking, and send him home on the first plane out.

Tue, 01/31/2012 - 22:57 | 2115325 tom a taxpayer
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Breaking News: According to Interpol sources, last week Hillary Clinton, U.S, Secretary of State had to intervene with Davos authorities to save Timothy Geithner, U.S. Secretary of Treasury, from arrest and a night in jail. It seems Timothy tried to get past the velvet rope front entrance to the Cabanna disco by claiming he was a "playa". The disco security team refused to let "this girly man" into the hottest disco in Davos. Timothy flew into a "girly rage", according to one witness, and the security team dragged him away to the local magistrate. Today the State Department issued an apology to the Swiss Embassy and explained that Timothy was "under a lot of stress and appears to have gone off his meds".


Tue, 01/31/2012 - 16:51 | 2114106 Stoploss
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Tue, 01/31/2012 - 17:59 | 2114397 CrashisOptimistic
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Greece has a LOT more leverage than people realize, no pun intended.

They, and no one else, decides which bonds get paid and which do not.  They have zero reason to put the ECB's and the IMF's holdings last in the default queue.

If the Brussels negotiators are playing hardball, Greece can do the same.

Tue, 01/31/2012 - 18:44 | 2114551 NumNutt
NumNutt's picture

Yeah funny 'crisis meeting' should be called something more realistic like - What do we do when the shit hits the fan meeting.


Tue, 01/31/2012 - 16:18 | 2113884 Cognitive Dissonance
Cognitive Dissonance's picture

Too bad.

And they were sooooo close to an agreement to go without the lubricant.

Tue, 01/31/2012 - 16:55 | 2114131 Poor Grogman
Poor Grogman's picture

I'm starting to think there is method in the Greek madness.

Milk the money changers for as much as you can...

Then do an Iceland...

Perhaps we are witnessing the birth of a new bungling bureaucratic M/O, after all one must always follow the path of least resistance right?


Tue, 01/31/2012 - 17:47 | 2114342 Captain Kink
Captain Kink's picture

 I don't think they can do this...legally, at least.  Where is the mechanism by which they can leave the EU?  If it existed, the Germans should leave the EU.

Tue, 01/31/2012 - 18:16 | 2114476 Poor Grogman
Poor Grogman's picture

Is the FED legal?

What about a lot of the recent wars?

Or the bailouts for that matter?

I think what is Legal is being redefined daily.

Interesting times...

Tue, 01/31/2012 - 22:51 | 2115309 Bringin It
Bringin It's picture

Little people must obey laws and be legal.

Tue, 01/31/2012 - 19:31 | 2114707 HardlyZero
HardlyZero's picture

(disclosure: I'm a Greek fan) Given all the broken "rules" it is not really clear that Greece ever was an EU member (legal that is).  There are many that would question Greece's legal membership in the first place.  So it would go something like...well we never really were serious about joining your sucky frat in the first place !!

Wed, 02/01/2012 - 06:22 | 2115767 StychoKiller
StychoKiller's picture

Perhaps we should consider what VonRibbentrop thought of international treaties...

Tue, 01/31/2012 - 17:56 | 2114378 Ropingdown
Ropingdown's picture

The only problem is that the Germans are onto them.

Tue, 01/31/2012 - 19:32 | 2114718 HardlyZero
HardlyZero's picture

There is always the "Leonidas Solution".

Tue, 01/31/2012 - 16:18 | 2113885 Theta_Burn
Theta_Burn's picture

And not a blip on the Euro....

Tue, 01/31/2012 - 16:22 | 2113912 LongSoupLine
LongSoupLine's picture



...and SPX green...bullish.  Unreal, simply unreal.

Tue, 01/31/2012 - 16:21 | 2113886 Mercury
Mercury's picture

And most importantly: where we ordering lunch from this time?

Oh, to be a Euro-zone caterer in a time of financial crisis...

Tue, 01/31/2012 - 16:19 | 2113890 The trend is yo...
The trend is your friend's picture

i have a feeling each one of these clowns is simply talking his/her book depending on how they are positioned for the day or week

Tue, 01/31/2012 - 16:20 | 2113893 falak pema
falak pema's picture

the wages of slavery, the road to humiliation is unending. But those Greek Oligarchs need to pay before their own people for bringing about this situation in the first place.

Tue, 01/31/2012 - 16:20 | 2113902 Hippocratic Oaf
Hippocratic Oaf's picture

Biggest goddamned yo-yo I've evuh seen!

Tue, 01/31/2012 - 16:24 | 2113921 LongSoupLine
LongSoupLine's picture

Biggest goddamned yo-yo I've evuh seen!


You obviously have never seen Cramer...

Tue, 01/31/2012 - 16:35 | 2113994 Hippocratic Oaf
Hippocratic Oaf's picture

Nope. He's a small yo-yo.......'bout 5'4" if I'm correct.

Tue, 01/31/2012 - 16:21 | 2113910 pauhana
pauhana's picture

What crisis?  There's a crisis?  Can't be.  Markets are up, everything is beautiful. 

Tue, 01/31/2012 - 17:16 | 2114224 JPM Hater001
JPM Hater001's picture

I agree.  We went from down about 80 to near even again today.  This is all a normal function of the healthy economy.  It's like a chest goes up, it goes down but it will go up again...until of doesn't.

Tue, 01/31/2012 - 17:55 | 2114372 Roy T
Roy T's picture

With some healthy gains in MS,GS,C,JPM, must be all priced in  ;)

Tue, 01/31/2012 - 16:23 | 2113920 Vince Clortho
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Extremely bullish.  Activate the Bull Pump!

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