For those keeping tabs on the Greek tragicomedy, now in its 5th season, today before midnight Yanis Varoufakis will submit a list of "reform measures" it plans to undertake to the Troika, pardon, Institutions. But while we patiently await the reveal of the full list of proposed Greek reforms, we can fast forward to the German reaction, because we already know what it will be:
Why? Because as Bloomberg reported earlier today, citing government spokesman Gabriel Sakellaridis says in interview broadcast live on Skai TV today, the Greek government will implement legislation allowing taxpayers to repay overdue taxes in 100 installments. This not new: in fact, it was proposed back in November, when Greek Enikos [6]said "the country's international lenders are not pleased with the new law voted by the government, which allows tax payers to pay off their debts towards the State in 100 installments."
So while the Troika will ask why nothing has been done on this until now, Greece will have no retort but instead will say that the easier repayment terms for overdue taxes will boost liquidity in state coffers especially since the cash situation “is not easy.”
Among the other proposal is that the government will introduce legislation tackling NPLs issue in the summer, not immediately; target is to strengthen country’s financial system. This is a key issue because Greek NPLs, currently around 40%, are far above where Cyprus banks were in March 2013 when the infamous bail in hit.
[7]
Which begs the question: why does anyone assume that just because Greece has a deal, as tentative as it may be, that the Greek bank run is over? If anything, the local banks have merely bought the local population some breathing room in which to quietly and effectively withdraw as much ECB-backed funds as they can before the capital controls and/or "bail-in" trapdoor slams shut.
But what is sure to make Schauble go berserk with rage is that Greece is now openly tearing apart the "existing programme" with its firm demand that the protection of primary residences from foreclosure will be upheld, saying that it creates no burden for banking system or the state budget: a state budget which as a reminder will be out of cash some time this week [8]!
Needless to say Germany will cross this proposal out with a very bright, very red pen.... as well as then next: "Minimum wage will be raised gradually until 2016, to allow businesses to adapt to labor cost increase."
At this point Germany will point out the deflationary vortex in which Greece has been stuck in the past 5 years and say "what labor cost increases", and cross that "reform" as well.
We also learn the Greek government plans to restore labor relations, labor law, collective bargaining saying the current regime resembles “dark age" (it does - thank the common currency for putting you there) which is incompatible with European labor culture, and will assesses proposals to secure liquidity of pension system, aim is not to cut pensions further. The German response to the latter? You guessed it.
The punchline: "Red lines still apply and government will respect popular mandate."
And... cue Germany's reply:
Because from the start, this was all an exercise in Germany showing Greece that no, the popular mandate, is irrelevant when Germany pays the bills, which will be the case as long as Greece is in the Eurozone.
And this is why as soon as Germany sees the Greek "reform" proposal it will stamp it with "Nein, Nein, Nein" from top to bottom, and tomorrow's "emergency" Eurogroup meeting is assured, in which the Troika throws back the proposal in Greece's face and demands that it strip all its "reforms" to comply with whatever was in the original memorandum, in the process making the Tsipras government nothing more than an extension of the hated Samaras administration.
Because Greece bluffed... and lost, and now it no longer has any leverage in negotiations with Europe until the next, even more unpredictable Greek government, comes to power.
