As we first reported [10] on Monday and as we outlined [11] in more detail on Tuesday, the IMF and Greece’s EU creditors are now at odds over what constitutes an acceptable set of reforms. Although disagreements between the IMF and the rest of the Troika over Greece are not unprecedented, Syriza era negotiations have been largely characterized by the fractious relationship between Athens and its creditors, with Greek FinMin Yanis Varoufakis personifying the tension. With Varoufakis now sidelined, talks looked set to move forward but have now stalled amid what some officials have described as intractable differences between the “red lines” adopted by the IMF and the supposedly more lenient terms favored by the EU. This is further complicated by reports that the IMF is pushing for the EU to write-off a portion of its Greek debt. In the end, it’s no longer clear who’s the ‘good cop’ and who’s the ‘bad cop.’
Today’s news flow out of Greece starts with what look like more ‘soft’ capital controls as Athens is considering the imposition of a surcharge on withdrawals and transfers and is also mulling a ‘ceiling’ on the latter.
Via DailyMail [12]:
Greece has revealed it is to introduce a surcharge for all cashpoint withdrawals and financial transactions in a desperate attempt to prevent citizens withdrawing their money from the country's beleaguered banks.
Ministers hope the controversial move could raise as much as €180 million, which the Athens government hopes will help the country avoid defaulting on debts owed to international creditors…
Clarifying that the charge will not apply to money paid in to a bank account, a senior finance ministry official told The Times: 'The surcharge is just one of a grab-bag of measures we are considering if things get tough.'
The official added that Greece is also considering a ceiling on bank transfers over €1 million in what could fire the starting pistol for capital controls if Greece does go bust over the coming months.
Meanwhile, Athens reportedly managed to scrape together enough cash to make a €200 million payment to the IMF today, but the real test comes on Monday when Greece must come up with more than €700 million to meet its obligations.
Additionally, the ECB will reportedly discuss increasing the haircut on collateral pledged by Greek banks for ELA, a move which could intensify the cash crunch and tighten the screws on the banking sector ahead of Monday’s do-or-die IMF payment. Here’s Bloomberg [13]:
European Central Bank officials will debate tighter rules for the liquidity that Greek lenders rely on for survival, two people familiar with the matter said, a move that underscores the fragility of the country’s financial system.
The Governing Council will discuss Wednesday whether to raise discounts on the collateral Greek banks pledge in exchange for emergency funding, said the people, who are familiar with the agenda and asked not to be identified. Governors will also review how much more Emergency Liquidity Assistance to offer Greek banks.
With access to capital markets shut and deposits flowing out of their vaults, Greek banks depend on ELA to stay afloat. While economists say the ECB is unlikely to demand higher haircuts without a green light from Europe’s politicians, the debate shows how concerned some central bankers are about Greece’s solvency 100 days after Prime Minister Alexis Tsipras came to power.
And a bit more color:
ECB is reviewing provisions for Emergency Liquidity Assistance for Greek banks today, Goldman Sachs says.
ECB has raised ELA cap on 12 occasions
Today’s review may be in spotlight for several reasons: ELA balance can be used to track deposit flows, and may signal that these re-accelerated in recent weeks; ELA collateral may be at risk from haircut revisions.
Collateral has been ample so far, ECB may eventually tighten ELA provision, has option to increase discount for Greek sovereign exposure from ~23% now to 44%, 65% or even 80%.
Of course no update on Greece's descent into complete insolvency would be complete without a Schaeuble reality check:
WWII while reparations calls are “nonsense”: Schaeuble
Reparations “false topic” to raise in discussion: Schaeuble
Schaeuble says Greece has failed to get Russian financial aid
Speaking of reality, we'll close with the following statistics which, while billed as a slight 'improvement', underscore the dire economic situation Greeks are forced to confront on a daily basis:
Greece’s unemployment rate in Feb. dropped to 25.4% from a revised 25.6% in the previous month, according to e-mailed statement from the Athens-based Hellenic StatisticalAuthority. Est. 25.6% from 4 economists surveyed. Unemployment rate for Greeks aged 15-24 at 50.1% in Feb. Overall female jobless rate 29.1% vs 22.4% for men.
