With the crucial May 12th €774mm Greek IMF payment looming [7] (and thus even more critical May 11th deadline for the Eurogroup's decision to release around €7bn in additional funds to Greece), the much-discussed 'splintering' of the Troika [8] (The Institutions as the Greeks would prefer we describe them) appears to be gradually un-splintering. Today's statement from the EU talks that the members of the Troika "share the same objective" may reassure some after the 'limbo' of serious disagreements between the European Commission and The IMF. [9] However, with various 'red lines' remaining unaddressed, EU sources say a deal on Monday is not possible.
The statement is unequivocally designed to suggest everything is awesome in the Troika and they have all made friends again...
[10]
Though we suspect the many varied 'red lines' of The Institutions are anything but settled...
"Serious" policy differences between Greece's two major lenders - the European Union and the International Monetary Fund - are preventing the country from reaching a compromise with lenders, a Greek government official said on Tuesday.
"The result is that the institutions have red lines everywhere: pension, labour (IMF), and primary surplus (Commission). Against this background there cannot be a compromise. The responsibility belongs exclusively to the institutions and their weakness in coordinating"...
The Greek official said the IMF was being insistent on pension and labour reforms that Athens opposes, while the European Commission was more leninent. The Europeans, on the other hand, were being strict on the target for a primary budget surplus while the IMF was less worried about that, the official said.
The IMF also wants Greek debt to made viable through a writeoff of debt, while the European Commission is against such debt relief, the official said.
But we should all feel comforted that a 3-line statement tells us otherwise... as the deadline looms.
[11]
The European Central Bank’s Executive Board discussed during their meeting on Tuesday various options for raising the haircut on Greek government bonds used as collateral in lending operations with the Bank’s Emergency Liquidity Assistance facility, senior Eurosystem sources have told MNI.
The sources said that even though the Board did not reach a final conclusion, it will review the various options during Wednesday’s Governing Council meeting, at which, besides considering the question of whether to hike ELA for Greece, members will be called to vote on whether a haircut should be decided today or in the next weeks.
If the necessary majority is found, then the decision will be communicated in writing around 21:00 CET Wednesday evening, one source said.
A Greek banking source commented that a possible raise in the haircut by 10% would be tolerable, but a 20% raise would make the credit facility of the Greek banks quite difficult and wouldn’t be sustainable for many weeks.
With the punchline being...
Apart from that, the Greek officials explained the liquidity situation of Greece and affirmed their desire to obtain a written statement from the Eurogroup on Monday that negotiations are progressing towards a deal. Such statement, according to the Greek side, would enable the ECB loosen its stance on Greece.
However, multiple Eurozone sources have told MNI that a deal on Monday is not possible and that the two sides are still quite far from reaching an Agreement.
Which we suspect explains the baord-based derisking in global risk assets as uncertainty is looming and ECB support waning.
