[12]
We were warning in several previous articles (here [13] & here [14]) the Greeks didn’t have much time left to enter into a new funding agreement with its lenders as the country was facing several billions of euros in mandatory repayments over the next few weeks.
Meanwhile, the International Monetary Fund has estimated Greece has until June 5th before it runs out of any money, so the leaders of Greece, the EU and the Eurozone have two more weeks to make the final tranche of 7.2B EUR of emergency funding available, or the consequences might be disastrous.
[12]
The negotiations to make the 7B+ EUR available have been ongoing for several weeks, if not months, and the parties involved in the negotiations haven’t even come close to reaching a deal. Athens was already running on fumes and directed its public institutions to send their cash back to the central government to meet some shorter term payment obligations. On top of that, the government is mulling over instating a transaction tax on cash withdrawals and wire transfers, and several sources indicate this will happen in the short term.
The thing is, it might be too late.
Late last night, a meeting between France, Germany and Greece came to an abrupt end [15] after the parties once again failed to come to some sort of agreement on the terms to make the additional emergency financing accessible for Greece. The main issue right now are the pensions and a sales tax in the country as the Eurozone representatives are forcing Greece to find new ways to cut expenses and increase its income. We aren’t sure the Greeks are unreasonable as its sales tax rate is already at a very high level of 23% after increasing it from 19% in 2010 (see next image).
[12]
Source: Tradingeconomics.com
But whoever is playing hardball during the negotiations, the clock just does not stop ticking and the fact that no follow-up meeting has been scheduled yet is really worrisome. A break-up of the Eurozone no longer is a remote possibility and this scenario should not be taken lightly. The bond market seems to be agreeing as even though the Greek 10 year bond yield is just over 11%, the market consensus [16] is expecting the yield to increase to in excess of 14% by the end of this year.
An additional emergency meeting will now undoubtedly be needed as the next regular meeting is only scheduled for June 18th, two weeks after Athens is expected to run out of funds.
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