The soap opera that just refuses to die, is just getting better and more bizarre by the day. The latest lunacy out of Greece, as reported by Market News, is that the near-bankrupt country is now imposing its own conditions on the bailout, saying it wants to amend the deal struck recently by Eurozone lenders, and wants to bypass the IMF's financial contribution, and eliminate the role of the IMF entirely, as it is "concerned that intolerably stringent conditions would be imposed by the International Monetary Fund in exchange for aid." Did anyone over in Athens even bother to read the fine print of what austerity means? It is good of the nation to finally wake up before suckering in US taxpayer dollars that, of course, would have never been repaid. And with that America, and the IMF, should wash their hands off the whole offer, and throw the ticking time bomb squarely into Merkel and Sarkozy's court where it belongs, together with the $1.5 trillion in Club Med bank claims that the Eurozone is on the hook for if, and certainly when, things go sour.
More from Market News:
"The reason is that since the summit, [Greek] Prime Minister [George Papandreou] has been receiving information from the IMF about the possible measures and reforms it would be asking in exchange for financial support," said one senior official. "The measures are tough and might cause social and political unrest. After that, various cabinet members voiced their opposition to the IMF contribution."
Curious, what did Mr. G-Pap expect? That reducing a cash deficit of 16% to something like 3% was going to be as simple as downloading the latest Ricky Martin song to his iPad? Oops. Oh and guess, what, all that stuff about Greece not needing help (yes, yes, hold your laughter), was bullshit after all:
Several Greek officials have already voiced their concern that the agreement reached by Eurozone leaders requires a lot of time to be put into effect and that the procedure is bureaucratic. The sources said the Greek government will be seeking a clearer European mechanism, without the participation of the IMF, which will be speedier and will respond immediately to a country's official request for financial support.
"What the government wants is to improve the deal and iron out the details that have not been decided yet," the senior official said. "There is a strong chance that Greece might be forced to ask for financial support after all, despite official statements to the contrary, and it is essential that the terms and conditions be clear."
Oh, and remember when G-Pap said he welcomed the IMF's (aka US taxpayers') participation? Yeah... he was just kidding about that.
Greece's apparent aversion to IMF involvement represents a sharp reversal from just a month ago, when Papandreou said his government would go to the IMF on its own if European leaders couldn't agree on the details of an emergency package.
Also, once this news is fully digested by the market, we expect the GGB 10 Year yield (currently at 6.5%) to primptly go north of 7%, once the implicit guarantee of lower rates in the future is eliminated.
While the IMF might insist on tough fiscal conditions in exchange for funds, it would almost certainly charge lower interest rates on loans than Greece's fellow Eurozone members. The EMU deal struck at the summit states that bilateral loans from Euro area states are to contain "no subsidy element" -- in contrast to the IMF's traditional practice.
In a nutshell what Greece is doing is, simply said, lunacy. In its attempt to once again take the easy way out, and to prevent losing already non-existent political favor with the masses, the administration is literally risking a full out sovereign bankruptcy.
Since the contingency aid deal was announced late last month, some analysts have wondered why Greece would bother borrowing from its fellow Eurozone states when it could get money so much more cheaply at the IMF.
And some high profile officials at the European Central Bank warned that the conditions requested by the IMF would actually be more lenient than those already required by the European Union's Stability and Growth Pact.
ECB Executive Board member Lorenzo Bini Smaghi, for example, argued that the conditions imposed by the IMF "are generally not stronger but rather weaker than those that we in Europe have now agreed on." He warned that, in the event of IMF involvement, "these weaker conditions will become the new standard and replace the EU's Stability Pact."
Once again, Greece defines what shooting oneself in the foot truly means. At least, post bankruptcy, the Greeks will have a good climate, good music and drink. Now... where is that Sotheby's auction of Santorini?