Talks between Greece and its creditors went full-retard on Wednesday when the following soundbite from Canada’s FinMin Joe Oliver hit the wires:
“No Greek payment to IMF would be default to IMF”
That seemed self-evident to us, but in a world governed by debt, we suppose everyone occasionally needs to remind themselves that failure to make good on one’s obligations constitutes default.
In any event, Greece apparently owes quite a bit of money to the world’s drug suppliers because, as we reported earlier this week, Athens is now running short on bed sheets and painkillers in its hospitals as the consequences of being completely beholden to the ”institutions” which control the printing of a fiat currency become increasingly clear.
Here’s what we said on Sunday:
The idea that a developed country cannot provide basic emergency medical care because it is in poor standing with the institutions that print a fiat currency is patently absurd and simply isn't tenable meaning that one way or another, this 'situation' will resolve itself in the coming weeks, an event which will put Europe's broken bond markets to a rather difficult test.
And now, we get this from Reuters:
Cash-strapped Greece has racked up mounting debts with international drugmakers and now owes the industry more than 1.1 billion euros ($1.2 billion), a leading industry official said on Wednesday.
The rising unpaid bill reflects the growing struggle by the nearly bankrupt country to muster cash, and creates a dilemma for companies under moral pressure not to cut off supplies of life-saving medicines.
Richard Bergstrom, director general of the European Federation of Pharmaceutical Industries and Associations, told Reuters his members had not been paid by Greece since December 2014. They are owed money by both hospitals and state-run health insurer EOPYY.
And in a further sign that, regardless of whatever outcome emerges from fraught talks between Syriza and group of creditors determined to use financial leverage as a means of subverting the democratic process in the EU, contingency plans are being discussed not only amongst 'the institutions' but amongst private sector firms as well:
Drugmakers and EU officials are now discussing options in the event Greece defaults on its debt or leaves the euro zone, disrupting imports of vital goods, including medicines.
"We have started a conversation in Brussels with the European Commission," Bergstrom said. "We want the Commission to know that our companies are in this for the long run and are committed to Greece."
There is a precedent for the pharmaceutical industry to agree exceptional supply measures during a financial crisis. It happened in Argentina in 2002, when some firms agreed to continue to supply drugs for a period without payment.
But the situation is complicated in Europe, given EU competition rules. They mean the Commission would need to take the initiative in approving any special scheme.
Drugmakers want any emergency program to include steps to mitigate spillover effects on other markets, including curbs on re-exports of drugs and a block on other governments referencing Greek prices when setting their own drug prices.
Simply turning off the supply is not an option for the industry, as Novo Nordisk discovered at the start of Greek debt crisis five years ago when it faced a storm of protest over plans to halt some insulin deliveries.
And while leaving Greeks with a shortage of "life-saving" drugs may "not be an option," Greece has run out of options as well when it comes to coming up with the money to pay for basic medical supplies which means that without a deal, the world's largest drugmakers could find themselves in the same financial place as the IMF and the ECB — that is, holding what amounts to IOUs from the Greek government.
The drugs industry has been here before. Greece also ran up large debts for its medicines in 2010-12, although they have since been repaid, with some companies receiving payment in government bonds that were subsequently written down in value.
Whether or not this is a precedent the industry will be willing to follow remains to be seen.