Greece Feigned Deal Progress, Launched Rumors To Avert Bank Run

By now, investors are mostly desensitized to conflicting reports out of Athens and Brussels regarding “progress” on Greece’s negotiations with creditors. Indeed it’s quite rare that a day goes by without an “unnamed” Greek official reporting that a deal is “close” only to have someone on the other side of the negotiating table dispel any notion that discussions are headed in the right direction. 

That said, Wednesday’s version of this merry-go-round seemed even more absurd than usual with Greece indicating that a deal between Syriza and the troika was imminent. In fact, PM Alexis Tsipras posted the following message to his official website:

As you are aware, the government operates collectively. Over time, we have established a collaborative decision-making process. Obviously, though, the ultimate responsibility lies with the Prime Minister and the Cabinet. I’d like to state that we have taken many steps and we are now in the final stretch, we are close to an agreement. This agreement will be positive for the Greek economy, this agreement will redistribute the [financial] burdens and I believe that, very soon, we will be in a position to present more information.

 

Additionally, I would like to add one thing: it is obvious that during this final stretch, composure and determination are required. We are not alone, we are dealing with three separate institutions, which often hold conflicting views and mainly, we are dealing with our partners -many different countries- among which there exist different approaches, but also within those countries there are differing political interests. As such, during this time there may be pressure, and there may be those that seek to create a false sense of danger.

 

I want to reassure the Greek people that we are negotiating to obtain secure and stable conditions, in advance, for the Greek economy. Today and tomorrow, salaries and pensions will be paid as they have been all this time; for the past four months now, some have been constantly claiming, in an attempt to spread alarmist and false news, that the Greek economy is on the verge of collapse.

 

I am optimistic that we will soon have positive results. We all, however, need to turn a deaf ear to those spreading doom, the alarmists. There is absolutely no danger to salaries and pensions or to the banks and people’s savings. And I believe that very soon we will be able to look ahead with greater optimism. However, we need composure and determination in this final stretch.

So, unpacking that, Greece is “in the final stretch”, is “close to a deal”, public sector employees will be “paid as they have been all this time”, and despite commentary from “alarmists” determined to “spread doom”, there’s “absolutely no danger to the banks and people’s savings.” 

Here is what Germany had to say about the idea that an agreement is imminent:

  • LITTLE PROGRESS SEEN IN GREECE TALKS, GERMAN GOVT OFFICIAL SAYS
  • GERMAN GOVT SURPRISED BY GREEK REPORTS OF PROGRESS: OFFICIAL

As for banks and depositors, Kathimerini reported that according to some sources, as much as €300 million in deposits disappeared from Greek banks on Tuesday alone after FinMin Yanis Varoufakis indicated the government may consider a special levy on ATM withdrawals in an effort to encourage the use of credit cards over cash. Meanwhile, the ECB declined to raise the ELA ceiling for the Greek banking sector citing a “stable” situation. 

What all of the above seems to suggest is that Greek officials are now desperately attempting to convince the public that the country, its banks, and its citizens are not hurdling towards the economic abyss with no agreement in sight when in fact, the situation is deteriorating rapidly on the way to an ugly climax on June 5.

That suspicion was confirmed today. As Kathimerini reports, PM Tsipras was advised by his aides to essentially lie in order to halt a terminal bank run. Here’s more:

Prime Minister Alexis Tsipras said Wednesday that a deal with creditors was “close” and government officials said an agreement was being drafted but representatives of the country’s creditors made it quite clear that they do not share such optimism.

 

In comments after a meeting at the Finance Ministry, Tsipras said a deal with creditors was “close” and that “very soon we will be able to present more details.” He stressed the need for “calm and determination,” noting that Greece would come under additional pressure in the final stretch of negotiations. He also referred to “conflicting views between institutions” and to “countries with different approaches.” Tsipras added that there is “absolutely no risk to salaries and pensions, nor to bank deposits.”

 

According to sources, Tsipras was advised to make the statement by aides fearing that jitters were creeping back into the markets and could prompt a new wave of deposit outflows. Tsipras chose to make the statement flanked by Finance Minister Yanis Varoufakis to underline the government’s backing for the latter, who has come under fire over his confusing statements about the content of a potential deal.

 

Earlier in the day, the European Central Bank decided not to raise the ceiling on emergency liquidity to Greece. A Greek government official commented that the Bank of Greece had not requested an increase to emergency liquidity as the current ceiling of 80.2 billion euros is regarded as adequate “following a stabilization of deposit outflows.”

Meanwhile, Greece is busy refuting creditors' refutations by swearing it really believes its own rhetoric...

"This optimism is not just words, it is based on the experience of the previous weeks and the progress achieved."

...and The Eurogroup is sticking to its script as well...

"We’re not there yet. There are open issues which need to be resolved."

We imagine these "open issues" are related to Syriza's attempt to uphold its campaign promises in the face of an unyielding attempt by creditors to dictate political outcomes using financial leverage and for better or worse, it's likely the "institutions" will succeed.