Troika Offers Greece Third Bailout Program, Prepares Emergency Plan If No Deal

On the heels of Thursday's failed Eurogroup meeting and heading into what is again being presented as an all or nothing, "Lehman weekend" for Greece and its creditors, reports suggest the troika has offered Greece a third bailout program:

  • GREEK CREDITORS OFFER EU15.5B OVER NEXT 5 MONTHS: HANDELSBLATT
  • ECB, IMF, EU OFFER GREECE 3RD AID PROGRAM: HANDELSBLATT
  • GREECE’S CREDITORS PROPOSE EU15.5B TIED TO AID DEAL: OFFICIAL

Here are the details, according to Bloomberg (citing an unnamed EU official):

EU creditor proposal foresees EU8.7b in EFSF funds: official

 

Creditor proposal foresees EU3.3b in SMP profits: EU official

 

Creditor proposal foresees EU3.5b in IMF funds: EU official

If true, this would mark a dramatic about-face for the IMF which had suggested it would not be interested in participating in a third Greek program. Similary, lawmakers in Berlin have voiced their opposition to a third bailout program for Athens as the German public has grown tired of throwing money at the Greek 'problem.' 

As for the specifics as outlined above, note that if Greece receives €3.3 billion from SMP profits it will mean that the ECB has forfeited the money it made on the Greek bonds it purchased in the past, effectively allowing Athens to repay the central bank with its own money. As for the EFSF funds, it's long been suggested that bank recap funds could be chanelled to Athens under the 'right' circumstances and apparently imminent default is as good an excuse as any. 

At least one analyst who spoke to Bloomberg doesn't see this as a viable long-term plan (of course there are no viable long-term plans for Greece, so one can-kicking exercise is probably just as good as any other) and also notes what we've been saying for months which is that after July, the focus will shift to elections in Spain and Portugal set to take place later this year:

The program extension proposed by Greece’s creditors looks like another can-kicking exercise to win some extra time at the very last second of the negotiations, Sunrise analyst Gianluca Ziglio writes in e-mailed comments.

 

EU15.5b should cover all the debt owed to IMF and ECB due to mature until December

 

This will do nothing to solve the Greek problem

 

Can’t see how Greece could take the bait unless they get really scared about a potential Grexit, since that has never been their spoken goal

 

The viability of the offer really depends on the contents of the third program and that we still don’t know

 

May find ourselves back in the same situation during the electoral period in Portugal and ahead of Spanish general elections

European finance ministers will meet again on Saturday. Angela Merkel, who met with Greek PM Alexis Tsipras and French President Francois Hollande on Friday, has indicated that a deal must be struck before the market opens on Monday. Here's a bit of color from Reuters:

The leaders of Germany and France discussed extending Greece's bailout programme and providing financing with Greek Prime Minister Alexis Tsipras on Friday on the eve of a decisive meeting of euro zone finance ministers, a French source said.

 

Chancellor Angela Merkel and President Francois Hollande had a private meeting with Tsipras before the final session of an EU summit in Brussels, urging Greece to accept a cash-for-reforms deal on Saturday to unlock frozen aid and avert a default.

 

"On the substance, the gap is not so wide. They discussed what has to be done today and tomorrow to conclude on issues still to be settled relating to reforms, the extension of the programme and the question of financing," the French source said after the roughly 45-minute meeting.

 

Both Merkel and Hollande stressed that Saturday's meeting of the Eurogroup was the decisive moment for a deal and there was no need for another euro zone leaders' summit, the source said. If necessary, they would have further contact with Tsipras before finance ministers meet at 5 p.m. (1500 GMT) on Saturday.

As for the finance ministers who will attend that meeting, they are preparing for the worst:

  • EUROGROUP PREPARES EMERGENCY PLAN IF GREECE REJECTS OFFER:SRCE