The Three Greek "Scenarios" Discussed Today In Brussels

Curious what the Eurogroup of finance ministers will be discussing behind closed doors for the next several hours (unless the meeting is very short which will be either a very good, or much more likely a very bad thing since the Greeks apparently came to today's meeting without a proposal so there is nothing to discuss)? Greek Kathimerini has summarized what it believes are the three scenarios currently up for debate in Brussels.

According to Eleni Varvatsiotis, citing European sources, the subject exit of Greece from the Eurozone now is openly discussed and examined how much it would cost to do a political and economic rescue or exit of Greece from the eurozone and what consequences it would have. Also discussed is whether the Eurogroup could "limit the damage" in Greece or would extend to other countries, such as Spain. Several Member States seem to prefer a clean solution, a Grexit, because the other two options require more than several chapters.

Here are the three scenarios (Google translated):

  • First scenario: A new program requiring very major structural reforms of the Greek side, and much larger than the last Juncker proposal. However, it is the most expensive of all, requiring deficits coverage, reimbursement of internal borrowing that made the previous months Greece and recapitalize banks. And all this while it is extremely doubtful whether Athens and SYRIZA-ANEL government has the political will to implement those for which he undertakes. "The negotiation starts again from zero," European officials are warning as the last sentence of Athens has rejected and members of the Eurogroup tomorrow expect a new one that could talk. Without this there can begin and negotiations. The commitment to redefine debt at the end of the program. The European Commission vice-B himself. Ntomprovskis said yesterday that the commitment of the Eurogroup in November 2012 (that would consider further easing if Greece complied with the obligations of the plan) no longer applies, and ended the last program. "The agreement on the debt is no longer on the table," he said, which sounded for the first time by a European official.
  • Second scenario: Introduction of parallel currency, primarily through promissory IOU. This proposal is inspired by the German Finance Minister Schaeuble. However, officials who contacted the "K" version IOU is clearly the first step exit from the monetary union. Furthermore it will be something entirely hybrid within a monetary union. Thus, one reason that adds more concern for the success of this project is that we need, first, a very organized state to achieve, and secondly, a very good technical preparation, and European partners do not consider that the state mechanism the country is well prepared.
  • Third scenario: Controlled bankruptcy and leaving the euro. Climate after the referendum has borne particularly by anger feelings longer expressed in the European Commission building for Handling the Greek government and its credibility Tsipras government is at its lowest, 16 of the 18 remaining members are in favor of the third scenario ie the controlled bankruptcy and leaving the euro. The two members who are against this third solution is France and Cyprus, with Paris, according to European official, to vacillating. This scenario is considered the most "cheap" for member states and the European Central Bank, and puts an end to potential damage. It provides little funding, mainly to cover commodity imports (balance payment facility), in order to prevent a humanitarian crisis, and probably some support the banking system. However, Greece will only cover the budget deficits, a significant portion or all of recapitalization needs of banks and part of the deficit. What you decide, finally, the next few hours the governments are at present unknown. But as he says official, the important thing is that now the Greek side to present credible proposals, which open at least at this stage of the negotiations.

None of these are good for the Greek people, and will certainly be a hard sell for Tsipras as the much hoped for support for a debt haircut fails to materialize as all the current finance ministers realize their political careers are finished if they concede to Greek demands.