Third Greek Bailout Suddenly In Jeopardy: Creditors Warn Cash May Be Delayed If Elections Don't Go As Desired

Just when everyone was convinced that the main "risk off" event of the summer, namely the Greek bailout, was safely tucked away and that having abdicated its sovereignty to its creditors  and Germany in particular, who now hold the Greek banking system hostage courtesy of draconian capital controls, that Greece would continue to receive its monthly cash allotment just so it could repay creditors from its first two bailouts and would not make headlines for the foreseeable future , Market News just reported that suddenly even the Greek bailout is no longer on autopilot as a result of the upcoming elections in three weeks, whose outcome is anything but assured.

According to Market News, "Greece's international creditors may delay the first review of the country's bailout until November, multiple EU sources told MNI Tuesday, pushing talks on potential debt relief further down the road as Greece prepares for snap national elections on September 20."

And just in case it was not clear that Greek sovereignty is now entirely conditional on the Greek people voting precisely as the Troika requires, and for a continuation of the austerity terms delineated in the 3rd Greek bailout, MNI reports that "officials will also stress that any new government that emerges from this month's poll must meet the current bailout terms in order to release the E3 billion pending from the its first loan tranche and have already warned the interim government to continue with the implementation of prior actions set for September."

In other words more of the same: Greece pretending to reform, creditors pretending to inject funds into the Greek economy:

"Realistically speaking, the inspectors' return to Greece might be delayed and the first assessment could take place in November instead of October. In such an event I don't expect talks about another Greek debt relief to run simultaneously," a top Commission source said. "But the new Greek government will have to implement a new set of milestones before receiving the remaining E3 billion irrespective of who wins."

As a reminder, Greece and its creditors have yet to define the package of measures that will be attached as milestones and prior actions for the release of the E3 billion.

Furthermore, the biggest hurdle to any Greek formalized bailout, the IMF's participation, remains anything but resolved: "there is still ambiguity about the involvement of the International Monetary Fund and when it will choose to agree with Greece a third loan programme. But the EU schedule will run irrespective of that."

Another source said that the IMF's Poul Thomsen gave recently a background briefing to the Board of Directors of the Fund where "he expressed his scepticism and reservations about the effectiveness of the new bailout and whether the IMF should participate."

What is perplexing, is that none of this comes as a surprise to the Greek creditors: "EU leadership and Eurozone Finance Ministers knew as early as July that outgoing Prime Minister Alexis Tsipras would call elections within September."

And here is where things get tricky: "we thought at the time that he (Tsipras) will win again and the everything will go as agreed," the source said, adding that "now there is background worry about the outcome and the formation of the new (Greek) government, even the possibility of double elections."

The reason for the worry is that unexpected to many, Syriza's lead, which as recently as a month ago was seen as insurmountable, has dwindled to almost nothing. As Reuters reported over the weekend, "the gap between Syriza and the conservative New Democracy party has shrunk to 1.5 percentage points, according to a survey by pollster Alco for Sunday's proto Thema newspaper.The poll gave Syriza 22.6 percent against 21.1 percent for New Democracy, with 79 percent of respondents saying Tsipras had disappointed their expectations and 66 percent believing he was wrong to call early elections."

But the biggest wildcard may be the Greek youth. Overnight, Bloomberg reported that none other than "Syriza Youth Wing" has withdrawn its support for Tsipras: "We won’t support Syriza in forthcoming elections, nor participate in its election ticket,” majority of Syriza party’s youth wing leadership says in statement posted on its official website.  Instead, the group's members say will continue fight against bailouts outside Syriza party, citing Alexis Tsipras’s decision to support an austerity-attached agreement with creditors as reason for their departure.

So the question suddenly becomes: if another party does what Syriza did in late 2014 when it promised to end austerity (with results that were very well known), will they win? And who could it be: will it be Varoufakis new "Pan-European anti-austerity" party? Or will Golden Dawn be given the mandate this time? The answer: probably neither, because courtesy of the Greek capital controls, the local population is still beholden to its European overlords courtesy of the ongoing indefinite lockdown on some €120 billion in Greek deposits.

One thing is certain: Greece will be making market-moving headlines once again, months if not years earlier than most had expected.