I thought it would be useful to just have a new thread on what the relevant dates are for various issues.Firstly we have the 15th May bond maturity, these are the roughly €400m of hold out bonds that weren't swapped in the voluntary debt exchange - to default or not to default is the question and I would guess that they will default - consensus appears to be that this is a bit of a non event. From what I can make out the bonds have quite a long 30 day grace period so even if they don't pay the bonds won't officially default until June.Secondly we have the next election - 17th June seems to be the date as I've seen a couple of pieces mention that now.When does Greece run out of money? Well that is a topic of much debate and most people expect that to be somewhere between late June and late July. So assuming no outright majority any coalition is going to have to be formed very quickly and get their act together very quickly in order to have sufficient money to pay pensioners/public sector workers (As this is where any default will occur). Also the bank recapitalisation is still to take place and can't until the new government forms and agrees to the European terms. They suffered massive losses in the voluntary debt exchange and are due for a big cash injection from the EU/IMF as part of the bailout. So god knows what happens there.There is still a very small chance that a government can be formed without a new election with talks still ongoing but the chances fade obviously with each day.If there is a new election there is the prospect that the 3 smallest parties are going to merge - these are Drasi, Recreation and The Democratic Alliance. Separately they all polled below the 3% needed to get an MP but jointly they got 6.5% of the vote. So given that they all support the bailout program they have apparently come to the conclusion that it could be in the national interest to join in order to get more pro program MP's and be part of a new coalition.B
http://ftalphaville.ft.com/blog/2012/05/15/1000181/greece-pa...Greece will pay holders of a 430 million euro bond that matures on May 15, a government official said on Tuesday.“The bond will be paid,” the official, who did not want to be named, told Reuters.The remaining amount of the bond had not been exchanged under a debt swap the country completed in March.
“The bond will be paid,” the official, who did not want to be named, told Reuters.Not official though - so still waiting. Would be surprised if they did pay it to be honest, I don't think anyone (other than obviously the holders) would care if they didn't.
So another key date - the Greek parliament opens on Thursday and this will be the first time new MP's enter parliament. Assuming that no last minute deal is done (and Syriza appear to be refusing all proposals currently, with the Democratic Left keen but unable to take part without Syriza due to their election pledge) then this will be the point that they will have to vote to dissolve parliament and call a new election.
Looks like no election deal - the meetings been brought to an end and they appear to have agreed to hold new elections.B
Secondly we have the next election - 17th June seems to be the date as I've seen a couple of pieces mention that now.Looks like there is a choice of dates being proposed - either the 10th or the 17th of June.
I don't understand where a new election is going to get them.GO
I don't understand where a new election is going to get them.Well my take on it fwiw is that Syriza are looking at the polls and believe that they can now take significantly more seats if a new election is held. Polls suggest a big swing post the election towards them. They appear to be arguing relatively convincingly that Greece can renegotiate their bailout deal with the rest of Europe to include elements to help boost Greek growth. They also are being very clear that they want to remain in the Euro.So this breakdown appears to have been because Syriza won't join the others in a grand coalition (excluding the far right party) but prefer to try and become the largest party and thus be in position to push their renegotiation strategy.
Fair play Bert that's a reasonable proposition. Not sure it will happen that way but I guess we will see.The only issue I have with renogiation is that it just continues to make Greece look juvenile in political terms, which I guess they are... it's just a pita to continue deal with them. It's a reoccuring and unnecessary distraction. Oh well, gives us something to talk about I suppose.GO
BertEEESo this breakdown appears to have been because Syriza won't join the others in a grand coalition (excluding the far right party) but prefer to try and become the largest party and thus be in position to push their renegotiation strategy.So the next election is going to depend on what proportion of the population are happy for Syriza to play "Give us a Better Deal - Call my Bluff" vs the EU, for the future of Greece, with the only other alternative currently on offer being an austerity package that:- destroys Greece's economy amd society- keeps the Euro massively under-valued so that Germany can continue to have a successful export-led economy with no apparent downside and no acceptance that they are screwing the rest of Europe.AIMHO.Cheers, MartinP.S. I imagine Syriza will do very well unless the rest of the EU offers them a much improved deal before the next election.
So the next election is going to depend on what proportion of the population are happy for Syriza to play "Give us a Better Deal - Call my Bluff" vs the EU, for the future of Greece, with the only other alternative currently on offer being an austerity package that:- destroys Greece's economy amd society- keeps the Euro massively under-valued so that Germany can continue to have a successful export-led economy with no apparent downside and no acceptance that they are screwing the rest of Europe.haha no I wouldn't say that the package on offer in any way destroys Greece's economy or society no and on a PPP basis the Euro looks pretty overvalued vs it's major trading partners still. But Syriza do appear to be making a convincing case to the electorate that they can get a better deal from the EU to soften the impact of the fiscal tightening.B
Hi Bert,A few points on the latest situation in Greece. All a bit disjointed, but I’m chatting to people about it all the time so I thought it might be worth posting even random stuff, given its macro importance right now.Firstly, today’s “will they/won’t they” over the €430m foreign law bond payment seems emblematic of the chaos out there - nobody’s in charge in Greece right now, so it’s virtually impossible to predict developments. Supposedly, the three largest party leaders were going to be consulted on whether or not it would be paid, but I’ve been told that Syriza said “no” and Pasok and New Democracy weren’t keen to be seen to have sanctioned the payment to hedge funds at a time when Greece is running out of cash. So it seems they have absented themselves from the decision and left it to the caretaker finance ministry. The latter will have wanted to pay to avoid formal default, so it looks like, amazingly, it’s actually being paid. Just goes to show how unpredictable events there are!And I think it’s important to appreciate quite how chaotic politics is in Greece right now. The election result has caused complete disarray, to the point where it may not be particularly helpful to think along traditional party lines any more - because the parties are now deeply fractured and unstable within themselves. So, as you posted earlier, three of the smaller supposedly “pro bail-out” parties are talking about getting together to try and cross the 3% threshold to get into parliament next time. But the last time they tried that they failed because they couldn’t agree about who would be leader. Also it’s not at all clear any more what is meant by “pro bail out” or “anti bail out”. Syriza are still saying that they would reject the bail out terms in whole, but all other parties are also talking, in various degrees, about wanting to amend the bail out terms to an extent that the Troika currently say is unacceptable. The real crunch will come when the €11bn of cuts which were scheduled to be specified and implemented in June actually have to be passed in parliament. Whatever government is in power then will find it pretty difficult to pass these. For example, the Democratic Left (currently 5th in MPs) are supposedly pro EU, pro renegotiation of bail out but anti default; if they had joined in coalition with Pasok and New Democracy (as was mooted earlier this week) the resultant coalition would have had168 out of 300 MPs - on the face of it a healthy majority. But the reason they didn’t do so seems to be that they were afraid they’d be obliterated at the next elections if they joined a pro-bail out coalition. They’re internally split, and basically nobody in Greek politics wants to be the one to actually implement the austerity measures, So, a Pasok,/New Democracy/Democratic Left coalition could not be confident that it would get enough of its 168 MPs to support such cuts to get the measures through. In which case the coalition would have collapsedSyriza’s policies are of course bonkers, and their spokespeople keep saying several incoherent things before breakfast. One day they’re going to raid bank accounts to fund public sector payments, the next day not. It’s basically student politics writ large (though their leader Tsipras, BTW, reportedly had a private construction company with his brother that works on government construction contracts, plus ca change). The problem however is that they have become a focus for the Greek people’s despair at austerity, and most Greeks are deeply schizophrenic about this. They want to remain part of the Euro, and if you scare them enough then they’ll say “absolutely, we must remain part of the Euro”. But then when you say they must have further austerity they say “absolutely not” and will vote down anyone who tries to implement it.Regarding the next elections, it’s worth noting that in recent days the threats from EU and German officials (that Euro exit will result if Greece doesn’t abide by the bail out terms in full) are now receiving blanket coverage across all the Greek media - and in very stark terms. The media consensus is that rejection and exit would be apocalyptic, and there is (at least for now) little or no media argument that leaving the Eurozone might be a good thing. It’s very difficult to tell what impact all this is having on voters, but I wouldn’t be at all surprised if the next polls show Syriza’s rise in the polls to have halted, at least temporarily. Markets would probably cheer that, though I don’t think they necessarily should - the fundamental unwillingness to implement further austerity measures remains.I fear that even if, following new elections, a coalition can then be cobbled together to supposedly implement austerity measures and keep Greece in the Euro, it won’t in practice be able to do so. Even if the measures the Troika are insisting on could be got though parliament without causing a coalition collapse (unlikely) IMO they wouldn’t in practice be implemented. There’s just too much institutional and popular resistance. Greece isn’t like the UK or Germany - the parliament can’t just decree things and then they automatically happen. For example, despite all the talk, to date no jobs have been lost from the Greek public sector. Amazing, isn’t it? The evaluation process for Greek public sector workers (the prelude to dismissing them) has recently been halted. It’s still normal to ride around Athens public transport for free. The new medicine procurement regulations (supposed to save billions by buying generics) hasn’t gone live. Reports today say the Public Power Corporation will not in fact be including the new property tax on its next bills, despite a law having been passed that they should do so. Etc, etc.. Basically, the Greek “clientist” state is massively resistant to change, and the great bulk of the economic pain has to date been concentrated in the private sector. Given this, it’s perfectly understandable why the Troika has insisted that there must be big structural change, but IMO their big mistake has been to allow the bulk of the pain to be suffered by the Greek private sector, and not offer them any hope of anything other than years more of brute austerity. In so doing, they’ve driven them into the arms of extremists and an unholy alliance with public sector workers trying to protect their jobs. If they want to change that, they’ve got to soften their rhetoric and offer some pro-growth relaxation in the pure austerity terms, whilst at the same time continuing to insist on the crucial structural reforms. A tricky balancing act to pull off.Of course, the big “weapon” the EU authorities have is withholding money. Greece will now run out of day to day funds by the end of June unless the EU advances more money, because business activity and government revenues have collapsed since the elections (reports say Government receipts are down around 25% since the elections), and the pips are squeaking everywhere. For example the Greek electricity market operator, HEMO, urgently needs €350m in loans to pay foreign fuel suppliers, and so far the Troika has been blocking this until they agree to increase electricity tariffs and reduce the guaranteed prices paid for renewable energy. Widespread electricity cuts were only just averted immediately prior to he elections, but will shortly begin unless HEMO can pay its suppliers. Ferry operators are talking about having to drastically cut services to the islands due to mounting cash flow difficulties. Greek banks are refusing to renew normal business loan facilities.So it will be very interesting indeed to watch what the EU actually does in terms of disbursements over the next few weeks. Junker was talking yesterday about dispersing the “held back” €1bn after all. If the EU do relax the purse strings, even a little, then this will show that when push comes to shove they’re still not prepared to force Greece out, and that there’s still room for a negotiated solution, probably with a more orderly “Grexit” following in due course. But if they stick to their hard line and continue to withhold money then, by the end of June, they’ll force Greece out of the Eurozone in a disorderly fashion because it wouldn’t be able to pay public sector workers so would have to issue IOUs or Drachmas. And that would have traumatic consequences both for Greece and for the wider Eurozone. As I wrote earlier this week, one must hope that wiser heads will prevail. I still think that the only lasting/realistic answer is for Greece in due course to leave the Eurozone in as agreed and orderly a manner as possible, devalue, and remain in the EU whilst the EU assist it in restructuring, but meanwhile it seems to me that a very short term disorderly default and exit should at all costs be avoided. Maybe the payment of the €430m foreign law bond today, which presumably must have had EU approval, is a sign that whatever its hard line rhetoric, the EU does in fact recognize this?All very uncertain, I’m afraid, and you’re probably non the wiser after reading the above! Personally, I’m staying out of markets for the time being whilst this plays out. But actually, from a purely investment point of view I’m quite encouraged to see that the crunch point finally appears to have arrived, and that soon we should get some certainty one way or the other. The refusal on the part of the EU (and indeed Greece) to face up to reality to date and make the really hard choices has been corrosive for markets. Whatever the outcome (and it will be painful whatever happens), certainty would be better. Markets can then find a level and we can move on from there.A
They have paid that bond - announced late this afternoon.
An absolutely fascinating post and insight Avidya, thanks so much for posting it!B
Good post I would say that despite cuts not being implemented as you say, Greece has managed to cut spending by around 5% of gdp and that is with gdp shrinking (8-12%? at a guess). Quite remarkable and close to primary neutral budget. Cuts are taking place or, as the case may be, bills are simply not being paid.r
They have paid that bond - announced late this afternoon.Jezzz - just looking into it and they haven't paid it, they've announced that they intend to pay it - but not actually as far as I can work out paid. They have 30 days by the looks.B
>>They appear to be arguing relatively convincingly that Greece can renegotiate their bailout deal with the rest of Europe to include elements to help boost Greek growth.Mind you if the change in the landscape is such that even a chap working in the city thinks they are arguing this relatively convincingly, would a second election not find all parties making this promise ? Hard to imagine the other parties sticking dogmatically to nope we'll take the medicine as is, if there's a credible possibility of improved terms.KPS no offence intended re calling you a chap in the city, I just mean if it looks likely to us, surely the greeks will be more inclined than us to believe it. Having looked into the void, are not both parties reconsidering the options ?
would a second election not find all parties making this promise ?Well it's very interesting what Avidya says about the TV coverage and whether that will see Syriza's momentum dry up. If not then I'm guessing that indeed others will be forced to also say they'll renegotiate. Remember though that exactly the same thing happened in Ireland really.Also not saying that I'm convinced to be honest but saying that they are managing to argue convincingly to the Greek electorate. Given some of the comments coming out of Europe though I'm guessing they will allow some concessions - so for example the EU deal apparently is a year shorter than the IMF deal. It would very easy to justify matching the IMF deal. Then some funded infrastructure to support growth is possible.
http://www.bloomberg.com/news/2012-05-13/euro-officials-begi...“We can only hope that the Greeks make the right decision,” Schaeuble told a group of students today at a Berlin school. “If they make another decision, we’ll have to react in such a way as to ensure that the consequences are as contained as possible.” Assuming the hard left get control and force a disorderly exit, capital controls, etc. What preparations and likely measures would the EMC/EU take to prevent contagion? As i understand it LTRO requires collateral - would there be enough? Do SDRs through the IMF provide a solution? If not, what other possibilities are there? Would debt union and/or monetisation of debt in that situation still be off the cards for the Germans?
For example, despite all the talk, to date no jobs have been lost from the Greek public sector. Amazing, isn’t it? The evaluation process for Greek public sector workers (the prelude to dismissing them) has recently been halted. It’s still normal to ride around Athens public transport for free. The new medicine procurement regulations (supposed to save billions by buying generics) hasn’t gone live. Reports today say the Public Power Corporation will not in fact be including the new property tax on its next bills, despite a law having been passed that they should do so. Etc, etc.I feel I should be putting this in bold, rather than italics.Truly remarkable. Do the well-paid staff of the Greek railways still have their jobs too?Thanks for posting.Jon
To me this is shouting "military coup".Any chance that the colonels will retake the stage?DM
Avidya, I am left quite breathless after reading all that .This is the sort of information our media should be disseminating so that UK does not end up joining those who believe in the tooth fairy , its in our back yard and we have to deal with it. However if you take the recent election results as an indiactor then we don't want to deal with it either , lets hope the population as a whole are not that naive and were just having a grumble. I am just becoming breathless again .
The bond seems to have been paid:http://www.reuters.com/article/2012/05/15/us-greece-bond-idU..."A central bank official told Reuters the money was paid to bondholders on Tuesday."
The bond seems to have been paid:Yep and it was a daft decision IMO. Bondholders, who were forced to accept losses of around 75pc on their debt two months ago or lose everything, hired lawyers to claim they were "fraudulently misled" after Athens repaid €435m to debtors who resisted the restructuring.The owners of the €435m bonds are hedge funds that refused to accept the terms of the bond swap in March, despite being repeatedly warned that Athens would not have any money to pay them later. But when the bonds fell due on Tuesday, Athens decided to pay them in full to avoid more uncertainty amid the political chaos.An official involved in the negotiation said: "It was considered imprudent to default on a bond issue at a moment of political instability, when the country's membership of the euro is being questioned."However, in solving the immediate threat, lawyers said Greece now has a far bigger problem. Bondholders with a total of €6.4bn refused to participate in the so-called private-sector involvement (PSI), leading to questions about whether they will also be paid in full.http://www.telegraph.co.uk/finance/financialcrisis/9268627/B...
Europe is definitely shifting IMO:German Chancellor Angela Merkel and French President Francois Hollande said they would consider measures to spur economic growth in Greece as long as voters there committed to the austerity demanded to stay in the euro.Requests for measures to bolster growth will be “considered” and the European Union may also “approach Greece with proposals,” Merkel said late yesterday at a joint press conference with Hollande during his first official visit to Berlin. “Greece can stay in the euro area,” and “Greek citizens will be voting on exactly that.”http://www.bloomberg.com/news/2012-05-15/merkel-s-first-holl...
the big “weapon” the EU authorities have is withholding money. Greece will now run out of day to day funds by the end of June unless the EU advances more money, because business activity and government revenues have collapsed since the elections (reports say Government receipts are down around 25% since the elections), and the pips are squeaking everywhereThe solution is GreekAid: where's Bob Geldorf when he's needed?
All very uncertain, I’m afraid, and you’re probably non the wiser after reading the above! Personally, I’m staying out of markets for the time being whilst this plays out. But actually, from a purely investment point of view I’m quite encouraged to see that the crunch point finally appears to have arrived, and that soon we should get some certainty one way or the other. The refusal on the part of the EU (and indeed Greece) to face up to reality to date and make the really hard choices has been corrosive for markets. Whatever the outcome (and it will be painful whatever happens), certainty would be better. Markets can then find a level and we can move on from there.If you are so encouraged that the crunch point finally appears to have arrived, are you not correspondingly encouraged to start taking a nibble at the markets with the FTSE 100 down 10% from its January high. P103
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