So, we’re going to the wire once again in the now traditional dance between Greece and the troika. As the FT reported on Thursday:
Eurozone leaders face a new round of brinkmanship over Greece’s €174bn bailout after international lenders failed to bridge differences on how to reduce Athens’ burgeoning debt levels, pushing the country perilously close to defaulting on a €5bn debt payment due next week.
Officials had hoped to finalise the new programme, which extends Greece’s rescue two years to 2016, at a meeting of eurozone finance ministers in Brussels on Monday. That would free up a long-delayed €31.3bn aid payment desperately sought by Athens.
But according to officials involved in negotiations, international lenders remain far apart on how much debt relief for Greece is needed and who will bear the losses from lower debt repayments.
That €5bn is due on a 3-month T-bill on Friday November 16. But the ECB which said it “is by and large done” with helping Greece is now resisting allowing the T-bills in question to be rolled over.
The ECB could raise the ceiling on the amount of T-bills the Bank of Greece can accept as collateral in exchange for emergency loans, thereby allowing Greek banks to stock up. This, at least indirectly, allows the ECB to still sorta kinda get its way.
In the meantime, as Citi said, the ECB can “create pressure to find a quick agreement by threatening to limit the use of Greek T-Bills under the Greek Central Bank’s ELA [Emergency Liquidity Assistance].”
And according to the FT’s Peter Spiegel an EU official said “there will not be any default on the 16th of November”. Heck, this particular T-bill was itself issued so that another piece of ECB debt could be payed off… and the T-bill ceiling was raised that time, so this is hardly new.
(There is an argument that lifting the ceiling might be seen as monetary financing within the ECB. But the last roof-lift obviously wasn’t. Okaaay.)
Pertinently, the IMF is still insisting that Greek debt levels are reduced to 120 per cent of gross domestic product by 2020 — which would involve eurozone governments having to take losses on their existing bailout loans. Not everyone is cool with that. For its part, the European Commission is urging an easing of the target to about 125 per cent by 2022.
The hope had been that debt relief measures could be limited to a cut in interest rates on bailout loans plus giving Greece the profits earned by the ECB on their €55bn in Greek debt holdings, estimated to be between €12bn-€15bn.
All-in, we’ll add November 16 to our ever-growing chimeric deadline list
on the calendar that we keep in the bathroom.
Eurozone faces brinkmanship on Greece – FT
Ex-Goldman Bankers See Crisis Opportunity in Greek Car Insurance – Bloomberg
EU keeps Greece waiting for loan – ekathimerini