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Titoli di Stato area Euro GRECIA Operativo titoli di stato - Cap. 3 (2 lettori)
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Escalation probable but Grexit still unlikely
We expect an escalation of the Greek crisis in the weeks ahead with no deal likely in the short-term and increasing pressure upon the Greek government to find a deal. Ultimately we expect Greece will be driven to new election by June, as either
(1) PM Tsipras cannot pass requisite measures through his current coalition, (2) a major missed payment, of either wages/pensions, which would sap public support, or to the IMF or (3) in a best case scenario, for a new mandate to complete the current bailout and/or seek the inevitable third package after June. Our base case remains that Greece will not ultimately exit the Euro: Greek public opinion remains very strongly in favour and we see little sign Greeces creditors want to push Greece out but rather extract austerity and reform from the Greek government. Graccident predictions are not time consistent: the Greek government nor its creditors will operate identically if there is a major event risk (e.g. missed IMF or wage/pensions payments, the 4 month extension expires, or the ECB moves to end ELA liquidity). This would trigger political developments and ultimately decisions in Greece Europe.
No Graccident. The path to good or bad runs via elections.
View summary
- The probability of a ‘full agreement’ on outstanding issues between Greece and its creditors is low in the coming weeks. A deal is unlikely at the Eurogroup on April 24th and probably until mid-May at best. The ‘major’ Greek red lines remain on pension and labour reforms and public wage/pension cuts. These are pre-requisites for a comprehensive deal with Greece from its European creditors
- Newsflow will get worse in coming weeks: Rhetoric on both sides will escalate in coming days/weeks increasing fears of Grexit. We expect Eurozone hawks to talk up Europe’s firewalls and the preparations in place for a Grexit and the lack of contagion, whilst Greek government sources will continue to leak or hinting at delayed IMF payments and elections. The Greek government talking up such risks can also generate a (yet absent) sense of urgency amongst the public opinion of the need for a deal, whilst generating support for the government’s negotiating stance.
- In our view, new elections in Greece are >50% likelihood by end June.
We caution in looking at events too linearly; however we can see new elections in Greece being triggered by any number of pending scenarios:
- 1. The government having to rely on New Democracy votes to pass a bailout-related bill (hence it will to avoid bringing any such bill to parliament).
- 2. The current government seeking a new mandate, either:
- i) After a U-Turn (“somersault” or kolotoumba) by Mr Tsipras to seek a new mandate for reforms/austerity but keeping Greece in the Euro, or
- ii) Try and ply a course within the Euro but outside of a package or whilst still perusing easier terms. This could well be under capital controls, potentially after a significant internal missed payment (wages/pensions, or an IMF tranche). We don’t think Mr Tsipras would (currently) campaign to leave the Euro explicitly given currently strong public support.
- 3. Ultimately to seek a mandate for a third bailout, or even to approve the final deal of current bailout. Even if a short-term positive scenario of partial agreement with creditors and sub-tranches and/or a ‘shift to the centre’ with Mr Tsipras changing coalition partners secures some loans without elections; the current government will in our view need a new mandate for a third bailout.
- Delay and escalation is in the interest of both sides. For the Greek government this increases the sense of urgency and shifts public opinion toward compromise, whilst for Europe’s creditors a ‘reform and austerity-lite’ deal is unpalatable so they expect Greek government’s eroding liquidity position weaken its hands notably.
- Decisions must be made. “Graccident” is not “time consistent” because major event risks would trigger a response. Even though both sides hint otherwise, if major event risks materialise (e.g. missed IMF payments, end of the 4-month extension), then both sides incentives to act differently will change since Grexit is in neither side’s interest. Such developments could be new Greek elections, a change of government partner by Mr Tsipras, or a ‘deal’ being put on the table by Europe.
- We view a referendum as highly unlikely. Given Greek public support for the Euro, the government would strongly be penalised for putting this at risk, not to mention the potentially severe consequences for financial stability, as deposit flight would likely accelerate markedly (bank runs could not be ruled out in such a scenario). Even in the even the government wishes to stand aside or whatever the alternative political calculation, we think new elections will be the more likely choice.
- Ultimately, Grexit presumes one of the following two points:
- 1) Greek voters will vote in favour of Euro exit (either explicitly or via supporting anti-Euro parties). This is not impossible but would require a catalytic event to trigger a large shift in public opinion.
- 2) European policymakers will toughen their line further to make Grexit the more palatable choice for the Greek electorate. At worst, we would expect a bailout deal similar to the first two will remain on the table for any government willing to sign it. Indeed stories indicating Greece’s creditors are considering allowing “Greek default within Euro” arguably try to show terms will not get easier in any case- but implicitly acknowledge that there will be new options on the table.
- Our view remains that Grexit is in neither side’s interest and is far less likely than not. Whilst escalation is in both sides’ interest short-term, so we expect much more noise and negative headlines ahead.
- Ultimately however it is in both parties’ interest to ultimately avoid Grexit. This does not mean that politics cannot lead to bad outcomes but we continue to consider Grexit to be a 10-15% probability. Even if this is post-elections in Greece, or in the extreme even after capital controls, a deal to keep Greece in the Euro is still most likely to be struck.
1. Where do we stand now?
At this stage resolution of the ‘crisis’ is largely political, so events can prove rather path dependent. As such we rather set out the existing positions of the different sides and where ‘pressure points’ exist in the negotiations to gauge the risks ahead.
- Greek government:
- The Greek government has set pension and labour reforms and new wages/pension cuts as ‘red lines’. Reportedly privatisations and increasing VAT rates or islands are also ‘red line issues’ but we view the Greek government stance as more flexible on these. The government is only willing to countenance further fiscal consolidation via tax evasion measures, public sector efficiencies or new taxes. Its position on tax administration reform (the other key reform in negotiations) is closer to the Brussels’ Group but its credibility to deliver this measure is viewed as limited.
- The Tsipras government retains strong public support for its negotiating stance, despite the impact in increasing domestic economic uncertainty. The Greek government has passed a number of popular policy measures from its manifesto, which have antagonised its creditors (e.g. humanitarian crisis bill, tax arrears repayment plans, a German WWII reparations committee)
- It is in Tsipras’ interests to delay an agreement to generate a greater sense of ‘crisis’. Greek public opinion is far less concerned about Grexit than in 2012: the new government has only been in place for c.100 days, wages and pensions have continued to be paid, whilst Grexit rhetoric has been at a fraction of that seen three years ago. Escalation of the crisis will prime public opinion for further developments. This is in Prime Minister Mr Tsipras’ interest if he wishes to remain in power, whatever his ultimate future plan…
- The current governing coalition will struggle to pass either wage/pension cuts or labour/pension package through parliament without having to rely on opposition votes.
- Indeed the government did not even bring the 4 month bailout extension for parliamentary vote for exactly such political concerns.
Current Composition of Greek Parliament
Click here to view chart
https://strategy.rbsm.com/IbWtKP9fj3ZW6oIa-OE82g!!.rt)
Source: Hellenic Parliament, RBS
- If PM Tsipras’ government does brings any bailout-bill emanating from negotiations with its creditors to parliament, it means one of the following:
How many MPs could Mr Tsipras afford to lose and avoid elections?
Click here to view charthttps://strategy.rbsm.com/IbWtKP9fj3b3KY56fVYrQA!!.rt)
N.B. We assume ND, GD KKE wouldnt join a coalition Source: Hellenic Parliament, RBS
- a) Mr Tsipras has performed a ‘shift to the centre’ to get the support of Potami and PASOK. This would likely require an agreement of some format and would be viewed positively by markets. This would also likely be heavily trailed in the press.
However, depending on the number of SYRIZA MPs who would defect (see left) this still may not be sufficient to avoid relying on New Democracy support. If New Democracy support is required Mr Tsipas’ political position will likely be untenable, meaning he is unlikely to survive any subsequent confidence vote.
- b) The government will fall, triggering elections. Even though any reforms that will deliver cash will probably pass, given support from opposition centrist parties (New Democracy, PASOK and Potami). However, without Mr Tsipras previously having previously struck a deal with the smaller centrist parties (Potami, PASOK), then any comprehensive bill would be unlikely to pass on SYRIZA/ANEL votes alone- pushing the country toward elections.
- c) A best case scenario a partial agreement with the Eurogroup might be passed with SYRIZA/ANEL votes alone. However this is unlikely to be more than a partial agreement and will not likely close out the final second bailout deal. Thus this will just prolong the process. Ultimately the reforms in the second bailout will struggle to pass parliament and at the very latest, the need for approval of a third bailout will remain unchanged- hence elections by end June (end of the 4 month extension process) are our base case.
b) Greece’s creditors
- Greece creditors remain unsatisfied with the current government’s proposed reforms and particularly its unwillingness to impose further wage/pension cuts, implement particularly pension reform and at the very least not reverse recent labour reform (i.e. by re-introducing collective bargaining).
- In our view, Greece’s European creditors have dual (and potentially conflicting) mandates:
- Avoiding Grexit given both financial exposures and the ‘precedent’ of Euro exit being set. Eurozone countries ~€200bn exposure in EFSF and bilateral loans, not to mention €110bn of ECB exposure to the Greek sovereign and banks.
- Finding a deal, yet avoid giving any significant concessions to the SYRIZA. In part this is due to concerns about political contagion (i.e. encouraging Podemos in Spain, Sinn Fein in Ireland, etc) and also since a third bailout is necessary, then do not wish to send a signal of lesser pressure for future reforms.
- At this stage, Greece’s European creditors are keeping public statements around negotiations relatively restrained (compared to 2012 no doubt). In our view this is being done to avoid poisoning domestic public opinion further since a third bailout is still the most likely scenario in June.
- Moreover Greek public opinion is likely to shift more anti-Euro if there is the perception of an ‘ultimatum’ being delivered to the government. In our view Greece’s European creditors would welcome Greek public opinion shifting against the SYRIZA government whilst maintaining its pro-Euro tendency.
- Thus, similar from the European side, the likelihood of an imminent deal is limited. Upfront or public concessions will send a negative signal for future negotiations, whilst the Greek government’s draining liquidity position is likely to weaken their hand in negotiations further, which at the very least will provoke political developments in Greece.
- At the current juncture the Eurogroup and the Brussels Group (IMF, Commission, ECB and ESM) remains united against the current government’s red lines. If and when the Greek government offers greater concessions on these areas, different thresholds exist for different players in willing to agree a deal. Relatively more ‘dovish’ institutions include the ESM, Commission, France and Italy, whilst the ECB, IMF, Germany, Spain, Netherlands and some smaller countries (notably Portugal, Belgium, Ireland and Finland) are the ‘hawks’ in our view.
c) ECB and capital controls
- Capital controls will (most likely) only happen if the ECB pulls, or says it will pull ELA. This requires a two-thirds majority vote in the Governing Council. If ELA remains in place, then with sufficient collateral, Greek banks could refinance large parts of their deposit base even as current uncertainty continues
- In light of this and the ECB’s existing c.€110bn exposure, we do not think the ECB wants to “pull the line” unless there is a material change in circumstances, not least since it will either be viewed as the culprit in speeding Euro exit or at the very least viewed as interfering in political affairs.
- In our view an ELA “deadline” (where the ECB gives notice it will cease ELA) or an ultimately a cessation of ELA to Greek bank will at the very least requires: (1) a missed payment to the IMF or (2) the end of the 4 month extension package in June, without a deal.
- The Greek banking system remains under significant pressure from deposit flight. Greek government bonds are not eligible, whilst ELA continues to be reduced by the minimum necessary on a weekly basis. The ECB will not allow an increased bill exposure for the banks and is not willing to lift this (as it did in August 2012) until there is tangible progress in the negotiations. The rapid deposit flight seen ahead of the bailout extension on 20 February has slowed but we would expect these to accelerate markedly in event of new elections or if the existing programme expires.
- In the event of new elections deposit flight would accelerate. Evidently if a anti-Euro parties increase their vote share, the ECB would have every incentive to reduce its exposure ahead of this by endorsing capital controls (though the decision would rest with the Greek authorities). We do not think ELA would be cut in the run up to elections, even in this case given the political overtones such a decision would take.
- On the other hand, if ‘pro-Euro’ parties are the most likely victors from elections, we would see why all parties would want to avoid capital controls. However, if anti-Euro parties are ahead, then we are more agnostic on whether capital controls would come into force.
- Meanwhile, a final complication with regards capital controls concerns a potential lack of collateral https://strategy.rbsm.com/IbWtKP9fj3YrsDzyM0_LkQ!!.rt as cited by Mr Noyer over the weekend. This could trigger an ELA deadline but there is significant within ELA collateral definitions. Rather this could instead be hinting at ELA being cut in the event that there is a missed IMF payment, since this could render Greek government bonds used at the ELA non-eligible for Greek banks.
2) Weeks ahead and negotiations
- There are a number of key meetings ahead (see list below); however at the current juncture we see a very limited likelihood that there is a deal in the next couple of weeks.
- The Greek government's liquidity position is clearly extremely stretched. Nonetheless the date at which it 'runs out of money' seemingly continues to be pushed back. Indeed the Greek press indicates there may be other state-owned enterprises even this week it may soak, whilst continuing to delay payments to commercial creditors. This https://strategy.rbsm.com/IbWtKP9fj3ZYbr3P0J7lDA!!.rt sort of story makes us think we are not quite at the point of no return, though the Greek state is scraping the barrel.
- In essence for the bigger picture, it makes little difference if this is in mid-May or later. It is clear Greece cannot pass the large ECB redemptions in July/August and even if Greece gets to end June, it is unlikely Greece’s creditors are likely to extend the current package- so developments will accelerate by end-June at the latest.
Upcoming Greek event risks
Date Event
6 May ECB Governing Council non-monetary policy meeting
8 May T-Bill redemption (1.4bn)
11 May Eurogroup meeting
12 May IMF repayment for ~779mln
15 May T-Bill redemptions (1.4bn)
05 June IMF redemption for ~312mln
12 June IMF redemption for ~351mln and two T-Bill redemptions (3.6bn)
15 June Eurogroup meeting
16 June IMF redemption for ~584mln
19 June IMF redemption for ~351mln
30 June End of Greek 4 month extension
10 July T-Bill redemptions (2bn)
13 July IMF redemption for ~467mln
14 July Holdout bond redemptions totalling ~88mln (bond denominated in JPY)
20 July Eurosystem, EIB and NCB bond redemptions totalling ~3.48bn
07 August T-Bill redemptions (1bn)
20 August Eurosystem and NCB bond redemptions totalling ~3.19bn
Source: Bloomberg, Wall Street Journal, Protothema.gr, RBS
- We caution in looking at events too linearly; however there are a number of key events to watch ahead:
- 1) Whether the Greek government has to take any ‘reform-related’ bill to parliament. As we discussed above, we think this is being avoided strongly given the high probability that this leads to the government falling.
- 2) Will there be a “sommersault” or kolotoumba? It does not appear at the current juncture Mr Tsipras wishes to do this- however if he is to remain in charge of the government without new election, he would likely need the support of centrist parties Potami and PASOK. However, domestic politics is not yet ripe for such a move and even if it were attempted, it is not clear Mr Tsipras has the numbers for it…
- 3) An anti-Euro turn? At this stage, this doesn’t appear likely given the Greek public’s very strong support for the currency that the PM would seek an anti-Euro mandate. However, given the fluid nature of developments, our greatest concern is capital controls, blamed by the domestic population on the ECB/Germany, followed by Mr Tsipras asking for an anti-Euro mandate.
Given strong public support for the Euro, we are doubtful this would succeed but an election after an ‘ultimatum’, capital controls, or worse still with the prospect of deposit haircuts on the table would make Grexit probabilities rise notably.
- A third bailout package is inevitable after June to allow Greece to meet future financing obligations, since market access is highly unlikely, whilst there are ongoing ECB and IMF redemptions in the months ahead (see left). However, this would probably require a mandate at some point (ahead of negotiations or afterwards).
- Ultimately even a short-term ‘best case’ short-term scenario partial agreement with creditors and sub-tranches and/or a potential ‘shift to the centre’ with Mr Tsipras changing coalition partners (to include Potami, or PASOK); the government still needs a mandate for a third bailout.
- At this stage we don’t view this as likely since public opinion remains strongly pro-Euro and little behaviour from Greece’s creditors to suggest there will not be some form a bailout deal on the table for a government willing to take it. We keep our Grexit probability at 10-15%.
- Going forward, we see further risks of escalations and elections are our base case scenario over the next three months. As such we expect negative Greek headlines to spike further and rhetoric to rise further since delay is in all sides’ interests. Graccident is not an endgame and ultimately we think Grexit remains only a 15% risk, despite pending escalation and elections.
Escalation probable but Grexit still unlikely
We expect an escalation of the Greek crisis in the weeks ahead with no deal likely in the short-term and increasing pressure upon the Greek government to find a deal. Ultimately we expect Greece will be driven to new election by June, as either
(1) PM Tsipras cannot pass requisite measures through his current coalition, (2) a major missed payment, of either wages/pensions, which would sap public support, or to the IMF or (3) in a best case scenario, for a new mandate to complete the current bailout and/or seek the inevitable third package after June. Our base case remains that Greece will not ultimately exit the Euro: Greek public opinion remains very strongly in favour and we see little sign Greeces creditors want to push Greece out but rather extract austerity and reform from the Greek government. Graccident predictions are not time consistent: the Greek government nor its creditors will operate identically if there is a major event risk (e.g. missed IMF or wage/pensions payments, the 4 month extension expires, or the ECB moves to end ELA liquidity). This would trigger political developments and ultimately decisions in Greece Europe.
No Graccident. The path to good or bad runs via elections.
View summary
- The probability of a ‘full agreement’ on outstanding issues between Greece and its creditors is low in the coming weeks. A deal is unlikely at the Eurogroup on April 24th and probably until mid-May at best. The ‘major’ Greek red lines remain on pension and labour reforms and public wage/pension cuts. These are pre-requisites for a comprehensive deal with Greece from its European creditors
- Newsflow will get worse in coming weeks: Rhetoric on both sides will escalate in coming days/weeks increasing fears of Grexit. We expect Eurozone hawks to talk up Europe’s firewalls and the preparations in place for a Grexit and the lack of contagion, whilst Greek government sources will continue to leak or hinting at delayed IMF payments and elections. The Greek government talking up such risks can also generate a (yet absent) sense of urgency amongst the public opinion of the need for a deal, whilst generating support for the government’s negotiating stance.
- In our view, new elections in Greece are >50% likelihood by end June.
We caution in looking at events too linearly; however we can see new elections in Greece being triggered by any number of pending scenarios:
- 1. The government having to rely on New Democracy votes to pass a bailout-related bill (hence it will to avoid bringing any such bill to parliament).
- 2. The current government seeking a new mandate, either:
- i) After a U-Turn (“somersault” or kolotoumba) by Mr Tsipras to seek a new mandate for reforms/austerity but keeping Greece in the Euro, or
- ii) Try and ply a course within the Euro but outside of a package or whilst still perusing easier terms. This could well be under capital controls, potentially after a significant internal missed payment (wages/pensions, or an IMF tranche). We don’t think Mr Tsipras would (currently) campaign to leave the Euro explicitly given currently strong public support.
- 3. Ultimately to seek a mandate for a third bailout, or even to approve the final deal of current bailout. Even if a short-term positive scenario of partial agreement with creditors and sub-tranches and/or a ‘shift to the centre’ with Mr Tsipras changing coalition partners secures some loans without elections; the current government will in our view need a new mandate for a third bailout.
- Delay and escalation is in the interest of both sides. For the Greek government this increases the sense of urgency and shifts public opinion toward compromise, whilst for Europe’s creditors a ‘reform and austerity-lite’ deal is unpalatable so they expect Greek government’s eroding liquidity position weaken its hands notably.
- Decisions must be made. “Graccident” is not “time consistent” because major event risks would trigger a response. Even though both sides hint otherwise, if major event risks materialise (e.g. missed IMF payments, end of the 4-month extension), then both sides incentives to act differently will change since Grexit is in neither side’s interest. Such developments could be new Greek elections, a change of government partner by Mr Tsipras, or a ‘deal’ being put on the table by Europe.
- We view a referendum as highly unlikely. Given Greek public support for the Euro, the government would strongly be penalised for putting this at risk, not to mention the potentially severe consequences for financial stability, as deposit flight would likely accelerate markedly (bank runs could not be ruled out in such a scenario). Even in the even the government wishes to stand aside or whatever the alternative political calculation, we think new elections will be the more likely choice.
- Ultimately, Grexit presumes one of the following two points:
- 1) Greek voters will vote in favour of Euro exit (either explicitly or via supporting anti-Euro parties). This is not impossible but would require a catalytic event to trigger a large shift in public opinion.
- 2) European policymakers will toughen their line further to make Grexit the more palatable choice for the Greek electorate. At worst, we would expect a bailout deal similar to the first two will remain on the table for any government willing to sign it. Indeed stories indicating Greece’s creditors are considering allowing “Greek default within Euro” arguably try to show terms will not get easier in any case- but implicitly acknowledge that there will be new options on the table.
- Our view remains that Grexit is in neither side’s interest and is far less likely than not. Whilst escalation is in both sides’ interest short-term, so we expect much more noise and negative headlines ahead.
- Ultimately however it is in both parties’ interest to ultimately avoid Grexit. This does not mean that politics cannot lead to bad outcomes but we continue to consider Grexit to be a 10-15% probability. Even if this is post-elections in Greece, or in the extreme even after capital controls, a deal to keep Greece in the Euro is still most likely to be struck.
1. Where do we stand now?
At this stage resolution of the ‘crisis’ is largely political, so events can prove rather path dependent. As such we rather set out the existing positions of the different sides and where ‘pressure points’ exist in the negotiations to gauge the risks ahead.
- Greek government:
- The Greek government has set pension and labour reforms and new wages/pension cuts as ‘red lines’. Reportedly privatisations and increasing VAT rates or islands are also ‘red line issues’ but we view the Greek government stance as more flexible on these. The government is only willing to countenance further fiscal consolidation via tax evasion measures, public sector efficiencies or new taxes. Its position on tax administration reform (the other key reform in negotiations) is closer to the Brussels’ Group but its credibility to deliver this measure is viewed as limited.
- The Tsipras government retains strong public support for its negotiating stance, despite the impact in increasing domestic economic uncertainty. The Greek government has passed a number of popular policy measures from its manifesto, which have antagonised its creditors (e.g. humanitarian crisis bill, tax arrears repayment plans, a German WWII reparations committee)
- It is in Tsipras’ interests to delay an agreement to generate a greater sense of ‘crisis’. Greek public opinion is far less concerned about Grexit than in 2012: the new government has only been in place for c.100 days, wages and pensions have continued to be paid, whilst Grexit rhetoric has been at a fraction of that seen three years ago. Escalation of the crisis will prime public opinion for further developments. This is in Prime Minister Mr Tsipras’ interest if he wishes to remain in power, whatever his ultimate future plan…
- The current governing coalition will struggle to pass either wage/pension cuts or labour/pension package through parliament without having to rely on opposition votes.
- Indeed the government did not even bring the 4 month bailout extension for parliamentary vote for exactly such political concerns.
Current Composition of Greek Parliament
Click here to view chart
https://strategy.rbsm.com/IbWtKP9fj3ZW6oIa-OE82g!!.rt) Source: Hellenic Parliament, RBS
- If PM Tsipras’ government does brings any bailout-bill emanating from negotiations with its creditors to parliament, it means one of the following:
How many MPs could Mr Tsipras afford to lose and avoid elections?
Click here to view chart
https://strategy.rbsm.com/IbWtKP9fj3b3KY56fVYrQA!!.rt) N.B. We assume ND, GD KKE wouldnt join a coalition Source: Hellenic Parliament, RBS
- a) Mr Tsipras has performed a ‘shift to the centre’ to get the support of Potami and PASOK. This would likely require an agreement of some format and would be viewed positively by markets. This would also likely be heavily trailed in the press.
However, depending on the number of SYRIZA MPs who would defect (see left) this still may not be sufficient to avoid relying on New Democracy support. If New Democracy support is required Mr Tsipas’ political position will likely be untenable, meaning he is unlikely to survive any subsequent confidence vote.
- b) The government will fall, triggering elections. Even though any reforms that will deliver cash will probably pass, given support from opposition centrist parties (New Democracy, PASOK and Potami). However, without Mr Tsipras previously having previously struck a deal with the smaller centrist parties (Potami, PASOK), then any comprehensive bill would be unlikely to pass on SYRIZA/ANEL votes alone- pushing the country toward elections.
- c) A best case scenario a partial agreement with the Eurogroup might be passed with SYRIZA/ANEL votes alone. However this is unlikely to be more than a partial agreement and will not likely close out the final second bailout deal. Thus this will just prolong the process. Ultimately the reforms in the second bailout will struggle to pass parliament and at the very latest, the need for approval of a third bailout will remain unchanged- hence elections by end June (end of the 4 month extension process) are our base case.
b) Greece’s creditors
- Greece creditors remain unsatisfied with the current government’s proposed reforms and particularly its unwillingness to impose further wage/pension cuts, implement particularly pension reform and at the very least not reverse recent labour reform (i.e. by re-introducing collective bargaining).
- In our view, Greece’s European creditors have dual (and potentially conflicting) mandates:
- Avoiding Grexit given both financial exposures and the ‘precedent’ of Euro exit being set. Eurozone countries ~€200bn exposure in EFSF and bilateral loans, not to mention €110bn of ECB exposure to the Greek sovereign and banks.
- Finding a deal, yet avoid giving any significant concessions to the SYRIZA. In part this is due to concerns about political contagion (i.e. encouraging Podemos in Spain, Sinn Fein in Ireland, etc) and also since a third bailout is necessary, then do not wish to send a signal of lesser pressure for future reforms.
- At this stage, Greece’s European creditors are keeping public statements around negotiations relatively restrained (compared to 2012 no doubt). In our view this is being done to avoid poisoning domestic public opinion further since a third bailout is still the most likely scenario in June.
- Moreover Greek public opinion is likely to shift more anti-Euro if there is the perception of an ‘ultimatum’ being delivered to the government. In our view Greece’s European creditors would welcome Greek public opinion shifting against the SYRIZA government whilst maintaining its pro-Euro tendency.
- Thus, similar from the European side, the likelihood of an imminent deal is limited. Upfront or public concessions will send a negative signal for future negotiations, whilst the Greek government’s draining liquidity position is likely to weaken their hand in negotiations further, which at the very least will provoke political developments in Greece.
- At the current juncture the Eurogroup and the Brussels Group (IMF, Commission, ECB and ESM) remains united against the current government’s red lines. If and when the Greek government offers greater concessions on these areas, different thresholds exist for different players in willing to agree a deal. Relatively more ‘dovish’ institutions include the ESM, Commission, France and Italy, whilst the ECB, IMF, Germany, Spain, Netherlands and some smaller countries (notably Portugal, Belgium, Ireland and Finland) are the ‘hawks’ in our view.
c) ECB and capital controls
- Capital controls will (most likely) only happen if the ECB pulls, or says it will pull ELA. This requires a two-thirds majority vote in the Governing Council. If ELA remains in place, then with sufficient collateral, Greek banks could refinance large parts of their deposit base even as current uncertainty continues
- In light of this and the ECB’s existing c.€110bn exposure, we do not think the ECB wants to “pull the line” unless there is a material change in circumstances, not least since it will either be viewed as the culprit in speeding Euro exit or at the very least viewed as interfering in political affairs.
- In our view an ELA “deadline” (where the ECB gives notice it will cease ELA) or an ultimately a cessation of ELA to Greek bank will at the very least requires: (1) a missed payment to the IMF or (2) the end of the 4 month extension package in June, without a deal.
- The Greek banking system remains under significant pressure from deposit flight. Greek government bonds are not eligible, whilst ELA continues to be reduced by the minimum necessary on a weekly basis. The ECB will not allow an increased bill exposure for the banks and is not willing to lift this (as it did in August 2012) until there is tangible progress in the negotiations. The rapid deposit flight seen ahead of the bailout extension on 20 February has slowed but we would expect these to accelerate markedly in event of new elections or if the existing programme expires.
- In the event of new elections deposit flight would accelerate. Evidently if a anti-Euro parties increase their vote share, the ECB would have every incentive to reduce its exposure ahead of this by endorsing capital controls (though the decision would rest with the Greek authorities). We do not think ELA would be cut in the run up to elections, even in this case given the political overtones such a decision would take.
- On the other hand, if ‘pro-Euro’ parties are the most likely victors from elections, we would see why all parties would want to avoid capital controls. However, if anti-Euro parties are ahead, then we are more agnostic on whether capital controls would come into force.
- Meanwhile, a final complication with regards capital controls concerns a potential lack of collateral https://strategy.rbsm.com/IbWtKP9fj3YrsDzyM0_LkQ!!.rt as cited by Mr Noyer over the weekend. This could trigger an ELA deadline but there is significant within ELA collateral definitions. Rather this could instead be hinting at ELA being cut in the event that there is a missed IMF payment, since this could render Greek government bonds used at the ELA non-eligible for Greek banks.
2) Weeks ahead and negotiations
- There are a number of key meetings ahead (see list below); however at the current juncture we see a very limited likelihood that there is a deal in the next couple of weeks.
- The Greek government's liquidity position is clearly extremely stretched. Nonetheless the date at which it 'runs out of money' seemingly continues to be pushed back. Indeed the Greek press indicates there may be other state-owned enterprises even this week it may soak, whilst continuing to delay payments to commercial creditors. This https://strategy.rbsm.com/IbWtKP9fj3ZYbr3P0J7lDA!!.rt sort of story makes us think we are not quite at the point of no return, though the Greek state is scraping the barrel.
- In essence for the bigger picture, it makes little difference if this is in mid-May or later. It is clear Greece cannot pass the large ECB redemptions in July/August and even if Greece gets to end June, it is unlikely Greece’s creditors are likely to extend the current package- so developments will accelerate by end-June at the latest.
Upcoming Greek event risks
Date Event
6 May ECB Governing Council non-monetary policy meeting
8 May T-Bill redemption (1.4bn)
11 May Eurogroup meeting
12 May IMF repayment for ~779mln
15 May T-Bill redemptions (1.4bn)
05 June IMF redemption for ~312mln
12 June IMF redemption for ~351mln and two T-Bill redemptions (3.6bn)
15 June Eurogroup meeting
16 June IMF redemption for ~584mln
19 June IMF redemption for ~351mln
30 June End of Greek 4 month extension
10 July T-Bill redemptions (2bn)
13 July IMF redemption for ~467mln
14 July Holdout bond redemptions totalling ~88mln (bond denominated in JPY)
20 July Eurosystem, EIB and NCB bond redemptions totalling ~3.48bn
07 August T-Bill redemptions (1bn)
20 August Eurosystem and NCB bond redemptions totalling ~3.19bn
Source: Bloomberg, Wall Street Journal, Protothema.gr, RBS
- We caution in looking at events too linearly; however there are a number of key events to watch ahead:
- 1) Whether the Greek government has to take any ‘reform-related’ bill to parliament. As we discussed above, we think this is being avoided strongly given the high probability that this leads to the government falling.
- 2) Will there be a “sommersault” or kolotoumba? It does not appear at the current juncture Mr Tsipras wishes to do this- however if he is to remain in charge of the government without new election, he would likely need the support of centrist parties Potami and PASOK. However, domestic politics is not yet ripe for such a move and even if it were attempted, it is not clear Mr Tsipras has the numbers for it…
- 3) An anti-Euro turn? At this stage, this doesn’t appear likely given the Greek public’s very strong support for the currency that the PM would seek an anti-Euro mandate. However, given the fluid nature of developments, our greatest concern is capital controls, blamed by the domestic population on the ECB/Germany, followed by Mr Tsipras asking for an anti-Euro mandate.
Given strong public support for the Euro, we are doubtful this would succeed but an election after an ‘ultimatum’, capital controls, or worse still with the prospect of deposit haircuts on the table would make Grexit probabilities rise notably.
- A third bailout package is inevitable after June to allow Greece to meet future financing obligations, since market access is highly unlikely, whilst there are ongoing ECB and IMF redemptions in the months ahead (see left). However, this would probably require a mandate at some point (ahead of negotiations or afterwards).
- Ultimately even a short-term ‘best case’ short-term scenario partial agreement with creditors and sub-tranches and/or a potential ‘shift to the centre’ with Mr Tsipras changing coalition partners (to include Potami, or PASOK); the government still needs a mandate for a third bailout.
- At this stage we don’t view this as likely since public opinion remains strongly pro-Euro and little behaviour from Greece’s creditors to suggest there will not be some form a bailout deal on the table for a government willing to take it. We keep our Grexit probability at 10-15%.
- Going forward, we see further risks of escalations and elections are our base case scenario over the next three months. As such we expect negative Greek headlines to spike further and rhetoric to rise further since delay is in all sides’ interests. Graccident is not an endgame and ultimately we think Grexit remains only a 15% risk, despite pending escalation and elections.
tommy271
Forumer storico
Juncker: Non c'è soddisfazione in merito ai progressi dei negoziati greci
2015/04/21 - 16:32
La sua insoddisfazione per lo stato di avanzamento dei negoziati greci espressa dal presidente della Commissione europea, JC Juncker.
In particolare, i leader dell'UE hanno sottolineato che "non siamo soddisfatti con lo stato delle discussioni" tra Grecia e della zona euro, e hanno reso necessario il rafforzamento degli sforzi della vista laterale greco a un accordo reciproco.
"La parte greco deve fare più sforzi per un accordo, che servirà gli interessi di entrambe le parti", ha detto.
Tuttavia, ha riconosciuto che gli ultimi 4-5 giorni sono discussioni intensificate.
Ma ha continuato JC Juncker, ma non siamo in un posto dove ci può essere un accordo diretto e veloce.
?????? - bankingnews.gr - online ?????????? ?????????
2015/04/21 - 16:32
La sua insoddisfazione per lo stato di avanzamento dei negoziati greci espressa dal presidente della Commissione europea, JC Juncker.
In particolare, i leader dell'UE hanno sottolineato che "non siamo soddisfatti con lo stato delle discussioni" tra Grecia e della zona euro, e hanno reso necessario il rafforzamento degli sforzi della vista laterale greco a un accordo reciproco.
"La parte greco deve fare più sforzi per un accordo, che servirà gli interessi di entrambe le parti", ha detto.
Tuttavia, ha riconosciuto che gli ultimi 4-5 giorni sono discussioni intensificate.
Ma ha continuato JC Juncker, ma non siamo in un posto dove ci può essere un accordo diretto e veloce.
?????? - bankingnews.gr - online ?????????? ?????????
logan79
Forumer attivo
ficodindia
Forumer storico
Carissimo, supponiamo che la Grecia faccia default. Allora la possibilità di accedere ai mercati da parte del governo greco è esclusa. La Grecia quindi
finanziariamente è commissariata dalla Troika che dir si voglia. Impossibile poiché il governo greco sta lottando proprio per liberarsi dal commissariamento. Ogni tentativo di commissariamento avrebbe come conseguenza l'uscita della Grecia dall'euro e quindi dall'UE.
tommy271
Forumer storico
Per rimandare (?) Relazione di avanzamento
Demeter CAPA
Bilinguismo registrato tra "istituzioni" per il rapporto di valutazione critica della situazione nei negoziati, ha annunciato il ministro delle Finanze tedesco Wolfgang Schaeuble con oggi un 'non so' rappresentanti della Commissione..
Questo Sabato, il 1 ° giorno di consultazioni in gruppo di Bruxelles a Parigi, il ministro delle Finanze tedesco aveva annunciato in un comunicato, un rapporto sarà preparata dai creditori internazionali della Grecia -la Commissione europea, la Banca centrale europea e il Fondo monetario internazionale, in vista di Eugroup 24 aprile a Riga. Ha detto poi che sarà la base su cui la zona euro MOF sarà in grado di avere una discussione più approfondita.
La ragione di un rapporto che doveva essere rinnovato entro il 10 dicembre e il cancelliere Merkel aveva posto come condizione della base di valutazione in Grecia.
Tuttavia, oggi, Annika Braitchart, portavoce del Comitato Finanza, Pierre Moskovisi ha detto che non vi è progresso nei negoziati tra le istituzioni e le autorità greche, ma non "sapere di qualsiasi relazione scritta", sottolineando che domani e Venerdì alle MOF saranno valutare i progressi compiuti nei colloqui tra le istituzioni e le autorità greche di recente.
Nel frattempo, le fonti da Bruxelles parlano di progresso, tuttavia, affermando che "siamo lontani dal raggiungere un accordo ', conferma che la maggior parte delle occasioni si rivolgono al dell'Eurogruppo l'11 maggio.
Group Brussels
Le dichiarazioni fatte al momento in cui si riunisce il Gruppo di Bruxelles per il quarto giorno a Parigi oggi la consegna di domani "testimone" per i ministri delle finanze della zona euro.
Al tavolo delle trattative, secondo quanto riferito, sono ora i principali fronti strutturali, il governo, il lavoro, ma entrambi i fronti determinare le possibili nuove misure e di prestito: il debito e le entrate fiscali.
Grandi scostamenti registrati nelle previsioni per il tasso di crescita (1,4% dice di Atene, con le "istituzioni" per vedere anche di recessione di quest'anno), mentre i movimenti di convergenza parziali registrati nella privatizzazione e l'obiettivo di un avanzo primario (ma non e le misure necessarie per coprire).
Fonte: Capital.gr – ÊåöÜëáéï óôçí ïéêïíïìéêÞ åíçìÝñùóç, ÏéêïíïìéêÝò åéäÞóåéò
Demeter CAPA
Bilinguismo registrato tra "istituzioni" per il rapporto di valutazione critica della situazione nei negoziati, ha annunciato il ministro delle Finanze tedesco Wolfgang Schaeuble con oggi un 'non so' rappresentanti della Commissione..
Questo Sabato, il 1 ° giorno di consultazioni in gruppo di Bruxelles a Parigi, il ministro delle Finanze tedesco aveva annunciato in un comunicato, un rapporto sarà preparata dai creditori internazionali della Grecia -la Commissione europea, la Banca centrale europea e il Fondo monetario internazionale, in vista di Eugroup 24 aprile a Riga. Ha detto poi che sarà la base su cui la zona euro MOF sarà in grado di avere una discussione più approfondita.
La ragione di un rapporto che doveva essere rinnovato entro il 10 dicembre e il cancelliere Merkel aveva posto come condizione della base di valutazione in Grecia.
Tuttavia, oggi, Annika Braitchart, portavoce del Comitato Finanza, Pierre Moskovisi ha detto che non vi è progresso nei negoziati tra le istituzioni e le autorità greche, ma non "sapere di qualsiasi relazione scritta", sottolineando che domani e Venerdì alle MOF saranno valutare i progressi compiuti nei colloqui tra le istituzioni e le autorità greche di recente.
Nel frattempo, le fonti da Bruxelles parlano di progresso, tuttavia, affermando che "siamo lontani dal raggiungere un accordo ', conferma che la maggior parte delle occasioni si rivolgono al dell'Eurogruppo l'11 maggio.
Group Brussels
Le dichiarazioni fatte al momento in cui si riunisce il Gruppo di Bruxelles per il quarto giorno a Parigi oggi la consegna di domani "testimone" per i ministri delle finanze della zona euro.
Al tavolo delle trattative, secondo quanto riferito, sono ora i principali fronti strutturali, il governo, il lavoro, ma entrambi i fronti determinare le possibili nuove misure e di prestito: il debito e le entrate fiscali.
Grandi scostamenti registrati nelle previsioni per il tasso di crescita (1,4% dice di Atene, con le "istituzioni" per vedere anche di recessione di quest'anno), mentre i movimenti di convergenza parziali registrati nella privatizzazione e l'obiettivo di un avanzo primario (ma non e le misure necessarie per coprire).
Fonte: Capital.gr – ÊåöÜëáéï óôçí ïéêïíïìéêÞ åíçìÝñùóç, ÏéêïíïìéêÝò åéäÞóåéò
ficodindia
Forumer storico
Juncker è pateticamente monotono, dice sempre la stessa cosa.
Ilmigliore
Osserva e agisci
[...]
fidatevi ...l'angioletto è sereno ...(ragionate con la vostra capoccia e se non avete l'angioletto ...procuratevelo )
mi sa che un paio di volte questo angioletto era indaffarato a fare altro...
tommy271
Forumer storico
Dijsselbloem: l'accordo deve essere raggiunto nelle prossime settimane
La necessità di raggiungere un accordo con la Grecia nelle prossime settimane, ha osservato il capo dell'Eurogruppo Jeroen Dijsselbloem, sottolineando che il denaro della Grecia si è concluso come trasmette il Guardian.
Ha detto che l'uscita della Grecia dalla zona euro potrebbe portare a una pericolosa instabilità in Grecia e in Europa.
Secondo ANA-MPA, Jeroen Dijsselbloem ha anche detto che la Grecia deve rispettare i suoi obblighi e accordi se vuole restare nella zona euro, ma ha aggiunto che un uscita della Grecia dalla zona euro "non è un'opzione".
Fonte: Capital.gr – ÊåöÜëáéï óôçí ïéêïíïìéêÞ åíçìÝñùóç, ÏéêïíïìéêÝò åéäÞóåéò
La necessità di raggiungere un accordo con la Grecia nelle prossime settimane, ha osservato il capo dell'Eurogruppo Jeroen Dijsselbloem, sottolineando che il denaro della Grecia si è concluso come trasmette il Guardian.
Ha detto che l'uscita della Grecia dalla zona euro potrebbe portare a una pericolosa instabilità in Grecia e in Europa.
Secondo ANA-MPA, Jeroen Dijsselbloem ha anche detto che la Grecia deve rispettare i suoi obblighi e accordi se vuole restare nella zona euro, ma ha aggiunto che un uscita della Grecia dalla zona euro "non è un'opzione".
Fonte: Capital.gr – ÊåöÜëáéï óôçí ïéêïíïìéêÞ åíçìÝñùóç, ÏéêïíïìéêÝò åéäÞóåéò