Monday Crunch

As was to be expected, the meeting of the Eurogroup plus IMF in Luxembourg did not result in a solution of the Greek affair. It is now up to the heads of the states to make a direct or indirect decision about the fate of Greece in the Eurozone. Latest economic data suggest that a end is near, in one or the other way. Greek banks are losing in an accelerating manner deposits, according to The Guardian some Euro 2 bn were withdrawn – between Monday and Wednesday this week! Tax revenues are receding as those economic actors who have some leeway withhold their payments. The fact that Greece still achieved a primary budget surplus in the first months of 2015 has only to do that the government reduced expenditures and postponed payments.

Martin Sundbu in his Free Lunch column in the Financial Times provided us with a crystal-clear analysis that led to the conclusiuon that it is up to the creditors to move. Key point is simply that Greece should have got a debt restructuring and debnt forgiveness alreday in 2010 rathet then bailing out private creditiors and burdening the Greek state with the costs. On the one side, this unfortunate decision is now history. On the other side, creditors may be careful not to repeat the underlying mistake of this early decision and be willing to allow Greece a new start. This would be expensive for the creditors. And yet, it would offer a way out that could actually help to bring the Eurozone back on a reasonable reform path. The rumour is that Monday will see a new offer by the Institutions. According to Die Zeit do the creditors intend to offer a extension of the current program until end of 2015; allow Greece to make use of the idle Euro 10 bn that were originally meant for the recapitalisation of Greek banks; allow the Greek government to issue additional Euro 2bn of short-term bonds which would be purchased by Greek banks and immediately turned to the ECB in order to get new money. Moreover, the ECB and the Commission offer a third program in the range of Euro 15 bn in order to create some stability. Nothing has been leaked what the creditors expect from Greece in exchange. The demands will not be low, though, as creditor governments more and more are running into problems to secure parliamentarian support for such a offer. We will probably know on Monday where and how the show continues to play.