The EuroZone has only two alternatives the International Monetary Fund MF report continues: Either stretch out—reprofile—Greece’s debt over 30 years or provide substantial debt relief above levels considered to date.
Hours after the early Monday morning agreement on an agreement, the plan for a third Greek bailout program and bridge loan had started to come apart. The obstacles could sink the possibility of any deal—if the parties raising a ruckus aren’t willing to compromise.
The EuroZone has forced Greece down this road before and there is no reason to think that tax increases and cuts to government spending will stimulate growth in the Greek economy this time. If the definition of insanity is doing the same thing over and over again and expecting a different result, then this program is insane.
It is hard to tell exactly what is going on in these talks without being in the room to judge the tenor of remarks, but from out in the corridors and from press leaks, it looks like Germany and its hard line allies such as Finland are trying to force a Greek exit.
Greece has made its pitch and now it’s up to the other members of the EuroZone to either strike a deal tomorrow or have EuroZone political leaders start planning for a Greek exit from the euro on at Sunday summit. If there’s no deal or likelihood of a deal by Monday, the European Central Bank has intimated that it would not be able to extend more loans to Greece’s banks.
Overnight the Shanghai market gained 5.76%. The Shenzhen market moved up 3.76%. The ChiNext market on the Shenzhen exchange climbed 3.03%. That’s being touted as a “recovery.” Greece put a detailed, credible negotiating proposal on the table tonight AHEAD of the midnight deadline. Newspaper reports from Athens say the proposal includes 13 billion euros of new austerity measures in exchange for 50 billion in new bailout money.
In the short term the European Central Bank holds the key to the Greek crisis. The central bank has so far extended 89 billion euros to Greek banks, but the ECB won’t find it easy to provide new funding now that Greece is operating without a bailout program. The deadline for the European Central Bank is July 20, when Greece faces a major debt repayment to the ECB
Greek banks have said they might not be able to open on Tuesday without help from the European Central Bank. Cash buffers are down to just 90 euros per capita. The European Central Bank will meet on Monday to decide if it will continue its emergency liquidity assistance program for Greece and at what level of funding.
