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Tuesday, July 07, 2015 4:39 PM


Always Another "Last Chance", Until There Isn't; Myth of the Open Door; Last Chance for Whom?


For at least a week I have seen numerous headlines and articles purportedly offering Greece a "last chance".

We saw the same headlines before both of the prior Greek bailouts.

Thus, and in spite of the fact we are weeks past the alleged midnight expiration of a deal, it's no surprise to see this headline today: Greece Faces Last Chance to Stay in Euro as Cash Runs Out.

Greek Prime Minister Alexis Tsipras launched a desperate bid to win fresh aid from skeptical creditors at an emergency euro zone summit on Tuesday, before his country's banks run out of money.

But German Chancellor Angela Merkel said on arrival there was still no basis for reopening negotiations with Athens.

"It is not a matter of weeks but of a few days" to save Greece from collapse, Merkel told reporters.

[Hmmm. Apparently there are a few day's worth of last chances coming]

Merkel and French President Francois Hollande said after conferring on Monday in Paris that the door was still open to a deal to save Greece from plunging into economic turmoil and possibly having to ditch the euro.

Merkel, under pressure in Germany to cut Greece loose, made clear it was up to Tsipras to present convincing proposals after Athens spurned tax rises, spending cuts and pension and labor reforms that were on the table before its 240 billion euro ($262.7 billion) bailout expired last week.

Jeroen Dijsselbloem, chairman of the Eurogroup of currency zone finance ministers, said the ministers would hold a conference call on Wednesday to review a Greek request for a medium-term assistance program from the European Stability Mechanism bailout fund, due to be submitted within hours.

[If ESM or ELA is granted, there could be month's worth of last chances]

A Greek government official retorted: "Some are maintaining 'we don't have proposals'... Is it really that 'we don't have proposals' or is it that they don't like our proposals?"
New Offer Coming

Greece was given a "last chance" to produce an offer this morning to eurozone officials.

To the surprise of eurozone leaders, Greece showed up without a proposal. Nonetheless, Greece poised to offer new proposal for third bailout.
Greek negotiators stunned some eurozone finance ministers by arriving at their meeting without a revised economic reform proposal.

Asked why Greece had not brought fresh proposals to the summit on Tuesday,[Euclid Tsakalotos, the new Greek finance minister] said: “It is more complicated than that. We have a set of reforms and we are discussing on that basis.”

There is still no basis for negotiations,” said Angela Merkel, the German chancellor. “I say it’s not a matter of weeks but of a few days.”

A Greek government spokesman said the plan verbally outlined by Mr Tsakalotos was the same as that sent to creditors on June 30 “with certain improvements”. The June 30 plan conceded to many of the demands made by bailout monitors but was still considered insufficient.

Eurozone officials have said that in order to agree a new bailout programme, further reforms and savings would be needed on top of those demanded under its now expired bailout, given the recent deterioration in the economy. That led several to worry that Athens still had not come to grips with what it needed to do to win over sceptical colleagues.
Myth of the Open Door

Check out that last paragraph. The door is open, but for what?

Also note that Merkel said "There is still no basis for negotiations". What kind of door is that?

Clearly, the only open door is for complete capitulation by Greece, and then some. Eurozone ministers now want additional reforms from Greece.

Until Greece defaults on the ECB, this will be the state of affairs.

Eurozone Exposure



Source of the table is Barclays, via email. I have no link.

Upon default, Germany will learn that its portion of the bill is about €92 billion, France €70 billion, Spain €42 billion, and Italy €62 billion.

Those numbers are from end of April and are undoubtedly higher today thanks to Target2 and cash under the mattress liabilities of banks.

Where is Spain going to come up with €42 billion or Italy €62 billion?

Questions Abound

  • Will the ECB simply print the money and hand it out in violation of rules?
  • How about setting the maturity 101 years into the future, effectively whitewashing the total?

Last Chance for Whom?

Looking at the above numbers, I have to ask, precisely: Who is the "last chance" really for?

The answer to that question explains why there has been "last chance" after "last chance" after "last chance".

Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com

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