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Sunday, May 24, 2015 12:11 PM


Greece Will Default on June IMF Repayment Says Interior Minister; Greek Choice Same As It's Always Been


One way or another the crisis in Greece is highly likely to come to a head in June.

Greek finances are in such sorry shape it needs a third bailout or it will be unable to meet payment obligations in August. And unless an agreement in June is reached to unleash more funds, Greece will not make it to August.

Today we learn, Interior minister warns Greece will default on June IMF repayment.

Greece has again threatened to default on loan repayments due to the International Monetary Fund, saying it will be unable to meet pension and wage bills in June and also reimburse €1.6bn owed to the IMF without a bailout deal with creditors.

“The money won’t be given . . . It isn’t there to be given,” Nikos Voutsis, the interior minister, told the Greek television station Mega.

He claimed the EU and IMF were pressuring Greece to make unacceptable concessions in the current bailout talks in return for unlocking €7.2bn of aid frozen since last year.

Predicting when Athens will run out of cash has proven a fraught affair for eurozone officials, who have been bracing for default since March.

Given the repeated warnings from Greek officials that bankruptcy is imminent, some officials have begun to disregard such threats, believing Athens is now using them as a negotiating tactic.

But a senior Greek official with knowledge of the government’s funding position confirmed that Athens would be unable to make the IMF payments, which fall due in four separate instalments of more than €300m each between June 5 and June 19, unless a deal is struck.

“We won’t accept blackmail that says it’s either liquidity with a memorandum [the Greek term for a bailout programme] or bankruptcy”, Mr Voutsis said.

The government has ruled out a domestic default on payment obligations to Greece’s 2.9m pensioners and 600,000 public sector workers, saying they have first claim on the country’s shrinking resources.

People who have spoken to Mr Tsipras say he is in a dour mood and willing to acknowledge the serious risk of an accident in coming weeks.

One official in contact with the prime minister said: “The negotiations are going badly. Germany is playing hard. Even Merkel isn’t as open to helping as before.”
Recall that Greece was only able to make the May IMF payment by borrowing money from the IMF.

That emergency credit line has been entirely used up. For details, please see Greece Empties IMF Reserve Account to Pay IMF; Liquidity "Terribly Urgent" Says Finance Minister.

Although we have seen crisis after crisis come and go with various kick-the can mechanisms, at some point there is no can left to kick. Is this finally the time?

'Catastrophic' Eurozone Rupture

The Telegraph reports Greece to Miss IMF payments Amid Fears of 'Catastrophic' Eurozone Rupture.
Finance minister [Yanis Varoufakis] said that the Syriza-led Greek government has now “made enormous strides at reaching a deal”, and that it is now up to the ECB, IMF and EU “to do their bit” and “meet us one-quarter of the way”.

One possible alternative if talks do not progress is that Greece would leave the common currency and return to the drachma. This would be “catastrophic”, Mr Varoufakis warned, and not just for Greece itself.

“Whatever some analysts are saying about firewalls, these firewalls won’t last long once you put and infuse into people’s minds, into investors’ minds, that the eurozone is not indivisible,” he added.

Mr Varoufakis' and Mr Voutsis' words followed a declaration from Alexis Tsipras, the Greek prime minister, that bargaining with Greece's creditors would soon come to a close.

"Rest assured that in this negotiation we will not accept humiliating terms," Mr Tsipras told Syriza's central committee. "The overwhelming majority of Greek people want a solution and not just an agreement ... it supports the government in this tough negotiation," he added.

For Greece itself, using the common currency is now like using a “foreign currency”, and any exit from the eurozone would be “a disaster”, Mr Varoufakis said.

He continued: “Trying to get out of it is tantamount to announcing a devaluation 10 months in advanced.” Economists warn that if Greece were to leave the euro area, it could trigger huge levels of capital flight.

In turn, Greece would almost certainly have to resort to capital controls in order to stem the tide of money out of the domestic economy.

Ratings agency Moody's has warned that there is now a "high likelihood" of such controls, which might be necessary to keep the Greek financial system alive. An estimated €30bn has been withdrawn from the country's banks since snap elections were called in December 2014.

Mr Varoufakis said that at some point the Greek government would have to make a choice between paying salaries and paying international creditors.
Greek Choice Same As It's Always Been

The choice Greece faces now is precisely the same choice four years ago: Whom to pay.

Greek citizens overwhelmingly want to stay on the euro, but they do not want further cuts in pensions accompanied by higher taxes and more layoffs.

So which is it? By fighting to retain pensions, Tsipras will at least have some cover if and when Greece returns to the Drachma.

Meanwhile, the smart money has already left. Those with euro deposits in Greek banks above and beyond what is needed to make immediate payments are fools.

I have been pounding the table for months warning Greek citizens to pull their money out. This may be the last chance.

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

Saturday, May 23, 2015 11:49 AM


Project Bookend: BoE Emails Guardian Top Secret Documents on Brexit, Including PR Notes on How to Deny the Project


Incompetence at Its Finest

Here's a major laugh for a long holiday weekend in the US: Secret Bank of England taskforce investigates financial fallout of Brexit

Bank of England officials are secretly researching the financial shocks that could hit Britain if there is a vote to leave the European Union in the forthcoming referendum.

The Bank blew its cover on Friday when it accidentally emailed details of the project – including how the bank intended to fend off any inquiries about its work – direct to the Guardian.

According to the confidential email, the press and most staff in Threadneedle Street must be kept in the dark about the work underway, which has been dubbed Project Bookend.

The revelation is likely to embarrass the bank governor, Mark Carney, who has overhauled the central bank’s operations and promised greater transparency over its decision-making.

MPs are now likely to ask whether the Bank intended to inform parliament that a major review of Britain’s prospects outside the EU was being undertaken by the institution that acts as the UK’s main financial regulator. Carney is also likely to come under pressure within the Bank to reveal whether there are other undercover projects underway.

Officials are likely to have kept the project under wraps to avoid entering the highly charged debate around the EU referendum, which has jumped to the top of the political agenda since the Conservatives secured an overall majority. Many business leaders and pro-EU campaigners have warned that “Brexit” would hit British exports and damage the standing of the City of London.

The email indicates that a small group of senior staff are to examine the effect of a Brexit under the authority of Sir Jon Cunliffe, who as deputy director for financial stability has responsibility for monitoring the risk of another market crash.

The email, from Cunliffe’s private secretary to four senior executives, was written on 21 May and forwarded by mistake to a Guardian editor by the Bank’s head of press, Jeremy Harrison.
Secret Agent Man

I offer the following musical tribute in "honor" of secret projects of the Bank of England.



Link if video does not play: Jonny Rivers - Secret Agent Man 1966

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

11:23 AM


Rand Paul: Unleashing the American Dream


Those living in or near Chicago have the opportunity to hear Senator Rand Paul in a discussion about how to transform Chicago, the state of Illinois and the U.S. with liberty-based public policy solutions.

  • Date:  Wednesday, May 27, 2015 from 12:30 PM to 2:00 PM (CDT)
  • Location: The 1871 Center at the Merchandise Mart, 222 West Merchandise Mart Plaza Chicago, IL 60654.



Cost of the event is $10.

The topic is "Unequal economic opportunity, failing schools and a broken criminal-justice system," as opposed to the Chicago pension crisis that I have been talking about lately.

Senator Paul is reaching out to minorities in inner cities, and that is a good thing.

I am trying to see if they can arrange a live video feed, but the preliminary indication is no.

The Illinois Policy Institute is sponsoring the event. To purchase a ticket or for media queries, please contact Eventbrite at Unleashing the American Dream.

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

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