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Tuesday, July 02, 2013 10:53 PM

EU officials Give Greece Three Days to Deliver Reforms or Face Consequences; The Eventual Outcome

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Reuters reports Greece Has Three Days to Deliver Reforms or Face Consequences.

Greece has three days to reassure Europe and the IMF that it can deliver on conditions attached to its bailout in order to receive its next tranche of aid, four euro zone officials said on Tuesday.

The lenders are unhappy with progress Greece has made towards reforming its public sector, a senior euro zone official involved in the negotiations said, while another said they might suspend an inspection visit they resumed on Monday.

Athens, which has about 2.2 billion euros of bonds to redeem in August, needs the talks to conclude successfully.

If they fail, the International Monetary Fund might have to withdraw from the 240 billion euro ($313 billion) bailout to avoid violating its own rules, which require a borrower to be financed a year ahead.


"It is a very difficult negotiation," a senior Greek official participating in the talks said. "We're moving fast to wrap up as many issues as possible as soon as possible."

Athens and the troika are at odds over an unpopular property tax and a sales tax for restaurants, while a shortfall of more than 1 billion euros has emerged at state-run health insurer EOPYY, meaning automatic spending cuts may have to be agreed to bring it back on an even keel.

The government plans to ask its creditors to lower this year's privatization target of 2.6 billion euros after failing to find a buyer for natural gas company DEPA.

The beleaguered government of Prime Minister Antonis Samaras has ruled out imposing any new austerity measures. Unemployment has hit a record 27 percent and Greeks have lost about a third of their disposable income as a result of bailout policies.
The Eventual Outcome

Given that Greece has caved in on every demand so far, it's certainly likely Greece will do so again, right now.

But if Greece does not immediately cave in, then expect the Troika to grant more time until Greece does cave in. If by some remote chance, should Greece not cave in, then expect the Troika to slightly change its demands so that Greece will meet the demands.

I actually prefer to be wrong about this. I would prefer Greece to tell the Troika "go to hell", then default. History suggests the odds that will happen "this time" are remote.

However, somewhere along the line, and totally unexpected, Greece (or Portugal, or Spain, or Ireland, or Cyprus) will indeed have had enough of the Troika, then accept the consequences and default.

I cannot predict the time, but I am quite certain of the eventual outcome.

Mike "Mish" Shedlock

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