Will He or Won't He?

The question on everyone's mind is "Will He or Won't He?"

The word "he" can mean either the ECB or Greece. Take your choice.

1. Is the ECB really prepared for a Grexit?
2. Is Greece really prepared for a Grexit?

In this corner, I am not quite sure either side is prepared for anything. Yet, if one side is more prepared than the other, then I suggest Greece has the upper hand.

Greek Bonds Decline as Tsipras Holds Firm to Bailout Rejection

Bloomberg reports Greek Bonds Decline as Tsipras Holds Firm to Bailout Rejection

Greek government bonds declined, with the three-year yield climbing to the highest since 2012, as Prime Minister Alexis Tsipras reaffirmed his government’s rejection of the country’s international-bailout program.

Tsipras’ comments are “underlining that Greece is still an unresolved issue and that a solution is not going to be easy,” said Arne Lohmann Rasmussen, head of fixed-income research at Danske Bank in Copenhagen. “It is always harder to absorb this uncertainty if you at the same time have a lot of supply in the market.”

Compromise?

On February 8, the Financial Times reported Washington Urges Eurozone Leaders to Compromise with Athens.

The Obama administration is pushing eurozone leaders to compromise more with Athens as fears grow that a protracted stand-off could damage the global economy, say senior EU and US officials.

The US lobbying comes amid mounting concern in Brussels and Washington about the hardline stand taken by some eurozone governments, particularly Germany, that Greece must press on with budget-cutting commitments made under its existing €172bn bailout regardless of last month’s election, which brought anti-austerity party Syriza to power.

Greece Says "No Extension"

Today the Financial Times reports No extension to Greek bailout, says Tsipras.

Alexis Tsipras, the new Greek prime minister, has insisted he will not seek an extension to the country’s current bailout, putting his leftwing government on a collision course with its creditors in the run-up to this week’s EU summit.

In his first speech to parliament since taking office last month, Mr Tsipras said on Sunday: “This government isn’t justified in seeking an extension . . . The bailout has failed.

“The Greek people gave a strong and clear mandate to immediately end austerity and change policies,” he said. “Therefore the bailout was first cancelled by its very own failure and its destructive results.”

Jeroen Dijsselbloem, head of the eurozone group of EU finance ministers, who clashed publicly with Mr Varoufakis over the debt issue during a recent visit to Athens, said bluntly on Friday: “We don’t do bridge loans.”

Collision Course

In a way, it does not matter who blinks first.

What cannot be paid back won't. Yet, only Greece is willing to state that. The rest of the eurozone still has not figured out Germany will suffer more than Greece should Greece default.

For further discussion, please see ...

• Playground Bully Theory vs. Eurozone Gang Rules; The Only (and Ironic) Solution
 
• ECB Revokes Greek Bonds as Collateral; ECB vs. Novices; Brass Knuckles

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