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Monday, June 01, 2015 5:32 PM

Default and Get it Over With; Stop the Needless Torture

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Greek officials keep stating a deal is near.  Meanwhile, Goldman Sachs Warns Greece May Need to Default on Debts as IMF deadline looms.

Goldman Sachs broached the subject of a default in a note published on Monday, claiming that the country could be forced into drastic measures amid fears that it will miss a €305m (£220m) payment due on Friday to the International Monetary Fund.

It will be “very challenging” for Greece and its creditors to reach a deal to unlock the final €7.2bn of the country’s bailout aid, said the bank’s chief European economist, Huw Pill. Warning that Greek government cash reserves were nearly exhausted, Pill said new elections could be triggered in Greece, alongside a debt default and limits on removing cash from banks.

“Facing this reality, a new political mandate­­ and thus a new government, a referendum or new elections ­­ will be required in Greece,” he said. “Not only is it possible that we may need to see sovereign technical default and/or blocked Greek bank deposits in order to come to an accommodation between Greece and its official creditors, it may be necessary to do so in order to break the current impasse in negotiations.”

Greek banks, which have been surviving on emergency handouts from the European Central Bank, have seen massive outflows in the past week. Andreas Dombret, an executive board member of the German central bank, told the Bild newspaper: “The Greek government would be well advised to act quickly. For the Greeks banks it is five minutes to midnight.”

“A temporary deal is close,” said the financial daily Naftemporiki, citing government sources. Greek sources were investing hopes in a meeting in Berlin on Monday night between the German chancellor Angela Merkel, the French president François Hollande and the president of the EU commission, Jean-Claude Juncker.

“Under no circumstances will it be the broad ‘unified’ deal that the government had hoped for, since it will even leave open the evaluation of the current programme which expires on June 30,” Naftemporiki said. “Essentially, with a ‘temporary’ agreement the government and the prime minister will solve, albeit fleetingly, the suffocating problem of the country’s financial needs while on the part of the lenders a painful ‘Grexit’ will have been avoided.”
Why Bother?

A temporary deal is possible, but color me skeptical following the Greek Prime Minister's attack on the Troika in the Sunday edition of the French newspaper Le Monde (See Tsipras Accuses Troika of "Creditor Monstrosity", Urges Eurozone Leaders to Read "For Whom the Bell Tolls").

Rather, I suspect Tsipras falsely seeks to reassure Greek citizens to stop the massive run on Greek banks that accelerated last week.

Stop the Needless Torture 

Why torture Greek citizens anymore? If you are going to default, it's best to do it right away, as in four or five years ago.

Instead, Greek politician after politician put Greek citizens through the wringer for years, with nothing but pain and misery for it.

Now they want yet another "temporary" deal that will last at most a month before they go back to still more negotiations over a third bailout that will never be successful.


Mike "Mish" Shedlock

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