Athens to Delay IMF Repayment; Greece Close to Approving Extended Servitude; Will Tsipras Survive?

Lesson in How to Answer a Question

Christine Lagarde said earlier today that she was “confident” Greece would make tomorrow's payment to the IMF.

Also today, when Alexis Tsipras was asked by reporters whether the installment would be made, the Greek prime minister replied: “Don’t worry about that.”

That was not a "yes" he simply said "don’t worry about that", a technical non-answer.

Athens to Delay Payment

Yet moments ago, the Financial Times reported Greece to Delay IMF Repayment as Tsipras Faces Backlash.

Greece has notified the International Monetary Fund that it will not make a scheduled €300m loan repayment on Friday after opposition to a bailout compromise with creditors erupted inside the governing party.

Following a rarely used procedure permitted under IMF rules, the Greek government intends to bundle all the payments it owes in June totalling €1.5bn and transfer it at the end of the month.

“This move is almost unprecedented and based on Tsipras’s comments yesterday unexpected,” said Mujtaba Rahman, head of European analysis at the Eurasia Group risk consultancy. “It unnecessarily raises the stakes and will further undermine the goodwill of Greece’s creditors.”

Ever since an emergency summit meeting of EU leaders hosted Monday in Berlin by Angela Merkel, the German chancellor, eurozone officials have been concerned that many of the terms in a compromise plan hammered out by Greece’s warring creditors would be unacceptable to Syriza.

Some eurozone officials believe Mr Tsipras will be forced to move to elections if he accepts creditors terms, which includes demands that Athens make public-sector pension cuts of 1 per cent annually starting next year. The pension measures, demanded by the IMF but resisted by the European Commission, were one of Athens’ most important “red lines” in negotiations.

In a sign of how fraught the political situation had become for Mr Tsipras, he was forced to put off an expected second round of talks in Brussels with Mr Juncker to address his parliament on Friday night.

Tsipras Cave-In

In spite of all rants by Alexis Tsipras about dignity and unreasonable demands, it now appears the Greek prime minister is willing to extend Greek servitude to the despised Troika.

In the wake of the reported cave-in, Greek Left Vents Fury at Creditors.

Leftists in Prime Minister Alexis Tsipras' party vented fury on Thursday at terms proposed by Greece's creditors for a last-ditch deal to stave off bankruptcy and European officials acknowledged that large gaps remain to be bridged.

Tsipras emerged from late-night talks with senior EU officials in Brussels saying a deal with international lenders was "within sight" and that Athens would make a crucial payment due to the International Monetary Fund on Friday.

But he rejected pension cuts and a tax rise on electricity that he said European and IMF creditors were demanding along with other conditions to win the release frozen loans and avert a default that could hit euro zone and world markets.

The lenders were demanding that Greece reduce spending on pensions by 1 percentage point of gross domestic product and raise a further 1 percent or 1.8 billion euros ($2 billion) by increasing value-added tax on products ranging from drugs to electricity, the sources told Reuters.

Dijsselbloem said the meeting that ended after midnight had narrowed down the remaining issues but differences were "still quite large" and Athens was expected to present alternatives to some of the lenders' proposals within days.

An EU source said Tsipras could return to Brussels for further talks as soon as late Friday night, possibly along with top IMF and ECB officials.

A Greek official said Tsipras would brief parliament on the state of the negotiations in Athens at 1500 GMT on Friday.

In one concession, the lenders were offering to unlock 10.9 billion euros in unused bank bailout funds that would enable Greece to cover its financial needs through July and August - more than the 7.2 billion euros left in the expiring bailout.

Key to the Deal

Assuming there is a deal, the last paragraph likely explains why. Unlocking €10.9 billion is actually a very huge concession by the creditors.

Of course, all it really does is give Greece enough money to pay them back. Add it to Greece's debt burdon that it will need to pay back.

Even so, Greece will still need a third bailout package of at least €50 billion (See Third Greek Bailout? Another €53.8 Billion Needed?)

Greece already has an unsustainable overall debt load of €323. But hey, let's go deeper in servitude to the tune of another €50-60 billion.

I really did not think it would play out with a third bailout, and it still might not.

A fresh deal means more debt servitude coupled with economic depression and higher taxes.

If such a deal is worked out, misery and despair in Greece still is not high enough. It will get there eventually, even if now is not the time. What can't be paid back, won't. The only question is timing.

Will Tsipras Survive?

Questions still abound. Will Tsipras call a vote of confidence? If So, will he survive the vote?

Pin the Blame

Is it possible this is nothing but a negotiating tactic by Tsipras hoping Syriza will turn down the deal, taking blame off him personally.

And should it play out that way, it's likely that was his "pin the blame" game all along.

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

Mike "Mish" Shedlock is a registered investment advisor representative for SitkaPacific Capital Management. Sitka Pacific is an asset management firm whose goal is strong performance and low volatility, regardless of market direction. Visit http://www.sitkapacific.com/account_management.html to learn more about wealth management and capital preservation strategies of Sitka Pacific.