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Greece will face problems to pay IMF & ECB in July, but Germany wants a 3. bailout package

“Greece does not have liquidity problems but in will face trouble to make installment payments to IMF and ECB in July,” Finance Minister Yanis Varoufakis told Greek Alpha 98,9 FM on Wednesday. Asked about whether there will be a liquidity problem in the near future, Yanis Varoufakis said:

We have no liquidity problem with the government, for the public sector, but there will be a problem to pay back installments to IMF and ECB,” Varoufakis replied, adding “today we start negotiations on this issue, but we would not be able to do so if we didn’t have the four-month agreement.”

Greece plans to start negotiations with the IMF and the ECB in order to fill the the financial gap. Athens need IMF’s green light to issue T-bills totaling €4-5 billion. From the ECB, Greece wants back €1.9 billion from the profits from the Greek bonds. but so far, i.e. before the Eurogroup agreement, the ECB had not sent any positive signal.

What are Greece’s financial needs towards the lenders? According to Reuters,

“Following interest payments this month of about 2 billion euros to private bondholders and official lenders, Greece must repay an International Monetary Fund loan of around 1.6 billion that matures in March.

Then it needs 0.8 billion euros for interest payments in April and about 7.5 billion in July and August for maturing bonds held by the ECB and for more interest payments.”

In Berlin, Finance Minister Wolfgang Schaeuble dampened any Greek financial hopes saying that there will be no money until Athens comply with the program demands.

“Greece has to comply with the commitments of the current program that is now been extended. Only when they have fully meet them, it will be paid. There is no euro in advance.”

What is interesting is that Varoufakis and Schaeuble were been interviewed almost at the same time.

The outstanding bailout tranche of €7.5 billion has been on hold after ex PM Samaras declared Presidential elections in December and the program review by the ex Troika was canceled. The tranche is expected to be given to Greece once it has met the commitments to the 4-month extension program as they gave been agreed at the Eurogroup of February 20th and after a successful review by the Institutions (IMF, ECB, EU).

Germany prepares 3. bailout package – again!

Meanwhile in Germany, the coalition of CDU- SPD has allegedly counted on   that Greece is going to need another bailout program in summer – the third since 2010 – estimated “at least €20 billion,” so the Rheinische Post.

I remember very well when German media were claiming in autumn 2014 that the third bailout program would be €10-11 billion. Six months later, the German “forecast” has doubled…. And before summer 2013, the 3. bailout estimation was running with €50 billion.

He, himself, personally, Wolfgang Schaeuble had said in August 2013 that Greece would need a third bailout program “in order to reach its debt sustainability targets.”

While Germany still contemplates on how much money it considers it is appropriate to burden with Greece in form of a third bailout program, some may raise the logical question:

Why does Germany want to give additional loans to the debt-ridden country, when everyone knows (Schaeuble incl) that the debt is unsustainable?

Hardliners in Eurogroup

Worth mentioning in this context is what Varoufakis disclosed to Alpha Radio about the Eurogroup meetings and the immense pressure some hardliners among the euro zone finance ministers put on the agenda.

Varoufakis:”They wanted to close down the banks and transform us into to a Kosovo-type province, without sovereignty and functioning banks.”

However, the day had no bad financial news. Speaking later to Bloomberg, Varoufakis said that “€700 million returned to the Greek banks after the Eurogroup agreement.” It has been estimated/claimed that €20 billion left the banks since December 2014.

PS Yanis, I’m afraid that the Eurogroup hardliners are stuck to their target.

 

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4 comments

  1. The main reason of not extending the current program by six months (as Greece asked for it) was the debt repayments on July and August. This way the creditors have secured the upper hand on “the negotiations”, as they know Greece has got the pressure.
    The debt redemptions that are now known (there will be more as T-bills are rolled over) on July and on August:
    On July: 10th 2 billion from existing T-bills, 13th 400 million for IMF, 20th total of 3.5 billion of which to the ECB 1.4 billion.
    On August: 7th 1 billion from existing T-bills, 20th 3.2 billion (ECB).
    The ECB is reluctant to raise the limit for Greek government issuing more T-bills, because these are bought only by Greek banks, which in turn run solely because of the ELA. Thus T-bills would turn into “ECB financing country”, which violates EU-law (The Lisbon Treaty).
    So, 3rd bailout seems inevitable although it is highly sensitive issue both in Germany (and for example in Finland, too) as well as it in Greece. The rest of the eurozone wants to see Syriza toppled over and they are ensuring it with their dictating policies.
    Either Greeks take this humiliation or they walk away from the flawed monetary union.

    • thanks for the explanation. 3. bailout? I doubt, any government here will manage to pass it through the Parliament

      • Well, there are no alternative sources for funding, if the limits that the ECB accepts as collateral for T-bills (Greek banks exchange T-bills to the ECB for fresh new money).
        Additionally, there is slightly over €7 billion unpaid from the second bailout, but the creditors (mainly Germany) is reluctant to dispose “in advance” to Greece, as they want to see reforms first.
        If mr. Varoufakis is sincere claiming insolvency problems as soon as in March there is a possibility Greece exiting “accidentally” from the European Monetary Union.
        This is what Germany is trying to figure out: is mr. Varoufakis bluffing or not. And as a footnote: if he is bluffing and it will be called, things can go awfully messy after that. The residue of trust between the euro countries will vanish rapidly.

  2. “Deputy Finance Minister Dimitris Mardas spoke of an 11-billion-euro “hole” in the budget until June, and since there is no financial aid coming until the end of April, the Greek government needs to find a solution” – See more at: http://greece.greekreporter.com/2015/02/25/greek-deputy-finmin-e11-bln-fiscal-gap-by-june/#sthash.bfxv6LDa.dpuf