Yesterday Tsipras met 6 European leaders (plus one other guy) to discuss the dire situation Greece finds itself in, trying to push through a ‘political’ as opposed to a ‘technical’ solution. Here is what we know. Greece is now almost completely out of money for the following reasons:
- A significant fiscal gap has developed (primary surplus gone) due to abysmal tax collections and arrears.
- There are no (and will not be) any money coming from the Bailout Package till an evaluation takes place.
- Greek commercial banks cannot draw liquidity from the ECB to purchase Greek Bonds, as they are no longer accepted as collateral by Draghi.
- The Greek commercial banks cannot draw ELA liquidity to purchase state Bonds because a) ELA is kept at minimum levels and used to cover losses from a slow motion bank run in progress and b) the ECB is about to formally prevent the BoG from allowing credit lines to be used for the purchase of state bonds.
- The interim bailout extension agreement does not allow Greece to use the bank bailout fund for other purposes (meaning for its liquidity needs).
- There is no interim aid or credit lines from the ‘ex’ Troika so long as Greece does not present a package of structural reforms.
This last bit is a gift from yesterday’s party bag. Merkel yesterday made it clear that there will be no quick disbursement of emergency aid unless Tsipras delivers on unfulfilled promises on structural reforms. This is different from what was said so far, which focused on the fiscal impact of new measures. We are back now where we were before the agreement of 20 February, discussing progress in structural reforms and fiscal sustainability.
This means ladies and gentlemen, that the game is over. Time to start investing in bottled water and portable generators. In case you find this alarmist, just wait till there is an internal moratorium on state payment obligations and capital controls. How does one get out of this? No idea. Our ‘first time left’ government is cosy with the priests, so perhaps we should pray.