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Is Greece paying for botched succession planning at the...

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Why Greece could still default on the IMF


June 23, 2015 Comments (0) Views: 1642 Homepage

Veni Vidi Tweeti

The situation in Greece is getting critical”, said European Union (EU) Council President Donald Tusk last Friday, summoning the Eurozone Heads of State to Brussels yesterday (Monday) evening. It wasn’t enough that the leaders were already scheduled to be in Brussels three days later for a two-day summit: things were so time-critical that they would just have to make an extra trip come what may. In Greece, the flow of deposits fleeing the banking system was starting to accelerate, or so we were told. In Frankfurt, the European Central Bank had moved to daily reviews of Greece’s so-called Emergency Liquidity Assistance (ELA) limit. Time, it seemed, was very definitely running out.

Well, the leaders came, they saw, and – at the end – they Pressered and they Tweeted (and I do know my Latin is a bit off, before you point it out). But what else exactly was discussed, agreed, and tabled for future deliberation is all a bit unclear, if you ask me. Actually, it really does beg the question of why the leaders had to trek to Brussels in the first place, and why they had so little to say for it all at the end.

Unusual brevity from the EU

Take the closing Press Conference of Presidents Tusk (of the EU Council) and Juncker (of the EU Commission), the Question & Answer session to which lasted a record-breakingly short five minutes and two seconds. The first question asked about debt. “This is not the time to discuss that issue”, said President Juncker, winking slightly at someone in the audience a second or two later at the brevity of his answer (nine words). The second question asked about the negative economic impact of the supposedly new austerity measures. “Maybe but I’m not so sure that parts of the proposal which were made could have marginally recessionary tendencies. But we are working on that because technical talks are going on and our teams are sitting together right now in parallel to the meetings we had”, answered President Juncker, before talking briefly about the Commission’s EUR 35bn offer of Greek-related spending should an agreement be reached. The third question asked about the possibility of capital controls. “Capital controls were not mentioned tonight”, replied President Juncker, with a new record for brevity at just six words. The fourth question asked about whether there was still time to make a final agreement given the various national hurdles that also needed to be overcome. “I’m convinced that we will come to a final agreement in the course of this week for the simple reason that we have to find an agreement this week” replied President Juncker (Descartes would have smiled, at least). And, with that, the moderator announced “We have no more time”, hustling the two Presidents into their waiting motorcades. It wasn’t that Asian markets were about to open, by the way. Or even that it was particularly late at night (EU Summit Mean Time adjusted!). Evidently, the Presidents just didn’t want to talk.

It was the same earlier in the day with Eurogroup President Jeroen Dijsselbloem and his press conference, the Question & Answer session to which was even shorter than that of the two Presidents later in the evening (it actually makes me wonder whether money had been placed on it by the parties involved!). At least, in his opening statement, Mr. Dijsselbloem did at least have the courtesy to summarise the key outstanding issue with respect to Greece, which in the end has nothing (by now) to do with targets, and everything to do with “prior actions, which is the key thing that it boils down to”. In fact, when a friendly Dutch journalist suggested to the Eurogroup President that finalising so-called Prior Actions lists usually indicated that a deal had already been done, he was firmly put in his place with the following answer (probably about the most substantive thing to come out of all of yesterday’s meetings and pronouncements, in fact):

On the prior actions, I think it’s very important that in the end prior actions tell us what exactly needs to be done very concretely very precisely. And it also gives the list for the Greek government of all the measures that they have to implement and take through parliament. So you are jumping ahead that the fact we talk about prior actions mean there is already an agreement: that is not the case. You’re going a little too fast.

Oh for the olden days, I thought, when Prior Actions were indeed the ‘icing sugar’ on an already baked IMF adjustment programme ‘cake’. But, then again, when Greece got its big bail-out cash back in 2010-2012, Prior Actions were well down the priority list versus saving the Euro.

Another bungled document exchange. Or was it?

Of course, one reason for the supposed lack of specifics from yesterday’s EU meetings (it was an ‘extraordinary’ Eurogroup and an ‘informal’ Eurozone Summit, in the end) was that the Greek government had not submitted its documents in time for their new proposal to be properly evaluated. Not for the first time, there was even some confusion about when exactly the latest documents had even been submitted, and to whom, leading to the following statement from Mr. Dijsselbloem:

Yes there were two versions but that’s no big problem. One was sent late last night and one was sent early this morning and it was, I believe, minor changes, though I haven’t compared them completely but they look very similar to me.

Let’s get this straight. So the situation in Greece was “critical”. It was so critical, in fact, that Heads of Government & Finance Ministers had to be convened even though they were already set to meet three days later. Then the Greek government bungled getting its documents in on time to the point that there was no time to evaluate their proposal prior to the Summit. And because of that, the Summit could not agree anything concrete. But it wasn’t a problem.

Needless to say, something did not compute. On the face of it, last night’s Euro Summit had been a complete waste of everyone’s time. In fact, what were all these senior people doing in Brussels if they weren’t negotiating the details of a new agreement with Greece (they weren’t even having dinner, looking at the pictures I’ve seen)?

Were EU leaders looking at Plan Z last night?

OK so it’s time for a theory. A conjecture. A punt. Queue the drum roll……..and read on.

Whatever it was they said they were doing in Brussels last night, the Eurozone’s heads of government and Finance Ministers were also doing something else. Something they could only do while physically present in Brussels, as opposed to something they could have done from their comfy national offices (and, remember, the Head of Government and Finance Ministers were all due to meet physically just 72 hours later).

If you ask me, they were looking over and/or discussing documents that they did not want to have physical possession of themselves lest they subsequently might have to release them under various Freedom of Information provisions. How about a plan to enact capital controls in Greece starting this weekend, for example? Or even contingency plans for the dreaded Grexit? How about some debt relief options? And, of course, there are proposals on the table (apparent confusion aside) from both Greece and the Institutions that might still be reconciled to an agreement, even at this late stage.

Think again about what you really heard last night

I began to think again about the little I had heard from Commission President Juncker last night. “This is not the time to discuss that issue”, he had said in response to a question about debt relief for Greece. He didn’t say there had been no discussion, did he? And nobody had any time to ask him to clarify the point because, five minutes later, he was in the back of his car and on his way out of the building. “Capital controls were not mentioned tonight”, he had said at another point. But what about the Finance Ministers’ meeting as opposed to the Heads of Government meeting?

On closer inspection, President Juncker hadn’t given us much comfort at all regarding the state of play in Greece.

Just ‘cause you’ve seen a fat lady doesn’t mean she’s a singer

I’m sure there was a good reason for yesterday’s extraordinary Eurogroup and informal Eurosummit meetings. But, just because there was a good reason for the meetings, doesn’t mean that anyone is going to tell us what it really was. All I know is that there’s now just one weekend separating us from the end of June, and one day less for the parties to agree what to do. If ever the EU’s contingency plans needed to be ready, they need to be ready now.

In other words, this Greece business remains far from over.

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