Eurogroup Warns: Comply or Default

Townhall.com ^ | February 6, 2012 | Mike Shedlock

[Kaslin]

Greek default drama is much like the movie Groundhog Day. If you prefer a quote from Yogi Berra instead, then please consider It's déjà vu all over again.

Every day for weeks we have heard a "deal is close". Moreover, on multiple occasions at the end of the week we were informed Greece "had" to reach agreement over the weekend or Greece would default. Let's hope this time someone really means it.

Once again, Greece says faces 24-hour deadline to clinch rescue.

Greece has just one day left to strike a deal with impatient lenders and reluctant political party leaders on a 130 billion rescue plan before the country is pushed towards a chaotic default, its finance minister warned on Saturday.

In an apparent warning to Greek political leaders opposing key reforms, Finance Minister Evangelos Venizelos said the patience of European partners and the International Monetary Fund footing the bill for Greece's bailout was wearing thin.

Technocrat Prime Minister Lucas Papademos was due to continue talks with lenders on Saturday in a bid to clinch agreement before calling in the socialist, conservative and far-right party leaders in his coalition to seek their blessing.

That meeting of party chiefs, initially scheduled for Saturday, has now been put off until early Sunday afternoon, a government source said.

NOT BACKING DOWN

Athens' talks with its international lenders have stumbled over their demands, which include cutting labor costs by axing holiday bonuses and lowering the minimum wage - proposals vehemently opposed by Greek political party chiefs.

Greek officials have described the negotiations as tough, with the troika of European Central Bank, European Union and IMF lenders unwilling to yield an inch from their demands. Marathon negotiations ended without a deal on Friday.

"The troika is not backing down on wages, holiday bonuses and supplementary pensions," a Greek government official said.

"None of these issues have been resolved. They are all open and the onus is on political leaders."

The bond swap talks were now the easier part of the overall process to save Greece, Venizelos said earlier. Representatives for the banks and insurers were expected to continue talks in Athens over the weekend.

Increasingly frustrated with Athens' inability to enact the reforms needed to reshape the recession-hit Greek economy, foreign lenders have demanded proof of the country's commitment to spending cuts before doling out any more funds.

They have demanded extra spending cuts worth about 1 percent of GDP - or just above 2 billion euros - this year, including big cuts in defense and health spending.

They want all Greek political leaders - who are keen not to be linked directly with the painful reforms as they gear up for elections expected in April - to endorse the measures, irrespective of the outcome at the polls.

"Greek political leaders must offer their commitment to the program," said a source close to the lenders. "No more loans will be approved if they don't."

In the latest sign that coaxing political leaders into backing the reforms will be anything but easy, the leader of the far-right LAOS party, George Karatzaferis, rejected Venizelos' "ultimatum" to strike a deal by Sunday.

"We must go through every letter, every comma of the lenders' proposals and see whether they help the country and boost growth," he said at a Greek ceremony to celebrate the new year. "If the bailout doesn't suit us, we will not accept it."

At the traditional "pie-cutting" ceremony, Karatzaferis also gave away drachma coins to fondly recall Greece's pre-euro days -- a return to which many Greeks fear.

Please stop the madness. Bailouts to Greece cannot possibly work. Moreover, the world will not end on Monday if Greece exits the Euro, nor will the world end if Portugal and Spain do the same later this year or next.

Juncker Issues ultimatum "Comply or Default"

The theater of the absurd continues for yet another day with Juncker's ultimatum: Comply or default

Jean-Claude Juncker, the head of the Eurogroup, warned Greece through an interview to a German magazine that it will either comply with its creditors’ requirements or default, as it should not expect any additional support from its peers.

Earlier, the head of the ruling coalition’s third partner, Giorgos Karatzaferis, stated in Thessaloniki that he would not tolerate any ultimatums.

"We need to examine whether the creditors' demands are in favor of growth for the sake of the Greek people, otherwise we will not get the support package. I am not going to sign up to that,» said the leader of Popular Orthodox Rally (LAOS).

This is beyond ridiculous. The EU and IMF Need to Stand Up and Announce "Too Late" Deal is OFF, then work with Greece to plan a return to the Drachma.

[cuban leaf]

Surely they can kick the can just a few more yards down the road. /s

[ClearCase_guy]

Greek default drama is much like the movie Groundhog Day.

For a minute I was asking myself what Antigone or Oedipus Rex had in common with a Bill Murray movie. Then I got it. Finance, not theater.

[Jack of all Trades]

Per this Guardian Live Blog entry a 24 hour deadline is a flexible thing.

Maybe working on a deal takes too much time away from grilling lamb and drinking Ouzo. Either that, or the EU is trying desperately to figure out how to take the shaft without triggering a CDS Armageddon.

No matter what happens though, the day will come soon when nobody will be able to print "money" fast enough to pay their debts.

[PapaBear3625]

As a minimum, the solvent EU countries should pass legislation saying that none of their banks is allowed to lend money to any Greek entity, whether the government itself, any Greek bank which might launder the money into a loan to the Greek government, or any Greek company.

Also, if Greece defaults and tries to issue new bonds, that any payments to new bond holders will be seized and used to pay off old bond holders.

Let the Greeks go cold turkey.

[dagogo redux]

Can’t get their act together? Can’t come up with a deal?

They must have some sort of disability. Have them sign up for welfare.

[KarlInOhio]

The European central banks' time would have been better spent on figuring out how to set up a fire break to keep the whole system from collapsing when Greece defaults rather than working on keeping Greece from defaulting and dropping out of the Euro. Hopefully they have already thought of it and this whole drama is just buying time to have that fire break built rather than actually expecting Greece to change at the last minute.