The Complete Greek Crisis Playbook: Full Updates II

Greece's grand entourage continues after 2 weeks of utter pandemonium for both the Troika and Greece herself. Financial markets have been in constant convolution amidst the darkest crisis which Athens finds itself in. The risk of a Grexit has never been higher, and we aren't mincing our words.

Now that Greece has expressed overt intention to leave the euro, which will be next? A simple analysis on gross exposure might be a hint.   Chart courtesy of Zero Hedge

Now that Greece has expressed overt intention to leave the euro, which will be next? A simple analysis on gross exposure might be a hint. 

Chart courtesy of Zero Hedge

After being the first EU and developed nation to default on the IMF for €1.56bn last week, Greece has decided in a public referendum held Sunday, to reject Europe's latest bailout proposal, perching the bankrupt nation ever closer to a Grexit.

Things are not looking good as Greek banks are still trapped in a bank holiday, without any sort of external liquidity assistance; its depositors now fear for their money which might be the subject of a depositor bail-in program should matters continue to deteriorate.

Even in the most optimistic of views, Any unlikely new bailout deal will take at least a full wee to formulate. Time is running short for Greece and her citizens, before the chimera start raining fire and brimstone over the Greek Acropolis.

We have complied all relevant news, updates, commentary, and analysis in the other two sections (Part I & Part III). You are encouraged to explore the content-stuffed pages for the full experience.

And The Latest...

  • Greece to extend bank holiday & capital controls Monday. ECB unlikely to raise ELA limit.
  • Eurogroup summit reaches agreement with Greece after 17 hour session.
  • Greece given 24 hours to accept Eurogroup proposal terms. Until Wednesday for parliament to pass.
  • Eurogroup demands more from Greece. No negotiations until changes made to proposal.
  • Full EU28 summit called off Sunday amidst "very difficult talks".
  • Eurogroup summit Saturday ends without agreement on Greek proposal. Leaders to reconvene 11am Sunday.
  • Greek parliament successfully rectifies latest proposal. Awaiting Europe's approval on Saturday's summit.
  • No verdict on Friday means weekends packed with incertainty climaxing with Sunday's final Eurogroup summit.
  • Eurogroup head: Verdict on Greece "probably today". 
  • Greece seeks 3-year, €53.5bn bailout from ESM; parliament to vote on passage.
  • Greece expected to present "solid" and detail proposal to creditors Thursday. 
  • Bank holiday, capital controls extended over weekends till Monday. 
  • Bank holiday, capital controls extended till Friday.
  • Greece requests for ESM bailout.
  • Eurogroup to reconvene Sunday, 'last chance' for Greece.
  • Eurogroup meeting ends without progress, new Greek FM came "empty handed".
  • Eurogroup meeting begins Tueaday afternoon. European ministers waiting to see Greek offer.
  • ECB changes ELA collateral requirements for Greek banks.
  • ECB leaves Greek ELA limit unchanged at €88.6bn.
  • Greek government extends nation-wide bank holiday & capital controls through Wednesday.
  • Greece's Tsakalotos to be sworn in as Finance Minister today.
  • Greek Finance Miniater Yanis Varoufakis resigns, even after "no" vote.
  • Official outcome of public referendum is to reject the EU's bailout proposals.

Brussels Now Controls Greek Banks

There is a much lesser known fact about the bailout deal Greece is about to sign itself to for the next 3 years. As humiliating for Greece as it has gotten, we believe there is a red line not be to crossed. But it has been.

The issue of Greek bank deposits goes far beyond the symbolism of loosing one's sovereignty. It crawls deep into the social fabric of the populace, impregnating society with a gnarly bomb its fuse lit.

Now on to the lesser know fact buried under pages of terms and conditions barring Athens from its long lost sovereignty and dignity as a nation. Brussels and not Athens, now has the power in "identifying and closing or breaking up sick banks". In other words, the Eurozone has the authority to manage ailing Greek banks, and dissolve them if it sees fit.

While there is a lot of commotion about the ECB's prerogative to finally raise the ELA limit for Greece's National Bank, collateral haircuts aside, nothing is concrete as of Tuesday. We are of the notion that the ECB will play hard ball with Greece, especially now that no bridge financing vehicle is in place and the validity of the new Greece-Europe deal is still seated in ambiguity.

As of the end of 2014, Greek banks’ total borrowing at the ECB’s regular operations amounted to €56bn, with negligible usage of ELA. Their usage of the ECB liquidity has increased to about €118bn as of the end of May. Barclays estimates that figure to be €125.4bn currently; ELA funding via Greece's Central Bank should be close to the current limit of €89bn.   The capital controls introduced on 29 June after the announcement of the referendum have reduced significantly the pace of deposit outflows. However, with depositors continuing to withdraw from ATM machines at a daily limit of €60, Greek banks’ liquidity needs have reached a level very close to the current ELA ceiling. Some of them now run the risk of exhausting liquidity.  Chart courtesy of Barclays

As of the end of 2014, Greek banks’ total borrowing at the ECB’s regular operations amounted to €56bn, with negligible usage of ELA. Their usage of the ECB liquidity has increased to about €118bn as of the end of May. Barclays estimates that figure to be €125.4bn currently; ELA funding via Greece's Central Bank should be close to the current limit of €89bn. 

The capital controls introduced on 29 June after the announcement of the referendum have reduced significantly the pace of deposit outflows. However, with depositors continuing to withdraw from ATM machines at a daily limit of €60, Greek banks’ liquidity needs have reached a level very close to the current ELA ceiling. Some of them now run the risk of exhausting liquidity.

Chart courtesy of Barclays

Regardless of whether the ECB's ELA is raised for Greece, it is unlikely that any increased liquidity buffer will make up for a fraction of the monumental capital outflows to the tune of almost €70bn year to date. Why? Any marginal ELA allowance post Wednesday's day of reckoning will be exhausted in no time.

The Greek government plans to reopen its banks but will continue to maintain the €60 daily withdrawal limit for obvious reasons. The estimated financial damage to the Greek banking sector was estimated to range anywhere from €25bn to €50bn, according to the calculations of senior EU official Monday. Damages as in capital that has been evaporated and never to be reconciled with the books of Greece's banks.

It is for this for this reason that the ECB chooses to play cautiously, adamant on raising Greece's ELA cap fearful that Greece appeals for another increase once that has too been maximized in short order. The ECB is wary that any boost to the ELA will result in an instant surge in deposit outflows. Rinse and repeat; the ECB does not want to be trap in this hamster wheel.

Another point to consider is the extremely high level of non-performing loans (NPLs), akin to toxic 'assets' (if one may call it so). We envisage a situation where deeper austerity pushes already struggling private debtors closer to the brink of insolvency (individuals, families, small and medium sized businesses inclusive). Said insolvency means that Greek banks will experience a leap in defaults on their loans, further impairing them.  

As a result, we do not see significant changes to the ECB liquidity programs to Athens in the coming weeks. Is is only until a rigorous directive ensures greater stability in Greece's banking sector will the ECB relent. And that vigorous directive will be secured come Wednesday if everything goes according to plan. A directive which essentially gives Europe the power to manage Greece's banks.

Looking at the bigger picture, the Troika has identified this possibly contagious risk to Greece's banking and financial system. To partially circumvent and mishaps, the Eurogroup demands that they receive control over the management of Greek banks in times of crisis, which includes the current period.

Analysts expect a reduction in a number of large banks from the current 4 to as little as 2. If matters worsen, we can expect consolidations and liquidation to start rolling in; not on the accord of the Greek government, but that of Europe, Greece's current and future master. The sense of indignity is immense within Greece.

More from Reuters:

"The European Central Bank's decision to support Greece's shuttered banks by keeping its emergency funding line open gives the country's lawmakers a few days to seal reforms for an aid deal to keep it in the euro.

However, the lawmakers are under pressure to act fast as the ECB, facing resistance from Germany, would be unlikely to extend the funding line next week if Greece misses a debt repayment due to the ECB on July 20.

The lawmakers' support for tough reforms, agreed by leftist Prime Minister Alexis Tsipras on Monday after all-night talks, is crucial for starting the next phase of negotiations on a tentative aid deal, that will potentially unlock funds to help Greece make the roughly 3.5 billion euros ($3.87 billion) ECB debt repayment.

Missing that payment would likely force the ECB to turn off the 89 billion euro Emergency Liquidity Assistance that it agreed to extend again on Monday.

"The Greek parliament is being asked to surrender unconditionally," said one euro zone central bank official, suggesting that the ECB could change tack on emergency funding if action did not come soon.

"If they don't deliver by Wednesday, it's going to be tough."

The ECB is expected to gather again on Wednesday evening in Frankfurt to discuss whether to extend the line again, sources said.

The 89 billion euro line is enough to keep the banks afloat but only barely. Without that funding, the banks would collapse immediately, dragging Greece further into chaos, a possibility if Greece misses Monday's repayment.

In Germany, where pressure has been building to cut off the funding, the Bundesbank does not want the line to continue beyond July 20 if the ECB repayment is missed, a person familiar with its thinking said.

Continuing to provide funds if Greece were to default on money it owes the ECB would appear to breach central bank rules that say it must not provide direct financing to states. The Bundesbank is determined that this not happen.

In any case, the 89 billion euros line is not enough to resume business as usual or lift the strict rationing of cash. Officials at Greek banks are counting on the ECB to increase the funding line to free up liquidity to allow the banks to start to function again.

While the ECB is expected to cut the funding line altogether next week if the repayment is missed, it is unclear whether the ECB would reward Greece for fast-tracked reforms with an increase in the size of the funding line.

"Not providing any liquidity at all would seem extreme," one Greek banker said.

"There should be a move from the ECB to keep the banking system going for the next few days, so a bit of liquidity is likely."

Extra money might require a guarantee from euro zone countries to underpin the collateral Greek banks give for the funding, something they last did in 2012.

Volker Wieland, one of the 'wise men' who advise the German government on economic policy, said an increase was possible but even if there was one, money controls would stay.

"It gives them the opportunity to keep up the emergency liquidity assistance," he said. "They can maintain it, they can even increase it slightly but the Greek government can certainly not lift capital controls."

Even with an increase in liquidity, capital controls would only be lifted gradually, another official said.

"You don't want to create room for a bank run that would create a bigger mess," the central bank source said.

Sorting out the banks, starved of cash after months of crisis and economic uncertainty, is essential to getting the Greek economy back on its feet. The Eurogroup of finance ministers estimated that any new bailout programme for Athens would require up to 25 billion euros to recapitalise its banks.

One of the preconditions imposed on Greece for a deal is that it signs into law European rules that would put euro zone authorities at the ECB and in Brussels, rather than Athens, in charge of identifying and closing or breaking up sick banks.

This in turn could lead to a shake-up of the sector that could see some banks close, with losses pushed onto bondholders and possibly even large depositors. In such circumstances, there would be little that Athens could do to prevent this.

One European official had told Reuters that the number of big banks in the country could be reduced from four - National Bank, Piraeus, Eurobank and Alpha - to as little as two."

Scrambled Greek Eggs

The average non-performing exposure ratio of Greek banks (NPE) is 41%, already very high but now also at risk of continually increasing over the coming quarters.    E  ven if Greece averts an EMU exit and its banks continue to receive liquidity through the ELA, the country’s entry into a new programme will still likely require banks to raise capital in order to bolster solvency and cushion them against asset quality deterioration associated with a weakened economy.   Chart courtesy of Barclays

The average non-performing exposure ratio of Greek banks (NPE) is 41%, already very high but now also at risk of continually increasing over the coming quarters.

Even if Greece averts an EMU exit and its banks continue to receive liquidity through the ELA, the country’s entry into a new programme will still likely require banks to raise capital in order to bolster solvency and cushion them against asset quality deterioration associated with a weakened economy.

Chart courtesy of Barclays

Now that an agreement is already on deck, we look at what will follow in the coming hours, and days.

But before we continue, we want to make our point clear: Greece has sold itself to Europe for the third time counting, ceding solidarity and sovereignty on a house of questionable cards; and Tsipras will never be able to redeem himself from both his Government and his people. Snap elections are a certainty.

Remember the Wednesday deadline the Eurogroup had set for Greece on Sunday? That will the the first milestone for Tsipras and his government to scramble to. And there is a lot of scrambling to be done. A lot.

First, Tsipras needs to convince his parliament to write all key measures under the latest bailout agreement into legislation. For that, he will need a majority vote of approval, something that is not easy given that there are many possible dissenters in his Syriza party. Leftists and center-lefts will be particular hard to convince.

On the previous vote this past Wednesday, several notable Greek politicians including its Energy and Reform Ministers commented that they oppose to Greece's then tailored bailout plan but voted for it because they wanted to see a deal a pushed through after almost 3 weeks of living in dysphoria.

These are the very people who are most likely to vote against the new bailout bill. This is why Tsipras has a more urgent task at hand. That of purging the Greek parliament of all possible dissenters to ensure that the bill goes through before Wednesday's closure.

As we type, Tsipras' scramble to purge the Greek parliament is under way. If the Prime Minster was able to sell Greece's sovereignty to Europe thereby betraying his people, we believe that he man is fully capable of reorganizing his government despite the tight timetable.

Greece's debt obligations till mid August. Looming near are the repayments to the ECB and private bond holders.   Chart courtesy of The WSJ

Greece's debt obligations till mid August. Looming near are the repayments to the ECB and private bond holders. 

Chart courtesy of The WSJ

Assuming the Greek parliament rectifies the measures and writes them into law, the official discussions on the detailed terms of the bailout package will commence. Theoretically, both sides can take as long as they wish to formulate a final term sheet fore Greece to implement, but there is a looming ECB repayment next week that requires immediate funding.

On 20 July, €3.4bn of ECB loans are due. Apart from the ECB, Greece needs to repay private lenders (bond holders) some €1bn on 17 July. Greece obviously lacks the funds to meet those obligations. Waiting until it actually gets the €86bn in ESM funding will mean Greece defaulting on private creditors and the ECB; both are not as friendly as the IMF.

To bridge this funding gap, the Eurogroup will somehow secure a bridge financing loan to Greece once negotiations begin.

Based on some unconfirmed figures reported on Bloomberg (stating that the adjustments regard mainly securities issued or guaranteed by the Greek government for which the haircuts were brought to 45%), Barclays  estimates that the average haircut has been increased to about 54%.      This implies a reduction in the ELA-eligible collateral buffer (net of haircuts) to about €15bn currently, €9bn lower than in June (before the latest haircut).    Chart courtesy of Barclays

Based on some unconfirmed figures reported on Bloomberg (stating that the adjustments regard mainly securities issued or guaranteed by the Greek government for which the haircuts were brought to 45%), Barclays estimates that the average haircut has been increased to about 54%.

This implies a reduction in the ELA-eligible collateral buffer (net of haircuts) to about €15bn currently, €9bn lower than in June (before the latest haircut).

Chart courtesy of Barclays

More pressing is the status of the ECB's ELA to Greek banks. Do not for once forget that the proverbial bank holiday and capital controls have been in force for 2 weeks and counting. For every extra day that banks remain shut, at least €1bn in marginal recapitalization will be required.

The ECB's Governing Council will be meeting a few times this week, and it remains to be seen if they increase Greece's ELA limit (currently stands stagnant at €86.6bn). Recall that the ECB had previously increased haircuts on collateral posted to Greek banks to 45% last week, making it harder for banks to obtain liquidity.

The deal currently proposes about €25bn of the total bailout funds be channeled to recapitalizing Greece's insolvent and illiquid banks, but we suspect the actual requirements are infinitely higher. Further, no sane Greek in their right mind will ever maintain deposits at those very banks that confiscated their savings.

Much more detail will be available as matters developed. But as always, we strongly advise readers to take everything emanating from Europe with a scoop of the saltiest salt. They have proven their ability to turn on a dime and reneg at every possible juncture.

More from Reuters:

"Euro zone leaders made Greece surrender much of its sovereignty to outside supervision on Monday in return for agreeing to talks on an 86 billion euros bailout to keep the near-bankrupt country in the single currency.

"Clearly the Europe of austerity has won," Greece's Reform Minister George Katrougalos said.

"Either we are going to accept these draconian measures or it is the sudden death of our economy through the continuation of the closure of the banks. So it is an agreement that is practically forced upon us," he told BBC radio.

"The agreement was laborious, but it has been concluded. There is no Grexit," European Commission President Jean-Claude Juncker told a news conference after 17 hours of bargaining

"In this compromise, there are no winners and no losers," Juncker said. "I don't think the Greek people have been humiliated, nor that the other Europeans have lost face. It is a typical European arrangement."

Tsipras himself, elected five months ago to end five years of suffocating austerity, said he and his team had "fought a tough battle" and had to make difficult decisions. He said he had secured an improved promise of debt restructuring and "averted the plan for financial strangulation".

Greece won conditional agreement to receive a possible 86 billion euros ($95 billion) over three years, along with an assurance that euro zone finance ministers would start within hours discussing ways to bridge a funding gap until a bailout - subject to parliamentary approvals - is finally ready.

German Chancellor Angela Merkel said she could recommend "with full confidence" that the Bundestag authorize the opening of loan negotiations with Athens once the Greek parliament has approved the entire program and passed the first laws.

One senior EU official calculated the cost to the Greek state of the last two weeks of political and economic turmoil at 25 to 30 billion euros. A euro zone diplomat said the full damage might be closer to 50 billion euros.

Tsipras accepted a compromise on German-led demands for the sequestration of Greek state assets worth 50 billion euros - including recapitalized banks - in a trust fund beyond government reach, to be sold off primarily to pay down debt. In a gesture to Greece, some 12.5 billion euros of the proceeds would go to investment in Greece, Merkel said.

In a sign of how hard it may be for Tsipras to convince his own Syriza party to accept the deal, Labour Minister Panos Skourletis said the terms were unviable and would lead to new elections this year.

Six sweeping measures including spending cuts, tax hikes and pension reforms must be enacted by Wednesday night and the entire package endorsed by parliament before talks can start, the leaders decided.

Tsipras was subjected to a 17-hour browbeating by leaders furious that he had spurned their previous bailout offer on more favorable terms in June and held a referendum last week to reject it. Only France and Italy worked to try to soften the terms being imposed on Greece.

Even if this week's immediate rescue succeeds, many EU diplomats question whether an unstable Greece will stay the course on a three-year program with a return to intrusive quarterly monitoring on the ground in Athens.

The final sticking point was Germany's insistence on an independent external trust fund to control state assets for privatization. Berlin initially wanted to use a structure in Luxembourg managed by its own national development bank, KfW, but eventually relented.

One diplomat said that was tantamount to turning Greece into a "German protectorate". But Merkel declared the matter a "red line" for Germany.

Euro zone finance ministers were tasked with finding sources of immediate bridge funding for Greece if it passed the laws, to prevent it defaulting on a key payment to the ECB next Monday.

Options included releasing European Central Bank profits on Greek bonds, tapping an emergency fund run by the European Commission, or bilateral loans from friendly countries such as France. Two French sources denied any bridging loan was planned.

Finance ministers said Greece needed 7 billion euros of funding by July 20, when it must make a crucial bond redemption to the ECB, and a total of 12 billion euros by mid-August when another ECB payment falls due."

Prime Minister Alexis Tsipras' statement to the citizens of Greece on reclaiming Greece lost sovereignty (ceded by none other than yours truly):

At least Tsipras is putting on a good fight by smiling to the press.  Photo: AFP

At least Tsipras is putting on a good fight by smiling to the press.

Photo: AFP

"We have been fighting hard for six months now, and we fought until the end to achieve the best possible outcome, an agreement that will enable the country to get back on its feet, and for the Greek people to be able to continue to fight.

We faced tough decisions, tough dilemmas. We assumed responsibility for the decision in order to prevent the most extreme objectives from being implemented—those pushed for by the most extreme conservative forces in the European Union.

The agreement calls for tough measures. However, we prevented the transfer of public property abroad, we prevented the financial asphyxiation and the collapse of the financial system—this was planned to the last detail – having recently been designed to perfection, and in the process of being implemented.

Finally, in this tough battle, we managed to gain the restructuring of the debt and a financing process for the medium-term.

We were aware that it would not be an easy task, but we have created a very important legacy. An important legacy, and a much-needed change throughout Europe. Greece will continue to fight, and we will continue to fight, so that we can return to growth, regain our lost national sovereignty. We earned our popular sovereignty. We sent a message of democracy, a message of dignity throughout Europe and the world. This is the most important legacy.

Finally, I would like to thank all of my colleagues–ministers, colleagues and associates who gave, along with me, a very tough fight. A fight, which at the end of the day, will be vindicated.

Today’s decision will maintain Greece’s financial stability and provide recovery potential. However, as we knew beforehand, the agreement will be difficult to implement. The measures include those that Parliament has voted on. Measures that will inevitably create recessionary trends. However, I am hopeful that the growth package of 35 billion euro that we achieved, debt restructuring, as well as securing funding for the next three years will create market confidence, so that investors realize that fears of a Grexit are a thing of the past—thereby fueling investment, which will offset any recessionary trends.

I believe that a large majority of the Greek people will support the effort to return to growth; they acknowledge that we fought for a just cause, we fought until the end, we have been negotiating through the night, and no matter what the burdens will be, they will be allocated – we guarantee this – with social justice. And it will not be the case that those who have shouldered the burden during the last years will be stuck footing the bill once more. This time, those who avoided paying—many of whom were protected by the previous governments–will pay now, they, too, will shoulder the burden.

Finally, I want to make this commitment: Now, we need to fight just as hard as we fought to achieve the best outcome abroad-in Europe, to rid vested interests in the country. Greece needs radical reforms in favor of social forces, and against the oligarchy that have led to the country’s current state. And this commitment to this new effort begins tomorrow."

Eurogroup Achieves 11th Hour Deal, Fools Everybody

After all hopes seemed lost as the dusk came over Europe, we along with the rest of the world were led to believe that any Greek deal would only come after both the Greek parliament and Eurogroup approved of the new bailout terms.

Sunday's 17-hour bargaining session at the Eurogroup summit led to a deal Tsipras had begged for. His supporters were the French and Spaniards.  Photo: AFP

Sunday's 17-hour bargaining session at the Eurogroup summit led to a deal Tsipras had begged for. His supporters were the French and Spaniards.

Photo: AFP

Little did we know that minutes before the European markets opened for Monday trading, the Eurogroup announced through social media that both sides had reached an agreement to Greece's third bailout package after a 17-hour marathon meeting through the night, where we suspect Tsipras was down in his knees begging the Eurozone ministers for acceptance.

The statement of Eurogroup head, Donald Tusk:

"Good morning. Today, we had only one objective: to reach an agreement. After 17 hours of negotiations, we have finally reached it. One can say that we have 'agreekment'. Leaders have agreed in principle that they are ready to start negotiations on an ESM programme, which in other words means continued support for Greece.

There are strict conditions to be met. The approval of several national parliaments, including the Greek parliament, is now needed for negotiations on an ESM programme to formally begin. 

Nevertheless, the decision gives Greece a chance to get back on track with the support of European partners. It also avoids the social, economic and political consequences that a negative outcome would have brought. I welcome the progress and the constructive position of Greece that helps to bring back trust among euro zone partners. 

Following national procedures, the Eurogroup will work with the Institutions to swiftly take forward the negotiations. Finance ministers will also as a matter of urgency discuss how to help Greece meet her financial needs in the short term, so-called bridge-financing.  

I would like to thank the President of the Commission Jean-Claude Juncker and the Eurogroup President Jeroen Dijsselbloem for their dedication and involvement in this progress. Without your work, today's agreement wouldn't be possible. Thank you."

Surprising as the deal may be, we are more eager to see how the Greek parliament and the Greek people react to Tsipras' double-faced stint; going against what 62% of Greece opposed to inset Sunday's referendum. We also wonder how much further will the can be kicked until one party truly snaps.

Tsipras has given Greece a relief of short term pain in exchange for a decade's worth of austerity, poverty, and abiding to Europe's bidding like a servant to her master.

Thanks to this last minute and totally unexpected deal, financial markets have gone bonkers almost right at the European open. Risk is bid, while the euro is one blending machine. More on the details as the official statement is published.

More from The WSJ:

"Eurozone leaders said early Monday that they would give Greece another three-year bailout involving some €80 billion ($89 billion) in rescue loans, provided the government of Prime Minister Alexis Tsipras manages to implement a round of punishing austerity measures in the coming days.

“EuroSummit has unanimously reached agreement” Donald Tusk, who presided over the talks with leaders, said in a tweet. “All ready to go for ESM [European Stability Mechanism] program for Greece with serious reforms & financial support.”

European stocks rallied early Monday on the news. In early trade, the Stoxx Europe 600 rose 1.2%, building on Friday's hefty gains. Germany’s DAX rose 1.3%, France’s CAC-40 added 1.5% and London’s FTSE 100 rose 0.6%. The euro hit an intraday high of $1.1197 against the dollar before falling 0.4% on the day.

The tentative rescue deal—hammered out after 22 hours of, at times acrimonious, negotiations between the currency union’s leaders and finance ministers—is likely to require the Greek left-wing government’s near-total surrender to its creditors’ demands."

Leaked Eurogroup Statement Shows Even More Draconian Demands

We posted an update a few hours earlier alerting readers that the key event for Sunday, the 28-member EU summit, was scraped by the Eurogroup themselves because it believed that the situation as it stands does not engender basis to start negotiations on a new bailout program for Greece.

A dejected Greek PM as Europe refuses to negotiate on his bailout proposal. After fleecing his people, enraging his party members, Tsipras now turns to this last strategy, hope.  Photo: Reuters

A dejected Greek PM as Europe refuses to negotiate on his bailout proposal. After fleecing his people, enraging his party members, Tsipras now turns to this last strategy, hope.

Photo: Reuters

Most commentators and analysts did not expect this outcome; the financial markets certainly did not, closing at the highs of the week on Friday as participants were sanguine and confident that a deal would be inked over the weekends. In other words, the hope-fueled ebullience is going to come crumbling down on Monday.

It just proves that anything and everything unexpected can and will happen in the Greek drama. It is not entirely false to say that we are back where we started on Tuesday, after 62% if Greeks voted "no" to whatever Tsipras and his government are so desperately pushing for.

In the previous section, we outlined the messy narrative coming from various Finance Minsters of the Eurozone. Messy because no official statement had been released then to explain why the Eurogroup was not able to agree to start properly negotiating with the Greeks.

That was until this afternoon when Reuters made public a leaked Eurogroup document which is apparently the draft statement that was intended for Greece.

More from Reuters:

"Euro zone finance ministers meeting in crisis talks in Brussels want Greece to commit to more measures to reform its economic system and government finances before they agree to negotiate a bailout loan.

Following is a partial draft Eurogroup statement, seen by Reuters. It was discussed by the ministers late on Saturday, before they resumed talks on Sunday.

Euro zone sources said it was likely to be amended but formed a basis for further discussion on Sunday. Sources also said ministers had pressed Greece to take other measures, including passing early legislation increasing value-added tax and making the national statistics agency independent."

In the draft statement, we understand that Greece needs to make larger changes to its VAT, pension systems (which we are very critical of), and the transparency of public sector accounting via the ELSTAT (Greece's statistical office).

The ESM capital as broken done into the 19 Eurozone states totaling €80.55bn. Germany holds a lion's share at 26.96% and €21.72bn.  Some word has been spreading that the Eurogroup and IMF sees Greece's proposed bailout amount of €53.5bn as insufficient, especially taking into account the money needed to recapitalize Greece's illiquid and insolvent banks.  The eventual bailout amount, should a deal be struck, could balloon to the ballpark of €75bn, almost all of the ESM's capital.   One can imagine how Germany would react. We personally do not see this as a possibility.  Chart courtesy of Barclays

The ESM capital as broken done into the 19 Eurozone states totaling €80.55bn. Germany holds a lion's share at 26.96% and €21.72bn.

Some word has been spreading that the Eurogroup and IMF sees Greece's proposed bailout amount of €53.5bn as insufficient, especially taking into account the money needed to recapitalize Greece's illiquid and insolvent banks.

The eventual bailout amount, should a deal be struck, could balloon to the ballpark of €75bn, almost all of the ESM's capital. 

One can imagine how Germany would react. We personally do not see this as a possibility.

Chart courtesy of Barclays

Unless these key changes are made in the new Greek proposal, the Eurogroup will not be able to officially decide whether to approve the next step for Greece to receive new bailout money, from the ESM or otherwise. But that is not all.

The circular loop continues because the entire process of redrafting the proposal (Greece's side), getting the Greek parliament to rectify what will be an even tighter social-economical noose, before sending said amended proposal to the Eurogroup for consideration.

This essentially means any plausible negotiation will only start on Tuesday at the very earliest. The process is not only tedious, but much harder this time because the Troika has demanded more austerity, to the utter chagrin of ordinary Greeks, and a majority of the Syriza-led government.

We are surely not holding our breaths this time. There is so much more the melting pot now than there was one week ago. Last week, Greece was a chooser. This week, Greece is a beggar; begging for Europe's acceptance despite a populace that is vehemently opposed to more of the same old.

Despite the serious sense of urgency on both sides, the issue of trust is the juggernaut that prevents any outright deal despite the mounting costs and associated collateral damages a breakdown in talks will entail.

Greece has cried wolf too many times and bluffed on all of them. Even France, the 'bridge' between two polar opposite camps, agrees that it is tough to believe that Greece will commit to its promises this time.

Europe is therefore tightening the screws on Greece's defunct economy and also on the patience of its people. Remember that Greeks have just been blatantly lied to because the referendum did not make a difference on Syriza's approach towards austerity. While we do not agree at all to the path the Eurogroup has taken, Greece is stuck with only 2 choices.

The ball is now in Greece's court. Either it plays along and goes through another arduous process of making the changes demanded by its creditors, or it capitulates and throws in the towel. The latter option would once again Greece back to the precipice of a Grexit, and the dominos to start falling.

Details From the leaked Eurogroup draft statement:

"The Eurogroup takes note of the request by the Greek authorities for a three-year ESM stability support and the accompanying list of policy commitments, including a comprehensive list of prior action. The Eurogroup reiterates the need for continued full involvement of the IMF.

The Eurogroup welcomes the assessment by the institutions that the list of policy commitments of the Greek authorities represents a basis to start the negotiations on a new program. The Eurogroup also agrees with the institutions that the package needs to be significantly strengthened and broadened in order to provide for appropriate conditionality for a possible three-year ESM program. The Eurogroup thus welcomes the additional following commitments of the Greek authorities on the basis of a clear timetable:

  • Fully comply with the medium-term primary surplus target of 3.5 percent of GDP by 2018, according to a yearly schedule to be agreed with the institutions;
  • Carry out ambitious pension reforms and specific policies to fully compensate for the fiscal impact of the Constitutional Court ruling on the 2012 pension reform and to implement the zero deficit clause;
  • Adopt more ambitious product market reforms with a clear timetable for implementation of all OECD toolkit I recommendations, including Sunday trade, sales periods, over-the-counter pharmaceutical products, pharmacy ownership, milk, bakeries. On the follow-up of the OECD toolkit II, manufacturing needs to be included in the prior action;
  • On energy markets, the privatization of the electricity transmission network operator (ADMIE) must proceed, unless replacement measures can be found that have equivalent effect, as agreed by the institutions;
  • On labor markets, undertake rigorous reviews of collective bargaining, industrial action and collective dismissals in line with the timetable and the approach suggested by the institutions. Any changes should be based on international and European best practices, and should not involve a return to past policy settings which are not compatible with the goals of promoting sustainable and inclusive growth;
  • Fully implement the relevant provisions of the Treaty on Stability, Coordination and Governance in the Economic and Monetary Union, in particular to make the Fiscal Council fully operational;
  • Adopt the necessary steps to strengthen the financial sector, including decisive action on non-performing loans, transposition of BRRD and measures to strengthen governance of the HFSF and the banks;
  • Develop a significantly scaled up privatization program with improved governance. A working group with the institutions shall provide proposals for better implementation mechanisms;
  • Amend or compensate for legislation adopted during 2015 which have not been agreed with the institutions and run counter to the program commitments;
  • Implement the key remaining elements from the December 2014 state of play of the fifth review of the second economic adjustment program."

No Deal, Eurozone Ministers Divided, Lack Trust On Greece

Out of the 18 Eurozone nations forming the Eurogroup, only 3 openly oppose to a Grexit. 10 nations including the 'core' nations (Germany, Austria, Finland) are prepared for a Grexit. 5 nations sit on the fence but would rather not see a Grexit. Times have changed!  Chart courtesy of RBS

Out of the 18 Eurozone nations forming the Eurogroup, only 3 openly oppose to a Grexit. 10 nations including the 'core' nations (Germany, Austria, Finland) are prepared for a Grexit. 5 nations sit on the fence but would rather not see a Grexit. Times have changed!

Chart courtesy of RBS

Update: Sunday's summit involving all 28 member states of the European Union has been cancelled. It seems the divide within Europe and between Greece and Europe is so stretched, there is no point for negotiations.

There has been no agreement between some 20 Finance Ministers from the Eurozone countries during Saturday's 10-hour long summit in Brussels. Leaders will reconvene at 11am Sunday for one last chance to broker an agreement before the financial markets open late Sunday.

Reading through the lines, we are with the impression that there are some officials who prefer Greece to leave the currency union, some who demand a debt restructuring element in the proposal, and some who just lack trust in Greece and Tsipras himself.

The polarization of opinions means that it will be difficult to conclude on an agreement before Sunday ends. Most had expected the Eurogroup to approve Greece's proposal without much resistance, and it turns out that they were wrong.

More from Reuters:

"Euro zone finance ministers were trying to draft a joint statement on Saturday listing further measures they want Greece to take in order to launch negotiations on a bailout Athens has requested, an EU source said.

The Greek government has put forward a set of reform plans to meet conditions for a three-year loan from euro zone partners but finance ministers said they did not go far enough and several sources said the other 18 euro zone states want Athens to offer additional actions and guarantees of implementation."

The main issue European negotiators have with Greece is trust, unsurprisingly. We have been very vocal about the country's proven track record on making promises but never delivering on them. Finance Ministers agree that for Greece to prove that it can be trusted on implementing the measures it said it would, and actually meeting the targets it has imposed for itself, much more needs to be done.

More incredulously to us, quite a few ministers were willing to talk about debt restructuring options and we're open to the idea. We are not optimistic that this option will be a formally viable one for the main reason of Germany's fierce dissent. Europe's most dominant member will not agree on any debt relief, so talks about one are moot.

There was also consensus that the sustainability of Greece's finances lacked substance. Measures were too few, important topics such as Greece's banking sector were eschewed from the proposal, leading some to question if Greece would blink in the middle of the term, asking for more assistance because it ran into unforeseen trouble.

Regardless of the rhetoric, Europe has to agree to something by the end of Sunday. Be it agreeing to approve or disapprove the proposal, or agreeing to open the floor to further negotiations with the proposal as a starting point. At this point, Grexit risks are still present but have diminished greatly.

Below are the comments from various European ministers, from Reuters:


  • "We will have exceptionally difficult negotiations."
  • "The problem is that that there was a situation at the end of the year that was very hopeful, despite all the scepticism of previous years, and that this was destroyed in an incredible way in the last months and hours.
  • "We are dealing with financing gaps which exceed everything we have dealt with in the past."
  • "We are talking about a completely new three-year programme."


  • "We, as Luxembourg, because we hold the EU presidency right now, are definitely ready to discuss debt restructuring, finalising is another issue."


  • "I see a huge problem with DSA (debt sustainability analysis), so long-term sustainability of the Greek debt. So now we will see what the institutions will bring on the table, what kind of finances and we have to assess it... This package would be appropriate for the completion of the second programme, but I'm afraid this is not enough for the third programme, for the ESM programme."


  • "We are still far away. It looks quite complicated. On both content and the more complicated question of trust, even if it's all good on paper the question is whether it will get off the ground and will it happen. So I think we are facing a difficult negotiation."
  • Will you talk about debt relief?
  • "I don't know we will get to that."
  • "There is still a lot of criticism on the proposal, reform side, fiscal side, and there is of course a major issue of trust. Can the Greek government be trusted to do what they are promising, to actually implement in coming weeks, months and years. I think those are the key issues that will be addressed today."
  • (For Greeks to regain trust) "Well, they will have to listen to the ministers and the institutions first and see what improvements are needed. And they will have to show very very strong commitments to rebuild that trust."


  • "Confidence has been ruined by every Greek government over many years which have sometimes made promises without making good on them at all. Today we need to have confidence again, to have certainty that decisions which are spoken of are decisions which are actually taken by the Greek government.
  • On debt restructuring: "France has always said there is no taboo about the debt. We have the right to talk about the debt."
  • We don't want there to be reduction in the nominal value of the debt because that is a red line for many of the member states in the Eurogroup.
  • "France ... is a link, and we will play this linking role to the very end." 


  • "I expect a long finance ministers meeting on Greece. It is not very easy but we will do all we can."
  • "The purpose of this meeting is to kick off negotiations on ESM which is a medium-term, very demanding programme and we are all here with open minds to reach an OK, a green light to start negotiations. The government, the Greek Parliament and the Greek people are positive towards starting what is the beginning of a negotiation. It is not about striking a deal tonight."


  • "This (Greek issue) has to be solved today because it is a question of coming up with this framework which gives assurance to the finance ministers."


  • "The Greek paper was silent on banking. Obviously the Greek banks are in difficulty now and it's going to be hard to put them back on an even keel, so we need a full briefing on that. Secondly I said we needed a medium term sustainable programme. Sustainability depends a lot on whether the programme is sufficient to cause the Greek economy to grow and to create jobs... It is very hard to stimulate an economy when on the demand you are doing corrective work so they need more supply side initiatives which effectively means a lot of reform which doesn't seem to be built into the programme."
  • "I think the trust is now being rebuilt in the relationship with Greece. I would hope that trust would continue to be rebuilt today. That's pretty important also." 


  • "It must be said that we are clearly making progress and the Greek government's proposal actually is pretty much along the lines of what the institutions' proposal was before the referendum. So clearly we see there is a willingness of the Greek to reach an agreement and also the vote in parliament showed that there is a parliamentary majority to move ahead with this programme."
  • "What we should be discussing today is basically about giving a mandate to the European Commission in liaison with the ECB and in close cooperation with the IMF to start negotiations about this ESM programme."


  • Asked about whether he was positive on a deal: "Yes and no. Of course it is a step ahead that Greece has finally delivered, surprisingly what was already agreed before and surprisingly after the referendum. What is missing are the details. The biggest item we have to talk about is what guarantees Greece can give to implement what has been agreed. We have seen for five years now that such lists are sent, but the implementing measures never happen."


  • "The Greeks have clearly made a step forward but at the same time we see that the institutions are critical of the plan, the missing specificities and they see that the plan is weaker in some areas than it should be. It is their suggestion to only start negotiations when these conditions are further filled in.
  • At the same time, many governments, mine too, have serious concerns about the commitment of the Greek government and also the power of the implementation. That has been the weak point because after all, we are discussing a proposal from the Greek government that was fiercely rejected a week ago, and that is a serious concern.
  • (On what the Greeks can do further) we have to discuss that. Clearly there has to be made a step that enables trust with all the financing parties. (What happens if there is no agreement tonight) That is basically up to the Greek government."


  • "I think we are here to make a lot more progress."


  • "Since the start, the European Commission had the objective, that of the integrity of the euro. It was to keep a reformed Greece in the euro zone."
    "I note that the Greek government has made significant gestures."
  • "We (the creditors) have said the Greek reform programme could constitute a basis for a new programme."
    "Our general sentiment is that there need to be reforms, solid reforms, reforms appropriate to the Greek authorities and reforms that are implemented as soon as possible."

New Greek Bailout Proposal Revealed

At least the Greek government kept is word this time and submitted its full proposal to the Eurogroup Thursday. The gist? A proposal markedly similar to the the European Commission's proposal on 26 June, the proposal which Tsipras and his party rejected without hesitation, and also the one which triggered the referendum call.

View there full proposal here.

The debt-to-GDP ratios of Italy, Spain, and Portugal. The latest Greek proposal lacks a debt write down segment which both the IMF and Eurogroup head acknowledged was crucial for Greece to recover in the long run.  Germany strongly opposes to any debt restructuring or write off, and because Germany is the dominant nation in the EU19 and EU28, no decision goes through without its approval.   Chart courtesy of Zero Hedge

The debt-to-GDP ratios of Italy, Spain, and Portugal. The latest Greek proposal lacks a debt write down segment which both the IMF and Eurogroup head acknowledged was crucial for Greece to recover in the long run.

Germany strongly opposes to any debt restructuring or write off, and because Germany is the dominant nation in the EU19 and EU28, no decision goes through without its approval. 

Chart courtesy of Zero Hedge

Underlining the entire bill is a 3-year, €53.5bn bailout package from the ESM effective till June 2018. Just enough to cover its debt redemption liabilities. But if this bill is passed by parliament and accepted by the Troika, Greece would need to find funds by mid-2018 to cover repayments due to the ESM.

The main difference between this and the EU's proposal lies in the details of the 10 key points which the proposal encapsulates. The government promises to enact legislation to increase corporate taxes and raise the annual fiscal surplus (which is nearly impossible), make changes to its pension system but not in a way the Troika wants (indirect and not direct).

There is however no mention of debt restructuring or relief in the bill. Recall that the IMF has openly stated that a feasible bailout deal for Greece should involve a debt relief structure, as it would be the most reliable and sure-fire way to ease the burden on Athens. Has Greece caught the phobia of a Grexit, thinking that any debt relief proposal might lead to it getting booted out?

The package is heavy on revenue promises and light on actual spending cuts. Greece promises to achieve a 1% primary budget surplus in 2015, rising to 2%, 3%, and 3.5% by 2018. We strongly feel this is extremely unlikely to happen; Greece has never met its budgetary targets in the last 5 years.

The tax reform involves a modest increase in corporate tax from 26% to 28%. Changes to the VAT system will keep the VAT on hotels at 13% but raise it to 23% for restaurants. After being lambasted in the European Parliament on Tuesday, Tsipras now promises to eliminate discounts on islands. 

Pensioners, led to believe that their welfare system was sustainable, are the real sufferers regardless of the latest verdict on the new bailout proposal.  Photo: AFP

Pensioners, led to believe that their welfare system was sustainable, are the real sufferers regardless of the latest verdict on the new bailout proposal.

Photo: AFP

The most important and also most sensitive topic of it all remains Greece's existing pension system. Here, Tsipras has obviously been trapped by his promises to the people and demands by his creditors. As we read through the lines, very little will be done to weed the existing pension system of its lavish profligacy.

The statutory retirement age has not been raised. Rather, the bill seeks to create strong disincentives to early retirement, penalties for early withdrawals, and to make all supplementary pensions individually financed. All indirect means of reducing public sector burden.

But there is a twist. Most of the changes will only come into full play in 2019, the top 20% of beneficiaries will see changes to their nests only in mid 2016. All this means no real effect for the next year or so; perhaps to further placate the spoilt Greeks.

The Greek parliament will now have to vote on this bill Friday and explain to the people why nearly two thirds of them just voted "no" to a deal which the government itself is now hoping will pass.

3 points to ponder about:

  1. Will the Troika accept this 'new' bailout proposal?
  2. Will the Greek parliament pass this bill?
  3. Will there be consensus amongst the Greek people?

And here is Tsipras' letter to European Commission President Juncker, ECB head Mario Draghi, and IMF head Lagarde:

"The attached proposal for a comprehensive and specific reform agenda by the Minister of Finance of Greece - aimed at complementing the request for a loan facility from the ESM of July 8 2015 - is conveyed to you following the Euro Summit decision of July 7 2015.  

In this context, it will be assessed by the three institutions to be presented to the Euro Group. It constitutes the result of many months of formal and informal negotiations that the Greek government undertook with the institutions at all levels, aiming at reaching a program that will be economically viable and socially just.  

With this proposal, the Greek people and the Greek government, confirm their commitment to, fulfilling reforms that will ensure Greece remains a member of the Eurozone, and ending the economic crisis. The Greek government is committed to fully implementing this reform agenda - starting with immediate actions - as well as to engaging constructively on the basis of this agenda, in the negotiations for the ESM Loan.  

This reform agenda constitutes part of the wider effort of the Greek Government, towards reforming the Greek economy and public administration, through fighting corruption, clientilism and inefficiency, promoting social justice and creating a positive environment for sustainable economic growth. Thanking you for our cooperation."

Bloomberg summarizes Greece's promises to the Troika (whether they will be delivered or not is another story):

A visual breakdown of the various elements of the latest Greek bailout proposal, involving €53.5bn from the European Stability Mechanism  (ESM) spread out over 3 years through 30 June 2018.  Graphic courtesy of AFP

A visual breakdown of the various elements of the latest Greek bailout proposal, involving €53.5bn from the European Stability Mechanism  (ESM) spread out over 3 years through 30 June 2018.

Graphic courtesy of AFP

"Financing and Debt

Greece is asking for three-year loans of at least 53.5 billion euros ($59.9 billion) to cover its financing needs between 2015 and 2018. It is also seeking debt restructuring and reprofiling of its long-term debt due after 2022. The earlier proposals were in return for a five-month extension of an existing bailout program for loans of as much 15.5 billion euros and didn’t involve any debt restructuring. 

Tax Reforms

With few exceptions, the Greek government adopts the creditors’ proposal on sales and corporate tax rates. The government is seeking to eliminate sales tax discounts on islands gradually by the end of 2016 instead of immediately, starting higher-income islands that are popular tourist destinations. It also seeks to keep hotels under a reduced 13 percent rate instead of the standard 23 percent.

Pension Reforms

The government proposes implementing a “zero-deficit” clause for supplementary and lump-sum pension funds, adopted in 2012, from October instead of immediately. While it agrees to phase out a supplementary allowance for low pensions by the end of December 2019, it wants to start phasing-out these benefits from March 2016 instead of starting immediately.

Fiscal and Structural Measures

Greece wants to increase advanced income tax payment on corporate income to 100 percent and gradually for individual businesses by the end of 2017, as part of steps to close loopholes for tax avoidance. It also proposes to eliminate preferential tax treatment for farmers by the end end of 2017. The creditors wanted these steps to be implemented by the end of 2016.

The government appears to backtrack on its own earlier proposals for military spending cuts, offering to reduce spending by 100 million euros in 2015 and 200 million euros in 2016. It had earlier suggested to cut military spending by 200 million euros in 2016 and 400 million euros in 2017. The creditors have sought an immediate cut in annual military spending by 400 million euros.

It offers instead to extend implementation of a luxury tax on recreational vessels in excess of five meters instead of in excess of 10 meters.

Labor Reform

Government insists to legislating changes to collective bargaining agreements this fall; creditors don’t want any changes to already agreed labor framework and demand that any changes be negotiated with the three creditor institutions first -- the European Central Bank, the International Monetary Fund and the EU.


This is where the government appears to fully adopt the creditors’ demand for all agreed sales of state assets to proceed, including transferring the state’s shares in the Hellenic Telecommunication Organization SA to the asset sales fund and selling regional airports under terms already agreed with a venture led by Fraport AG, the winning bidder already selected by the previous government."

Greece's "New Currency" Surfaces

Moments ago, Bloomberg was out with an article claiming what is probably the first documented account of Greece's "new currency", the New Greek drachma.

A screen capture of the electronic bill in question at a Hilton Hotel in Athens, where there was a currency denomination in "DRACHMA EQ", possibly alluding to a new national currency for Greece.

A screen capture of the electronic bill in question at a Hilton Hotel in Athens, where there was a currency denomination in "DRACHMA EQ", possibly alluding to a new national currency for Greece.

European leaders have made it clear that they are taking extra efforts to prepare contingency plans should a negative event, such as a Grexit or a disorderly debt restructuring occur. As we pen this, Greece has not yet submitted its detailed 3-year ESM bailout proposal to the Eurogroup for review.

Tsipras has until Sunday's final deadline to reach a material agreement with Europe, after which things will probably get nasty.

More from Bloomberg:

"Between June 28 and July 4 at a Hilton hotel in Athens, transactions on a Bloomberg reporter's Visa credit card issued by Citigroup Inc.were posted as being carried out in "Drachma EQ."

The inexplicable notation -- bear in mind, the euro remains Greece's official currency -- flummoxed two very polite customer service representatives and spokesmen for the companies involved. It depicts a currency changeover that the Greek government and European officials have been working for over six months to avoid.

Citigroup and Visa Inc. declined to comment. A Hilton Worldwide Holdings Inc. spokeswoman said that the Athens hotel had billed the customer in euros, not drachmas." 

Key Upcoming Events

From Bloomberg:

The Athens Stock Exchange may remain closed indefinitely, but the debt securities of its banks that trade on foreign secondary markets show the hopelessness in trying to salvage its insolvent and bankrupt banks.    Yields have surged and most bonds now trade less than 30¢ to the dollar.  Chart courtesy of Zero Hedge

The Athens Stock Exchange may remain closed indefinitely, but the debt securities of its banks that trade on foreign secondary markets show the hopelessness in trying to salvage its insolvent and bankrupt banks.  

Yields have surged and most bonds now trade less than 30¢ to the dollar.

Chart courtesy of Zero Hedge

  • July 8: Greece scheduled to submit request for a bailout agreement to the European Stability Mechanism 
  • Euro area finance ministers may hold a conference call to assess Greece’s request for a new program * European Central Bank Governing Council will review liquidity situation of Greek lenders
  • Greek bank holiday, capital controls decree expires; government set to renew it
  • July 9: Greece must submit its reform agenda, which will be assessed by the European Commission, the European Central Bank and the International Monetary Fund. Results will be given to the Eurogroup, which will hold another call to discuss the new proposals
  • July 10: Greece needs to refinance EU2b in t-bills
  • July 11: Euro-area finance ministers will meet in Brussels
  • July 12: Euro-area and EU leaders will hold meetings to discuss the results of Greece’s expected comprehensive reform agenda

Greece Blinks, Begs For Bailout Acceptance

It would seem like the Troika's imposition of a hard deadline on Sunday worked. Over Tuesday night, the Greek government scrambled to put together an interim letter addressed, formally requesting for a 3-year bailout from the European Stability Mechanism (ESM).

Greek PM Tsipras at Tuesday's Eurogroup summit.   Photo: Reuters

Greek PM Tsipras at Tuesday's Eurogroup summit. 

Photo: Reuters

This comes after Tuesday's Eurogroup summit ended without progress, and pressure from Greece's creditors. Many thought that a Greece that just voted "no" to austerity, "no" to more painful reforms, and certainly "no" to stooping down to the Troika, would not have so easily succumbed to its 'adversaries'.

Surprise! Because what the latest Greek letter to the ESM proves is that the referendum was rubbish, and that Greece needs Europe more than Europe needs Greece.

Under all that bravado, lies a hypocritical bureaucrat, one that promises one thing but does the opposite. We wonder how the Greek people would react once the full details of the proposal their leaders willingly extended actually encapsulates more of the same old.

More from The WSJ:

"Greece formally requested a three-year bailout from the eurozone’s rescue fund Wednesday and pledged to start implementing some of the overhauls demanded by creditors by early next week, according to a copy of the request seen by The Wall Street Journal. 

Crucially for Greece’s creditors, the letter says the government would start implementing some measures, including on taxation and pensions, by the beginning of next week, though it doesn’t go into details. 

The letter is a first step toward fulfilling a demand by international creditors, who have given Athens until Sunday to come up with tougher measures they would impose in return for desperately needed financing that could keep the country from bankruptcy and even worse economic turmoil.  

The full list of overhauls and budget cuts is what will determine whether the application for a new rescue program will be approved by the rest of the eurozone. The currency union’s leaders said Tuesday they would assess whether it makes sense to start formal negotiations on a bailout program at an emergency summit on Sunday."

Sunday Heralded As Final Frontier For Greece

Sunday now looms as the climax of a five-year battle to contain Greece’s debts, potentially splintering a currency that was meant to be irreversible and throwing more than a half-century of economic and political integration into reverse.

The much anticipated Eurogroup meeting and subsequent summit on Tuesday was uneventful with Greece failing to bring any new offers to the table. Europe's heads of states will reconvene Sunday for another meeting, as a 'last chance' for Greece to convince its creditors that it it at least get short term financing.

It seems like Greece's bank holiday and capital controls, already protracted, will be extended once more as any hopes of an ECB aid have been dashed by the utter lack of urgency on Greece's side. The bank holiday and capital control decree expires Wednesday, and was last extended on Monday for 2 days.

In other news, increasingly more Of Europe's official voices are either explicitly or implicitly implying that they are prepared for a Grexit in some form or another, as we have foretold a long time ago.

More from Reuters & Bloomberg:

"German Chancellor Angela Merkel said on Tuesday she hoped to have sufficient reform proposals from Greece this week to be able to ask the German parliament to approve negotiations on a new long-term aid programme for Athens.

She said all 28 European Union leaders would meet next Sunday to discuss support for Greece provided Prime Minister Alexis Tsipras put forward detailed reform proposals along with a loan request by Thursday that were considered satisfactory.

If the reform list was adequate and Greece took some prior actions to enact first measures, Merkel said she was sure that short-term finance could be provided to help Athens over its immediate funding needs.

“We have a Grexit scenario prepared in detail,” European Commission President Jean-Claude Juncker said, using the shorthand for expulsion from the now 19-nation currency area. “Our inability to find agreement may lead to the bankruptcy of Greece and the insolvency of its banking system,” European Union President Donald Tusk said. “If someone has any illusions that it will not be so, they are naive.”"

Global Markets In Bloodbath

This is quite unprecedented. The degree of risk aversion leads us to believe that fear is absolutely gripping the markets. Whether all these are due to the Greek crisis or the cataclysm in China and Hong Kong remains unclear.

From top left to bottom right: WTI, S&P 500, EuroStoxx 50, Hang Seng, 10-year UST, 10-year bund, copper, USD Index, silver, gold, EURUSD, and GBPJPY.  Charts by Business Of Finance

From top left to bottom right: WTI, S&P 500, EuroStoxx 50, Hang Seng, 10-year UST, 10-year bund, copper, USD Index, silver, gold, EURUSD, and GBPJPY.

Charts by Business Of Finance

What we know is there is there is widespread liquidation of margined positions. Such sharp moves are are indicative that something snapped, and the rest followed through.

Just about all global equity indices are deep in the red. Commodities are slaughtered. "Unsafe" bonds are crashing, "safe" bonds are rocketing. Corporate credit (IG & HY) are tanking irregardless of issuer quality. The euro is being raped, the yen and greenback are massively strong, pound is crucified, aussie and kiwi are down in the toilet.

PIIGS sovereign bonds have been slaughtered this week. Contagion risk anyone?   Chart courtesy of Zero Hedge

PIIGS sovereign bonds have been slaughtered this week. Contagion risk anyone? 

Chart courtesy of Zero Hedge


  • Copper testing a 15-year support level, down more than 15% so far this week. Catalyst is obviously China. Risk aversion fueling sell off too.
  • Crude oil about to test 2015's lows having fallen by more than 11% this week alone. Catalyst remains unclear but probably due to margin calls, Iranian supply ramp fears, and China.
  • Silver down 70¢ (-6%) on Tuesday alone. Extremely heavy volume sales means margin calls and capitulation to raise cash.
  • Hang Seng Index (Hong Kong) is down 10% this week alone, and down 20% from June highs; bear market with China.
  • China stocks are still tail spinning down to ground zero. Chinese 'NASDAQ'  down 40%+ from highs.
  • Bund yields crashing, prices rallying hard on risk aversion flows. 
  • 10-year GGB yields exploded 870bps in 3 days (from 10% to 18.7%)!
  • Rest of PIIGS government bonds crashing as well.

ECB Hints At Reinstating Drachma

The time has truly come. Our pontifications of a Grexit are being echoed by more and more as the days pass, not just pundits and analysts but actual European officials. At the velocity of how things are escalating, it is not far fetched to envisage the reinstatement of the age old Greek Drachma.

Today, ECB Governing Council member Ilmars Rimsevics stated in a Latvian radio interview that he felt it was realistic for Greece to bring in another currency, probably referring to the Drachma. Echoing our sentiments from the get go, Ilmars also stated that Sunday's historical referendum was, in effect, a vote against euro membership; this is contrary to what the Greek government insists - that the referendum was about bailout proposals.

The seeds of exodus have been sown, European ministers are becoming increasingly fed up with a nation that refuses to change from its profligate old ways, a nation that has not admitted it was at major fault when it borrowed beyond its means, and a nation that embraces a hypocritical bureaucrat.

We suspect that more and more center-right figure heads will start to voice their honest opinions in the coming days, adding mass to the impetus for Greece to leave the Eurozone once and for all.

But before readers are misled by this seemingly ominous possibility, we have noted in the past that a Grexit bears a gleaming sliver lining. Going beyond the initial stages of shock and dismay, a Grexit looks to be in the best interests of both Greece and the Eurozone in general, except Germany that is.

We wish to be clear: Leaving the euro is not a policy choice. It is more so when enforced by a referendum, materially reducing Greece’s freedom of actionWe have pointed out that the new Drachma mismatches involved in any attempt to exit the euro would be so toxic for the banking system as to make it not a practical alternative.

It is certainly not a way to avoid default. Rather, an attempt to exit is a way of default, at the expense of making that default systemic and so more costly. We are seeing this right now, with anecdotes of large dislocations and the reality of an isolated banking system.

More from Bloomberg:

"“The Greek nation has been brave and has voted itself out of the euro zone,” Ilmars Rimsevics, governor of the Bank of Latvia and ECB Governing Council member, says in an interview with Latvian state radio. Latvian central bank governor and ECB member Greece has voted itself out of the euro zone after a referendum on Sunday when Greeks overwhelmingly rejected bailout terms proposed by international creditors, Latvia's central bank governor and ECB member.

“We see that one country that has not fulfilled its promises, that has not done the necessary home work, some day they could be outside the euro zone and that means that the euro zone together could be stronger.”"

ECB Fails To Blink, Adjust Greek Haircuts

The ECB's governing council met Monday afternoon in response to Athens' rejection of the EU's bailout proposal. Many hoped that the ECB would increase the ELA to Greek banks but that was not what happened.

Not only was the ELA maintained at 26 June levels (€88.6bn), collateral requirements became stricter with deeper haircuts on collateral posted by Greek banks, the haircut now stands at 45%.

All this was to the chagrin of Greek banks, the Greek government, and its people. The proverbial bank holiday and capital controls, which have already been in place for 7 days, was extended till Wednesday because Greek banks will not be able to meet withdrawal requirements without direct financing from the ECB.

This does not come to us as any surprise as we have been warning of this course of action since last Wednesday. All eyes will now turn to negotiators because any hope of the ECB giving in would rest on the willingness of the Greek government to make concessions on austerity despite its people publicly having voted the opposite.

More form Bloomberg:

"The European Central Bank reckons Greece’s financial system can survive until at least after Tuesday’s summit of European leaders without an injection of extra liquidity, people familiar with the matter said. 

The Governing Council may consider keeping the existing 88.6 billion-euro ($98.1 billion) assistance in place long enough to judge if Greece and its creditors can come any closer to agreeing on the country’s debt financing, the people said. The council is due to hold a conference call at 6 p.m. Frankfurt time on Monday, said the people, asking not to be named as the matter isn’t public. An ECB spokesman declined to comment. 

The ECB may consider evidence of how political discussions are progressing, including a call of euro-region officials taking place before governors are due to talk, one of the people said. The ECB’s bank-supervision arm is scheduled to hold a telephone conference after the Governing Council call, another person said."

The Eurogroup meetings have been schedule for Tuesday afternoon. We note that the IMF remains the most open to negotiations, while most European Finance Ministers and officials still have their arms folded at this point, understandably so.

And the ECB's statement:

"ELA to Greek banks maintained

  • Emergency liquidity assistance maintained at 26 June 2015 level
  • Haircuts on collateral for ELA adjusted
  • Governing Council closely monitoring situation in financial markets

The Governing Council of the European Central Bank decided today to maintain the provision of emergency liquidity assistance (ELA) to Greek banks at the level decided on 26 June 2015 after discussing a proposal from the Bank of Greece.

ELA can only be provided against sufficient collateral.

The financial situation of the Hellenic Republic has an impact on Greek banks since the collateral they use in ELA relies to a significant extent on government-linked assets.

In this context, the Governing Council decided today to adjust the haircuts on collateral accepted by the Bank of Greece for ELA.

The Governing Council is closely monitoring the situation in financial markets and the potential implications for the monetary policy stance and for the balance of risks to price stability in the euro area. The Governing Council is determined to use all the instruments available within its mandate."

Greece's New Finance Minister

After resigning despite his having his wishes materializing like clockwork, Yanis Varoufakis has resigned as Greece's Finance Minister as we reported earlier on Monday.

Varoufakis is described by some as being slightly aggressive and impulsive in nature. There

was once where he caused a row during a Eurogroup summit in April.

Many believe that any negotiations can now be smoother without Varoufakis at the table. Financial markets actually rallied when news of the academic-turned-minister voluntarily resigned. All eyes are on the next person to undertake this crucial role.

The person to fill that shoe comes by the name of Euclid Tsakalotos. He will be officially sworn in as Greece's new Finance Minister on Monday. 

One thing we are curious over, is if Varoufakis had all this planned way before the referendum results were knownWe suspect so, given the relative zen of matters. Regardless, the Greek people can only hope Tsakalotos heralds a new phase of expedited deal brokering, because time is dearly running out.

More from The Telegraph & Bloomberg:

"An Oxford-educated economist, Mr Tsakalotos has much in common with the political elite of Westminster, having been educated at St Paul's school, before going on to read politics, philosophy and economics (PPE) as an undergraduate. He later completed his PhD in economics from Oxford in 1989.

The 55-year-old, who was born in Rotterdam, served as the chief economic spokesman and effective shadow finance minister for the Syriza-led government.

Unlike Mr Varoufakis, Mr Tsakalotos is no party outsider. He has been a member of Syriza for nearly a decade, serving as an MP in the Greek parliament since 2012.

Like many of his fellow Leftist parliamentarians, Mr Tsakalotos's background is as a jobbing Western academic rather than a career politician, having taught at the universities of Kent and Athens.

Described as the "brains behind Syriza's economic policy", he has authored and co-authored six books, the most recent of which seeks to debunk the causes of Greece's economic turmoil.

Published in 2012, Crucible of Resistance: Greece, the Eurozone and the World Economic Crisis, argues that far from being an economic laggard, Greece underwent two decades of neo-liberal modernisation before the onset of the financial crisis in 2008. The result, he argues, was a widening in social inequality and a gaping democratic deficit.

In a refrain that will be familiar to many, the Marxist economist diagnoses Greece's ailments as not simply the consequence of "an economic crisis" but a "crisis of democracy" in the eurozone.

But far from advocating a "Grexit", as some of the more radical elements within Syriza, Mr Tsakalotos thinks Greece should maintain its membership of the euro.

Greek Prime Minister Alexis Tsipras is counting on a change of style, if not necessarily substance, by turning to a longtime ally to seek a new deal with creditors to keep his nation in the euro.

Euclid Tsakalotos was named finance minister to replace Yanis Varoufakis, who resigned Monday after more than five months of fruitless back and forth. An Oxford-educated economist who was deputy foreign minister, Tsakalotos had already begun to take a leading role in debt talks before 

Tsipras’s surprise referendum call brought them to a halt on June 27.

Tsipras is betting that a new, less confrontational face will help him bring German Chancellor Angela Merkel and other European leaders back to the table after Greeks voted to reject further austerity in Sunday’s vote.Varoufakis had vowed to “cut off my arm” rather than sign a bad deal.

“It’s an important symbolic and necessary move,” Famke Krumbmuller, an analyst at political consultancy Eurasia Group, said by e-mail. Creditors “now really need to see the trust restored by a serious and credible commitment from the Greek side to implement reforms,” she said."

In Volatile Markets, Cash Is King

Nothing is certain but uncertainty itself. The environment markets find themselves in today is reminiscent of the days where investors were ambushed by sudden and unanticipated events much like a deer in the headlights.

We, along with many other professionals are urging traders and investors to remain liquid, mobile, and maneuverable. In times such as these, we never know when the something major crops up; like the ECB granting additional liquidity assistance to Greek banks - an event that many see as very unlikely and has therefore not been fully discounted.

Almost every asset class now trades erratically. Even with clearly defined themes such as de-risking or re-risking flows, prices of the main assets (currencies, bonds, equities, and commodities) have not exhibited strong correlations.

There is great value in being overweight on cash than risk losing big on an adverse move. 

Societe Generale's liquidity preference:

"Of the poor use of polling companies to anticipate elections results... So, a NO vote. Greek voters expressed themselves clearly, with a 61% majority in favour of something else, when asked to vote on a solution for a better future for Greece. Again, like with the Scottish referendum and the UK general election, the polling companies’ predictions have proved wrong and, until the last minute, markets continued to believe the vote would be extremely close based on the latest surveys. If listed anywhere, one should sell polling companies as they are of little use – something to remember for the UK referendum in a while.

A NO vote, but for what exactly?

Implode, or ask for a new round of negotiations? If an overdue Greek debt restructuring happens, it must come alongside another round of structural reforms, which could help ensure the sustainability of future debt repayments. Mrs Lagarde from the IMF has suggested doubling the duration of the sovereign debt, already one of the longest in the world. The critical date is the 20 July deadline for debt repayment to the ECB: policy makers will need to have found a solution by then otherwise Greek risk will become substantially higher.

Eurozone assets are obviously the most exposed– we are in a risk-off period, so we reiterate the need to have cash in portfolios. The US dollar and US Treasuries are the safest assets in our view.Markets were expecting a Yes vote, so they will be disappointed. As we wrote last week, we don't believe they will panic as policy makers have learned from past errors and continue to show the strong coordination needed to respond to what is, without doubt, a new chapter in the European crisis.

For now, we confirm our view of last week that markets will stay volatile for a while and that one must be protected from this unknown."

Russia Mocks Germans After "Oxi"

Mother Russia, its people, and Vladimir Putin are all not fans of the European project and for good reasons. Countless financial and trade sanctions were imposed on the Russian economy following the fallout in the battle for eastern Ukraine. These sanctions have damaged Russia's global presence and placed a huge strain on its economy.

Those sanctions collectively pushed Russia in to a brief but extremely painful economic and financial crisis, something we have discussed as length on these pages previously. The ruble was in free fall, Russia economy spiraling into a tail spin, and major states were plunged into states of emergencies. Cascading oil prices did not help.

For all of that, Russia hates Europe, and Europe detests Russia. It is a tit-for-tat kind of thing, and it seems to be everlasting. So when Russia got a chance to mock Europe for its incompetence in dealing with the Greek crisis, it did so with reckless abandon.

Recall that Tsipras was in talks with Russian leaders in St. Petersburg earlier in June. While Russia has yet to extend formal help to Greece, whether direct financial aid or indirect strategic partnerships and cooperations, Russia would rather take Greece's side than to stay quiet about the mess in Europe. The Russia just cannot help it.

The mockery in its full glory, from Russia's Sputnik:

"German Chancellor Angela Merkel was adamant she would not be the German leader that presided over a Greek exit from the Euro that would plunge the European dream into crisis. She may not yet have failed, but she is damaged.

After the Greeks voted against accepting the latest demands from its creditors, Merkel is facing her worst nightmare: a possible Greek exit from the euro, a possible exit from the EU completely and loss of confidence in the currency itself.  

For months, Merkel has been anguishing over how to tackle the Greek problem. After five years of bailouts, the problem is nowhere near fixed and – if anything – worse. Yet she may have herself to blame for vacillating over the issue.  

When the Greek crisis hit in 2010, Merkel insisted on bringing in the International Monetary Fund (IMF) as part of the troika that included the Eurozone states and the European Central Bank (ECB). There was no clear lead authority. Merkel did this against the advice of her finance minister Wolfgang Schäuble, who has long argued that the EU should solve its own problems. This was the first mistake. 

As a result, the three institutions put together a scratch package of bailouts and demands that have created chaos. Traditionally, in previous country bailouts, the IMF would have been the lead agency. The troika have pursued a series of mini bailouts with conflicting demands, when – many argue – a managed exit from the euro would have been the better course of action.  

Merkel’s next mistake was a cultural one. When she came to power, Germany was in the grip of economic crisis: high unemployment and a tax and welfare regime that was in need of reform. She set about doing this and her austerity package worked 

When Greece began to collapse, due to its appallingly low rate of tax collection and its totally unsustainable welfare and pensions system, Merkel pronounced that her German reform methods be inflicted on the rather laid back Greeks, who had been enjoying the largesse of Euro membership during the good times. Culturally, to try and turn round the Greek tax and pensions system within five years was to hard a hill to climb.

One the one hand, she was demanding a stricter package of reforms, based on her own Germanic experience, which would inevitably cripple Greece. While on the other hand, she was determined not to let Greece leave the euro and damage the great European dream.  

Half of her was Merkel — the pragmatic economist, the other was Merkel — the great European. She has now discovered, in her vacillation, she has not shown the leadership expected of the most powerful woman in the European Union."

Greek Finance Minister Quits

Greek Finance Minister Yanis Varoufakis resigned late Monday morning; new minister to replace him.

We have lost all respect for both Mr. Tsipras and Mr. Yanis.

Yanis Varoufakis on his resignation, speaking like a fallen solider still thinking he's gladiator:

"The referendum of 5th July will stay in history as a unique moment when a small European nation rose up against debt-bondage.

Like all struggles for democratic rights, so too this historic rejection of the Eurogroup’s 25th June ultimatum comes with a large price tag attached. It is, therefore, essential that the great capital bestowed upon our government by the splendid NO vote be invested immediately into a YES to a proper resolution – to an agreement that involves debt restructuring, less austerity, redistribution in favour of the needy, and real reforms.

Soon after the announcement of the referendum results, I was made aware of a certain preference by some Eurogroup participants, and assorted ‘partners’, for my… ‘absence’ from its meetings; an idea that the Prime Minister judged to be potentially helpful to him in reaching an agreement. For this reason I am leaving the Ministry of Finance today.

I consider it my duty to help Alexis Tsipras exploit, as he sees fit, the capital that the Greek people granted us through yesterday’s referendum.

And I shall wear the creditors’ loathing with pride. We of the Left know how to act collectively with no care for the privileges of office. I shall support fully Prime Minister Tsipras, the new Minister of Finance, and our government.

The superhuman effort to honour the brave people of Greece, and the famous OXI (NO) that they granted to democrats the world over, is just beginning."

More updates as they come...

Compliation Of Headline Bulletins

In no chronological order:

  • Finnish Parliament Committee Opposes Greek Aid Talks
  • Greek proposals don’t warrant negotiations on new bailout, public broadcaster YLE says, citing unnamed sources. 
  • Finnish parliament’s Grand Committee adopted position regarding Greek bailout request on Saturday; stance won’t be published ahead of Eurogroup debate in Brussels, state secretary Olli-Pekka Heinonen told local media
  • MP Paavo Arhinmaki, head of Left Alliance, told Helsingin Sanomat newspaper he left dissenting opinion at Grand Committee meeting; said Greek govt proposals “could be basis to start talks”
  • The idea of giving Greece a sabbatical from the euro area cannot be taken seriously, an EU official says in Brussels.
  • It is legally not feasible, makes no economic sense and is not in line with political reality, official says
  • It is time now for a serious discussion and solutions, not for reactivating academic, non-practical ideas, official says
  • Official says euro suspension is old idea floated by German academic Hans-Werner Sinn
  • 1014 - European Commission President Jean-Claude Juncker will meet members of Greece's opposition parties on Thursday and Friday in Brussels as all sides seek a weekend deal to avert a Greek bankruptcy, a Commission spokesman says.
  • 1009 - The head of the European Council, Donald Tusk, says the EU's national parliaments have to be persuaded to vote in favour of helping Greece if European leaders reach a good agreement on Sunday. Tusk says a deal on debt should be part of the agreement.
  • 1005 - Bulgarian Economy Minister Bozhidar Lukarski is quoted as saying Greek-owned banks in the Balkan country are "under controls" to prevent funds being sent to Greece. More than a fifth of Bulgaria's banks are Greek-owned.
  • 0944 - Irish Finance Minister Michael Noonan says he sees a better than 50 percent chance of Greece reaching a deal with its creditors by a weekend deadline following a "distinct change of mood" in recent days.
  • 0852 - Eurogroup chief Jeroen Dijsselbloem has no plans to withdraw his re-election bid, his spokesman says. Dijsselbloem, who is also the Dutch finance minister, is seeking another 2.5 year term in a race against Spaniard Luis de Guindos. He represents European creditors in the negotiations with Greece.
  • 0830 - The chief executive officer of Greece's natural gas company, DEPA, says the utility can guarantee the unobstructed supply of gas supplies in the country.
  • 0745 - Greek Energy Minister Panagiotis Lafazanis, leader of the far-left flank of the ruling Syriza party, says he expects an aid deal with creditors "soon" but he opposes a third bailout with tough austerity measures that would stifle growth.
  • 1015 - Technical experts will review Greece's request for an ESM loan on Wednesday but there will be no conference call among euro zone ministers, a spokesman says
  • 0956 - Russia is not in a position to help solve the Greek debt crisis, and the EU should resolve it on its on, the chief executive of Russia's second largest bank VTB says
  • 0947 - Greece lodges formal request for bailout loan with the euro zone's special support fund, a spokesman for the European Stability Mechanism says
  • 0920 - European Central Bank Governing Council member Ewald Nowotny says hard to imagine that ECB council could increase emergency liquidity for Greece
  • 0904 - Bank of Italy and ECB member Ignazio Visco says ECB will will do what it can to contain financial and economic consequences of Greek crisis.
  • 0903 - Greece successfully rolls over T-bills to refinance a maturing six-month issue
  • 0820 - Greek Prime Minister Alexis Tsipras tells European Parliament says will present details proposal to EU in next 2-3 days.
  • 0812 - Greek Prime Minister Alexis Tsipras tells European Parliament the referendum gave him a mandate to find a socially just and economically sustainable solution to end the crisis.
  • 0747 - EU Economics Commissioner Pierre Moscovici tells BBC radio an agreement between Greece and its euro zone partners is still possible.
  • 2347 - Euro zone members give Greece until the end of the week to come up with a proposal for sweeping reforms in return for loans
  • 2135 - Merkel says she hopes to have sufficient reform proposals from Greece this week to be able to ask the German parliament to approve negotiations on a new long-term aid programme for Athens. If the reform list was adequate and Greece took some prior actions to enact first measures, she says she is sure that short-term finance can be provided to help Athens over its immediate funding needs.
  • 2030 - Austria's finance minister says Greece's request for financial aid from the European Stability Mechanism (ESM) is so far very vague.
  • 2020 - Summit over; Italian Prime Minister Matteo Renzi says a final meeting on Greece, involving all 28 EU leaders, will take place on Sunday.
  • 1932 - Greek banks could start to run out of cash over the next two days if creditors do not agree to a new aid deal, two sources familiar with the country's financial system say.
  • Schaeuble Says He’s Waiting ‘With Excitement’ For Greece’s Offer, asked if Greece can keep Euro says, must ask Greek government.
  • Germany's Gabriel says elite in Greece has plundered country for years, Europe just watched it happen
  • Finnish FinMin Stubb says - Euro Zone not looking at bridge finance for Greece 'at this stage' 
  • Belgian Finance Minister Says Greek Banking System in ‘Freefall’
  • Dombrovskis Says Grexit Can’t Be Excluded If No Credible Plan
  • Slovak finance minister says nominal debt relief for Greece impossible
  • Moscovici Says We need to prepare future with Greece in the eurozone and to avoid Grexit
  • 1113 - US stock index futures pare gains after Finnish finance minister says Eurozone not looking at bridge finance for Greece "at this stage"
  • 1058 - German Finance Minister Wolfgang Schaeuble says debt writedowns are not possible under bailout rules.
  • 1051 - Russian Economy Minister Alexei Ulyukayev says Greece has not asked Moscow for financial help, although the two have discussed joint investments.
  • 1024 - Proposals that Greece will present on Tuesday do not differ significantly from the reform plans that Greeks rejected in a referendum on Sunday, Germany's Sueddeutsche Zeitung says, without citing a source.
  • 1021 - Fifty percent of French people want Greece to leave the euro zone, according a survey by pollster Odoxa in daily Le Parisien.
  • 0952 - Europe could talk about reducing Greece's debt burden if the Greek government shows it is implementing economic reforms, German Vice Chancellor Sigmar Gabriel tells Stern magazine.
  • 0904 - European Parliament head Martin Schulz says he is in favour of Greece staying in the euro zone, having said on Sunday it might have to introduce another currency if its voters rejected bailout terms.
  • 0800 - The Athens stock exchange will remain shut until Wednesday, the Greek Capital Markets Commission said, in line with the closure of the country's banks.
  • 0711 - European Commission President Jean-Claude Juncker says the ball is in Greece's court to come forward with proposals to resolve its debt crisis.
  • 0711 - A unified negotiating stance from Athens should ensure that Tuesday's euro zone summit makes more progress than the last round of Greek debt talks, Germany's EU commissioner Guenther Oettinger says.
  • 0627 - Euro zone governments could consider writing off some of Greece's debt if Athens commits to a package of reforms, Luxembourg's Finance Minister Pierre Gramegna says.
  • 2055 - European Central Bank's Governing Council member Ewald Nowotny says bridge funding is a possibility for Greece while a new bailout programme is being negotiated.
  • 1958 - Tsipras spoke to ECB told Mario Draghi there is an immediate need to lift capital controls, a government official says.
  • 1947 - International Monetary Fund chief Christine Lagarde told Tsipras the institution cannot provide funds to countries that have missed payments to it, an IMF representative says.
  • 1927 - Spanish Prime Minister Mariano Rajoy say negotiations with Greece must continue but be concluded quickly.
  • 1912 - The ECB demanded an increase of around 10 percent on some Greek bank collateral offered for emergency funding, although the overall impact of the change is set to be limited, a Greek banking source says.
  • 1822 - Euro zone countries are open to discussing a new programme for Greece, Italy's economy minister says.
  • 1745 - The European Central Bank says it will keep emergency liquidity assistance to Greek banks steady and says it will use all instruments in its mandate to preserve financial stability.
  • 1729 - German Chancellor Angela Merkel and French President Francois Hollande, meeting in Paris, urge Greece to quickly make "serious" proposals to reach a cash-for-reform deal.
  • 1714 - The White House says Greek and European leaders should seek a compromise that allows Greece to remain in the euro zone.
  • 1115 - The European Central Bank's Governing Council will discuss on Monday the provision of emergency funding to Greece's banks, two sources say.
  • 1112 - Italian Prime Minister Matteo Renzi says euro zone meetings scheduled slated for Tuesday must resolve Greece's debt crisis once and for all.
  • 1055 - Latest developments have not made it easier for the European Central Bank to change its stance on emergency funding it has granted to Greek banks, ECB Governing Council member Ewald Nowotny says.
  • 1048 - French President Francois Hollande's office denies remarks from a Greek source that he has spoken by phone on Monday with Greek Prime Minister Tsipras.
  • 1030 - Tsipras will speak by phone on Monday with Russian President Vladimir Putin, a Greek government official says.
  • 1013 - Spain's Economy Minister Luis de Guindos says Greece should remain part of the euro zone and Madrid is open to negotiating a third bailout.
  • 0948 - Germany's government spokesman says the door for negotiations with Greece is open, but conditions for such talks are not yet met.
  • 0928 - Euro zone finance ministers say they expect to hear new proposals for credit from Greece when they meet on Tuesday.
  • 0926 - The head of Germany's BDB banking association says the immediate consequences of any Greek default should be manageable for banks in other euro zone states.
  • 0916 - Russia hopes Greece will quickly reach a compromise deal with creditors, and questions regarding financial help for Greece should be addressed to Athens, a Kremlin spokesman says.
  • 0906 - Jeroen Dijsselbloem, head of the Eurogroup of finance ministers, says the ministers will meet 1100 on Tuesday.
  • 0903 - The European Central Bank's Christian Noyer says the ECB cannot restructure the Greek debt it holds as that would amount to financing a government, which it is banned from doing.
  • 0836 - European Commission's vice president for the euro, Valdis Dombrovskis, will give a news conference at 1000 on the impact of the Greek referendum.
  • 0812 - U.S.-listed shares of National Bank of Greece are down 15 percent in pre-market trading.
  • 0811 - Italy's top official for European Union affairs calls for Greece and its creditors to resume negotiations with an increased willingness to compromise.
  • 0728 - Greece's chief negotiator in bailout talks, Euclid Tsakalotos, is the top candidate to be finance minister after the resignation of Yanis Varoufakis, a government official says.