Reports are emerging that a secret report by the EU / ECB / IMF troika on Greece will show that even if the most optimistic scenarios are met, Greece will not achieve the desired debt ratio, nor get even close. This may be the trigger for a bankruptcy announcement in Athens.
In addition, the bond swap made by the ECB might not be a preparation for the second bailout and the PSI, but rather for a bankruptcy announcement. Plan B is turning into Plan A on both sides of the Atlantic. Updates.
Secret Troika Report
The Greek government has approved even more budget cuts in order to fill the funding gap found by the troika. The small amount of 325 million euros does not begin to describe a bigger hole.
The Telegraph reports that the sense of the endgame has been fueled by this report:
It found that even if Greece implemented all the austerity measures expected of it, and if it achieves highly optimistic economic growth targets, it will still fall short of what is needed, with debt likely to total 129 per cent of GDP in 2020.
Projections for 8 years from now can be arranged in any form the writers want it to be. If the troika wants Greece out of the euro-zone, the debt-to-GDP ratio for 2020 could be set to 150% or 200% in the optimistic scenario. It’s not hard facts we’re talking about, but future estimations.
When the “secret” report will come out to the open, Greece will be pressured to announce official bankruptcy, as no other choice are left.
A Greek exit of the euro may not be so bad for Greece and for the euro-zone in the long run.
And are the Germans, the ECB and the IMF moving for a Greek default? More evidence is coming out that plans are being made with cooperation on both sides of the Atlantic.
“Angela Merkel’s public position is a necessary illusion. The pressure from Frankfurt to get onto the task of preparing for default has been augmented by Washington’s sense of urgency. I wouldn’t call it close cooperation, but Schauble, Draghi and now Monti are fully aware of it. Mario Monti in particular has, I understand, welcomed it.
It’s also a US interest to keep things under control, especially as the US funds the IMF. The IMF has already said it will contribute less to the second Greek bailout. Perhaps they will contribute nothing, as there will be no second bailout.
The European Central Bank was very successful with the LTRO: banks in Europe now have additional 489 billion euros from the central bank. Another operation is planned for February 29th, and could be brought forward.
Banks are now prepared for a Greek default.
The move by the ECB to swap its bonds for ones that would be immune to Collectiva Action Clauses (CAC), meaning no danger of receiving a haircut was seen as a preparation for the PSI deal.
With all the other events piling up, including the lower contribution of the IMF, this seems as a preparation for a Greek default as well.