STOCK MARKET WATCH -- Wednesday, 13 May 2015

[Demeter]

1. Greece Authorizes €750 Million Payment to IMF Despite Failing to Get Concession Sought

http://www.nakedcapitalism.com/2015/05/greece-authorizes-e750-million-payment-to-imf-despite-failing-to-get-concession-sought.html?utm_source=feedburner&utm_medium=email&utm_campaign=Feed%3A+NakedCapitalism+%28naked+capitalism%29

Today, Greece blinked. Despite leaks that suggested the government had decided to take a tougher line with the Eurogroup and was prepared to make a voluntary default on its €750 million payment to the IMF due tomorrow, Greek officials relented and told the central bank to send the funds onward. However, as we discuss at the end of the post, based on a tweet after we launched our post, that Greece might have gotten some eyewash.

We had indicated in our post earlier today that Greece may have made a tactical error, in that by saying that it had enough funds available, it was making clear that any failure to pay was elective. The reason is that the ruling coalition is getting close to the point of not having sufficient cash to meet salary and pension payments.

And even if Greece manages to make its end of May pension and salary payments in full, it’s hard to see how the government gets through June, when it has €1.5 billion coming due to the IMF with the first payment, €300 million, falling on June 5. If forced to resort to paying its citizens in funny money, it runs the dual risk of deepening the contraction and denting domestic support. However, Greece, like the Eurozone, has made an art form of pulling rabbits out of hats.

Nothing seems to have changed today, save exposing that the bluster in the Greek media and to friendly foreign reporters like Ambrose Evans-Pritchard, was not matched by action. Perhaps that reflects a pattern that we’ve seen before, that the messaging to the ruling coalition’s domestic audience is far more aggressive than what the government is prepared to do in practice. We’ve seen more than once how Greek negotiators, including Tsipras, will raise issues with creditors, then take a conciliatory line, but later make more defiant statements at home, seemingly walking back the position taken with counterparties.

According to the Financial Times report:

Greece failed to get the statement from the Eurogroup that it wanted, to allow the ECB to give it more room to borrow. Since it is to the negotiating advantage pthe creditors is to keep Greece in the sweatbox, it seemed unlikely that they’d relent. That is how things played out today:

Some members of the governing hard-left Syriza party had pushed ministers to withhold the payment until eurozone finance ministers meeting in Brussels agreed to endorse progress made by bailout negotiatorsin recent days.

Athens has lobbied furiously for such a statement, which officials believe would allow the European Central Bank to lift the ceiling on its issuance of short-term debt, which would provide more breathing room for the cash-strapped government…

Ministers had only a perfunctory debate over the Greek programme, and issued a statement that was far more lukewarm than Athens had hoped — welcoming the improved atmosphere in the talks but warning that “more time and effort are needed to bridge the gaps”.

Such language is not expected to give the ECB the leeway it would need to lift its restrictions on Athens’ ability to sell treasury bills, which are almost exclusively purchased by Greek banks.

If this account is correct, this explains the veering back and forth in stories out of Greece regarding the government’s plans. As we’ve pointed out, the ruling coalition is boxed in by Syriza’s left wing, which holds 1/3 of Syriza’s seats and is thus able to bring down the government. But that also means that leaks about government plans or even statements by officials (since Greece’s ministers have a habit of not singing from the same hymnal) need to be calibrated, and that’s well nigh impossible if the story is based on anonymous sources. Tsipras himself is a moderate, as is Varoufakis, and by all accounts Tsipras is still very much in charge of final decisions...MORE

I'M GLAD I'M NOT GREEK...I DON'T THINK I COULD STAND SUCH A GOVERNMENT. HARD TO BELIEVE THERE'S ONE WORSE THAN OUR OWN.