Greek Default: The Troika Prepares to Engage Reverse Gear

By John Ward

The Troika continues to avoid using real money, and damns Athens with leaks

Wolfgang Schauble spent most of the weekend muttering about Greeks not fulfilling the bailout clauses, until Angela Merkel requested that he halt’s Maul, after which Wolfie  – who really can’t bear to say anything nice about Greece – popped up again yesterday to say that, thanks to the Troika’s immaculate budgetary planning, Greece would achieve the 2020 debt/GDP ratio, and possibly beat it.

Last week, I posted to suggest that the planned defaulters would devote this week to suggesting that Greece wasn’t playing the game, and thus should not get the rest of this second bailout bonanza of 130 bn euros. Yesterday I pointed out (to the apathy of the MSM) that it was quite likely Athens wouldn’t get any of it, as the spondooliks behing handed over weren’t from the bailout EFSF anyway: they’d been issued via a bit of smoke-and-mirrors bond creation by SuperMario of the ECB. I do believe that these two things may well be linked, and overnight there’s been more evidence of the ‘excuses for backing out’ beginning to surface from the Troika and Brussels.

Herr Schauble having assured us that 2020 was looking tip-top, a report was leaked to Reuters yesterday late afternoon GMT showing that ‘current projections reveal large fiscal gaps in 2013-14′. As the report was producedjointly by the European Union (EU), the European Central Bank (ECB) and the International Monetary Fund (IMF), it quickly becomes clear why they leaked it to one of the biggest news agencies in the world. Louise Armitstead picked up the story last night (it’s a very good piece), pointing out how the Report also says ‘The recovery previously announced for next year will be further delayed with, at best, a stagnation of activity in 2013′. I love that word ‘announced’, don’t you? Sort of smacks of time-dilation by the all-powerful Sprouts: ‘we announce, and lo – it happens.’ Or not.

Now the pure maths students among you will have noticed that 2013 is one year away, not eight. It is in fact next year, the one that starts in nine months from now. Do we, um, perhaps think that what happens then might f**k up the 2020 outlook? We should all watch for several prominent figures now starting to ask that question – and others. For example, “Why are we giving Venizelos the money if Greece is going down a deep well with no water at the bottom next year?”

Interestingly, the Troika have thus far chosen to ignore the $107bn of additional liability brought up by ISDA. Methinks they might be keeping it in reserve, for shocked discovery at a later date. In the meantime, I’d imagine the next salvo will concern Things that the Greeks Haven’t Done, how very dare they. Reuters, for example, notes that the Report hints darkly, ‘The continuation of the very comprehensive international financial assistance can only be expected if policy implementation improves‘. Those are my italics, but I’m not entirely sure they’re necessary. Keep an eye out for more brickbats this week and next.

Regualr Sloggers already know what my point is: these people are putting together alibis, and assembling a ‘case’ to justify pulling the plug some time soon. And those who suggest this analysis is awry – because money is being handed over – should realise that not a single cent of new or real money has yet been given to Greece. We’re now told that 40 bn euros of it will be money withheld from Bailout One; and for people who were awake yesterday, the rest of it was funny-non-cash-bond surreal stuff issued last week by Mario Draghi while Jens Weidmann wasn’t looking.

The Troika is ensuring that Greece’s survival of the March 20th default possibility costs them nothing….and getting its soundbites in a row for when Greece makes an unceremonious Euro-exit. Thus in what they hope will seem like the final analysis, they’ll be able to say, “Look – we did our best – we invested money to save them, but sadly nothing could.”

Will it be March 23rd? I think that was a plan at one point; for all I know further on that one, it might still be. All I’m doing is reading the runes…and the signs are there. However, others are now suggesting a limp along until the long Easter Bank Holiday – an even longer break in which to close all Greek banks than the three-day weekend due to follow March 23rd. The key point here is not to pick dates and to place bets: it is to get over the fact that a ‘surprise’ default carried out while everyone’s away (and handled with apparent efficiency) might do a lot to calm the markets. I don’t think it would, and I think it would still turn messy in the end. I also think that at least one other peripheral might also start thinking about pulling the same stunt….only without involving Brussels. Spain, for example. For all kinds of bad debt reasons involving the ECB, that would be the beginning of the end for the eurozone.

Angela Merkel, meanwhile, has been largely quiet and far away. According to the Telegraph’s punctuation department, she went to Afghanistan yesterday and killed 16 villagers. She didn’t actually, but it reads like that. She went because she’s not sure Germany should be pulling out. Is the Leaden Lady looking for her Falklands here? We have no way of knowing, but anyway after that she legged it with all speed to Goldman’s Italian office, there to meet Mario Monti and go into metaphor warp-drive.

“We’ve come a good way along the mountain path, but we’re not completely over the mountain,” Merkel told the Italian media, “I suspect that in the next few years there will continue to be new mountains — there won’t be a celebratory event in which we say we’re over the mountain and now we can sit among the trees and say that we’ve done it.”

Ve luff to go a wanderung, along ze mountain track val-de-ree-val-der-rah. Given the debts involved here, I’m not sure mountains were a wise choice for the Chancellor’s allusions to future tribulations, but unfortunately blood, toil, tears and sweat had already gone. Asked about boosting the region’s crisis-fighting war chest – is it a firewall? Is it a bazooka? No, it’s a war-chest – Merkel declined to comment. I understand, however, that Signor Monti gave her another ear-bashing about it. As Wolfie Strangelove has already explained, Berlin will remain firm it its opposition to firewall-boosting until the end of March. Whatever can he have planned for before then?

Stay tuned.

Related: The world’s cheapest bailout goes ahead

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