Yesterday Tsipras uttered two stunners during his interview on national TV: one was the admission that after today Greece will no longer be a sovereign, democratic state but will instead be controlled by the Troika.
- GREEK PM TSIPRAS SAYS LENDERS GIVE A MESSAGE THAT IN COUNTRIES UNDER A BAILOUT THERE IS NO POINT IN HOLDING ELECTIONS
This is a problem for the Greeks: if they allow their government to hand over Greek sovereignty to Germany for at least the next three years (in reality much less since the next and final Greek default will be imminent for the nation whose banks will also be controlled by the ECB) they will have nobody to blame but themselves.
But it was his other statement that also managed to stun Germany when he said:
- I SIGNED I DEAL I DO NOT BELIEVE IN BUT I’M WILLING TO IMPLEMENT AND WILL ASSUME RESPONSIBILITIES
It wasn’t just that: according to Bloomberg Tsipras also said he only agreed to the deal with “a knife at my neck, wo which we said that we expect “Schauble to burst at few capillaries” after reading this.
Sure enough, just a few hours later the response did come, only not from Schauble who now has more pressing matters to attend to, but one of his subordinated. According to Bloomberg, comments by Greek Prime Minister Alexis Tsipras on Tuesday evening undermined trust that Greek govt will take ownership of economic adjustments in new bailout program, German Deputy Finance Minister Jens Spahn says on ARD public television. Spahn is a member of Chancellor Angela Merkel’s CDU party.
“The decisive point for today is that the Greek government, the Greek parliament show that they back these agreements, that they’re taking unilateral steps upfront, that they want to rebuild confidence; then one can talk about all follow-up measures”: Spahn
“What the Greek prime minister did on Greek television yesterday irritates me. It’s not just about cutting back. It’s about that this country needs an idea of how it will grow again economically, how it wants to be successful, how it wants to change structures, how it wants to gain trust.”
But that’s the whole point: Greece could care less about trust – it just wants some “deal” so the ECB raises the ELA so people can withdraw some more cash from locked bank accounts. Everything else is noise.
For now Spahn does not get it: “And when someone says “I actually don’t really support what I’m doing now“, then I think that’s a problem — this doesn’t necessarily create trust.”
He will in a few months, or maybe less, because not only is the shape of the full Greek bailout in doubt, so is the modest €7 billion bridge loan that is supposed to “carry” Greece for the next few weeks (recall Greece needs €22 billion in funds just through August) and whose proceeds will be used entirely just to repay the ECB and IMF.
Here is the reason again from Bloomberg (and common sense):
European officials were at a loss over how to put together a bridging loan that will keep Greece from defaulting on the European Central Bank and its own citizens next week.
One person familiar with the matter said that Greece’s finances seem to get worse with every meeting and governments are now reluctant to help out with even short-term funds.
“The Greek government has not received a bridge-financing program yet because some try to block this,” Tsipras said in an interview with ERT-TV before a parliamentary vote on the deal on Wednesday. “My priority is to make sure that the choice I made the other day, with a knife at my neck, is finalized.”
In other words, in a few hours Greece will vote to hand over its sovereignty to Europe (and mostly Germany) even as the same Europe is still unsure how to fund a €7 Greek bridge loan that will barely last the country for one week, let alone the next 3 years.
As for the math, with every passing day that Greece does not have a deal, even an interim one, its funding needs increase by about €2 billion. Here is the math as laid out by the IMF yesterday:
The preliminary (mutually agreed) assessment of the three institutions is that total financing need through end-2018 will increase to Euro 85 billion, or some Euro 25 billion above what was projected in the IMF’s published DSA only two weeks ago, largely on account of the estimated need for a larger banking sector backstop for Euro 25 billion.
So two weeks of capital controls deteriorated the banking situation so much, Greece now needs an additional €25 billion in funds to keep both the state and its banks alive, which amounts to a little over €2 billion per day. Assuming all of this is from the ongoing deterioration of the banking balance sheets (as capital controls tend to result in a surge in NPLs from 40% to almost 100% since nobody has any money to pay down any debt obligations), it means that Greek NPLs are deteriorating at the pace of 1% per day.
This also means that the total Greek bailout funding needs increase with every passing day that Europe is unable to decide on just how to bail out Greece, which in turn means capital controls continue indefinitely. And perhaps most importantly, since Greek banks simply will not open if this results in just another bank run surge which will soak up whatever deposits are available for withdrawal, capital controls will continue, leading to ongoing deteriorating in bank balance sheets until they can deteriorate no more and NPLs hit 100%. At that point Greece will officially have no banking system left, and will become, no matter how the government votes, a full bailed out vassal state of Europe.
One can see why Greece’s new overlord, Germany, which no longer wants to be associated with the insolvent nation, is “irritated.”
And Greece, since you are literally about to sell yourself for the privilege of repaying your creditors (the same creditors who will shortly impose the dreaded deposit haircuts you hope to avoid by selling out) you should be more careful: without sovereignty you want to keep your vassal rulers as happy as possible…