The Corner

Edging Towards Grexit?

Writing in the Daily Telegraph, the never-entirely relaxed Ambrose Evans-Pritchard :

Greece is drawing up drastic plans to nationalise the country’s banking system and introduce a parallel currency to pay bills unless the eurozone takes steps to defuse the simmering crisis and soften its demands.

Sources close to the ruling Syriza party said the government is determined to keep public services running and pay pensions as funds run critically low. It may be forced to take the unprecedented step of missing a payment to the International Monetary Fund next week.

Greece no longer has enough money to pay the IMF €458m on April 9 and also to cover payments for salaries and social security on April 14, unless the eurozone agrees to disburse the next tranche of its interim bail-out deal in time.

“We are a Left-wing government. If we have to choose between a default to the IMF or a default to our own people, it is a no-brainer,” said a senior official.

“We may have to go into a silent arrears process with the IMF. This will cause a furore in the markets and means that the clock will start to tick much faster,” the source told The Telegraph.

Syriza’s radical-Left government would prefer to confine its dispute to EU creditors but the first payments to come due are owed to the IMF. While the party does not wish to trigger a formal IMF default, it increasingly views a slide into pre-default arrears as a necessary escalation in its showdown with Brussels and Frankfurt.

The April 9 deadline is real enough, but somehow I suspect that Greece will find the money:

Reuters:

Greece will pay a loan tranche due on April 9 to the International Monetary Fund on time, its deputy finance minister said on Friday, seeking to quell fears of default after a flurry of contradictory statements on the issue in recent days.

Greece is fast running out of cash and its euro zone and International Monetary Fund lenders have frozen bailout aid until the new leftist-led government reaches agreement on a package of reforms.

That prompted the interior minister to suggest this week that Athens would prioritize wages and pensions over the roughly 450 million euro ($489 million) payment to the IMF, though the government denied that was its stance.

Euro zone officials then said Greece told them it will run out of money on April 9, which the finance ministry denied saying….

Athens has not received bailout funds since August last year and has resorted to last-ditch measures such as borrowing from state entities via repo transactions to tide it through the cash crunch….

German Chancellor Angela Merkel has said Greece would receive fresh funds only once its creditors approve the comprehensive list of reforms Athens has presented.

No developed country has ever defaulted to the IMF. Talk by Greece that it might is part of the less that subtle pressure that Syriza is applying to its creditors, part of an elaborate dance that has been going on for a while.

As is this:

(Reuters) – Russian President Vladimir Putin and Greek Prime Minister Alexis Tsipras plan to discuss economic ties and the European Union’s sanctions against Moscow when they meet for talks next week, a Kremlin spokesman said on Friday.

Russia wants the EU to lift the sanctions imposed over Moscow’s role in the turmoil in Ukraine and hopes to get support from some EU member states, notably Hungary and Greece.

The Kremlin spokesman, Dmitry Peskov, said it was too early to talk about any possibility of Moscow providing financial help to the cash-strapped Greece before the talks….

Putin and Tsipras will meet in Moscow on Apr.8. It will be Tsipras’ first visit to the Russian capital after his leftist Syriza party swept to victory in a snap election in January.

Tsipras visited Moscow in May, 2014, and attended a conference on ties between Russia and Greece, as well as being received by senior Russian state officials. Five other members of the Greek delegation now also hold senior government roles in Athens.

Ambrose Evans-Pritchard:

Syriza is still hoping that German Chancellor Angela Merkel can defuse the crisis, deeming her a “real ally”, but fear that she will be confronted with a fait accompli beyond even her control.

Syriza is right on the first count. Merkel has repeatedly shown herself to be a chancellor who puts the interest of the EU’s ‘ever closer union’ ahead of those of her own country. More than that, she is a very cautious woman, anxious about what the wider consequences of Grexit might be (not without reason; nobody can really be sure what they might be). She will do what she can to avert it. 

All the same, she has to pay attention to the growing discontent to her right (and not just her right, incidentally).

Financial Times:

Angela Merkel received a sharp reminder of the need to maintain a firm line in bailout talks with Greece after a prominent opponent of the German chancellor’s eurozone rescue policies quit his seat in the Bundestag on Tuesday.

Peter Gauweiler, a leading eurosceptic and member of Ms Merkel’s conservative alliance, said he had felt pressured to vote in favour of bailout programmes that he opposed.

Mr Gauweiler represents a deep vein of German public opinion that has become increasingly hostile to the Greek bailout. He was one of 29 members of Ms Merkel’s Christian Democrats and its sister party, the Christian Social Union, of which he was deputy chairman, who last month voted against extending the bailout by four months.

Though the extension was passed by a wide majority of 541 out of 586, it marked the biggest rebellion to date over a bailout, and signalled the dangerous footing for the chancellor.

…Ms Merkel is also under pressure from anti-euro Alternative für Deutschland party, which has won over disaffected CDU voters.

“This resignation indicates that Merkel is very constrained, not simply from the AfD, but also within her own party,” said Mujtaba Rahman, analyst at the Eurasia Group risk consultancy. “It suggests Merkel will need to maintain a hard line, which means no money without material reform from Greece on pensions and labour.”

A poll published this month by broadcaster ZDF showed 52 per cent of Germans now favour a Greek exit from the single currency, up from 41 per cent in February.

52 percent of Germans are right.

But Merkel, in the end, will almost certainly still fold. 

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