Friday, July 17, 2015

17/7/15: Eurogroup tightens screws on Greece: Bridge v MoU


Eurogroup statement on Greece (h/t @FGoria):
Key:

  • Bridge finance via EFSM (as rumoured, so no surprise here);
  • Bridge finance security cushion via SMP profits being moved to an escrow account (unexpected) clearly to ensure Denmark's and UK agreement to use EFSM. Bad news: SMP profits should be rebated back to Greece to alleviate debt burden, not 'securitised' to increase debt burden;
  • Good bit - SMP profits are to be returned to Greece unless used as EFSM bridge loan cushion. So at some point in time, Greeks will get these funds to, presumably, cover a part of bridge finance funding;
  • The bit "...he risks of not concluding swiftly the negotiations with the ESM remain fully with Greece" (emphasis mine). This amounts to setting pressure very high on Greek Government to basically accept MoU conditions unaltered, as presented to them and, thus, makes the very idea of 'negotiations' a farce. Given that EFSM cover (bridge) is only for July, at most for first week of August, this statement basically puts Greece on notice: either agree immediately to ESM (Bailout 3.0) conditions or face a loss of SMP funds on top of everything else.
In effect, Eurogroup is driving home the tactical advantages gained by over-extending Bridge loan negotiations into the last minute and from Tsipras' total surrender at July 12-13 meetings. Greece has no where to go, but to ESM at this stage, so my suspicion is that MoU will be tougher than Bailout in Principle position of July 12-13.

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