Wednesday, June 24, 2015

'No Deal' - Creditors Did Not Accept Greek Proposal, Does The IMF Actually Want A Greek Default?

"No Deal": Tsipras Says Creditors Did Not Accept Greek Proposal | Zero Hedge

Who could have possibly foreseen that the IMF would throw up all over the Greek "proposal"... aside from this post here "Why The IMF Will Reject The Latest Greek Proposal In Just Two Numbers" yesterday afternoon of course. In any event, moments ago Bloomberg reported that just as we wrote here yesterday afternoon, there is no deal and that Greek PM Alexis Tsipras told his associates that creditors not accepting equivalent fiscal measures has never happened before, according to a Greek govt official, who asked not to be named in line with policy.

Creditors “not accepting parametric measures has never happened before. Neither in Ireland, nor in Portugal, nor anywhere. This strange stance can hide two scenarios; they either don’t want an agreement or serve specific interests in Greece,” the official cited Tsipras as saying."

As for Tsipras suggesting that Troika does not want an agreement, he is absolutely correct. Recall "Goldman's "Conspiracy Theory" Stunner: A Greek Default Is Precisely What The ECB Wants"... the same Goldman that blessed a Lehman bankruptcy and got precisely what it requested.
In any event, the ball is now in Greece's court...
... also as we predicted, where either the Greek negotiators will finally enact the "dreaded" pension cuts, or else the Troika will be able to wash its hands of a Greek default and blame it all on Greek intransigence. As a further reminder, at this point it is all about who gets the blame for a "Grexident."

When it comes to geopolitics, there are often wheels working within wheels that are working within wheels.  Once in a while we get a peek behind the scenes, but for the most part the machinations of the global elite remain shrouded in mystery most of the time.  And sometimes the global elite appear to be doing things that, on the surface, do not seem to make much sense at all.  What is going on in Europe is a perfect example of this.  If everyone was negotiating honestly, I believe that a Greek debt deal would have been reached by now.  As this endless crisis has stretched on month after month, it has become increasingly apparent that more is going on here than meets the eye.  In particular, the IMF has been standing in the way of a deal time after time.  So what do IMF officials want?  Are they looking for the “unconditional surrender” of this new Greek government in order to send a message to other governments that would potentially defy them?  Or could it be possible that the IMF actually wants a Greek debt default for some other insidious reason?

When the latest Greek proposal was embraced with enthusiasm by EU officials, many hoped that this meant that the crisis would soon be resolved.  But it turns out that there is still one very important player that is not happy, and that is the IMF.  The following comes from the Wall Street Journal

But the IMF is still unhappy with key aspects of Greece’s new economic proposals and German officials were irritated by the speed with which the commission welcomed them, warning that much work needs to be done.
Greece’s plan calls for reducing the deficits in its pension system and government budget by relying heavily on raising taxes and social-security contributions, whereas the IMF wanted bigger spending cuts.
The Washington-based IMF has said Greece’s economy is already too heavily taxed and that too many additional tax increases would hurt economic growth, making it harder to pay down Greece’s debt.
It is still short of everything that should be expected,” IMF Managing Director Christine Lagarde said Monday, suggesting Greece will have to modify its proposals significantly to win the IMF’s backing.
So what would make the IMF “happy”?
Would anything short of total capitulation by the Greek government suffice?
Meanwhile, members of Syriza are expressing a high level of frustration with the compromises that Greek Prime Minister Alexis Tsipras has already agreed to.  At this point, there is even doubt whether the current Greek proposal could get through the Greek parliament.  The following comes from Bloomberg

Despite all of the optimism that we have seen this week, the odds of a Greek debt deal getting pushed through are looking slimmer by the day.
And even if a deal somehow miraculously happens, all it would really mean is that the can has been kicked down the road for a few more months

For a long time, I have been warning that the next major economic crisis would begin in Europe before spreading across the entire globe.
Greece has a relatively small economy, but Italy, Spain and France are going down the exact same road that Greece has gone.
And what IMF officials are doing right now is that they are setting a precedent for future debt negotiations that they know are almost certainly coming with other countries in the future.
Sadly, most of my readers (being Americans) don’t really grasp the importance of what is going on over in Europe.  We are watching a horrific train wreck unfold in slow-motion, and what is going to happen over the next few weeks is going to have massive implications for the entire planet.

The IMF demands no tax hikes and pension cuts. Instead it will get almost exclusively tax hikes, amounting to 92% of the proposed measures, and just a few cuts, few of which actually impact Greek pensions. In short: the proposal is not only unsustainable, it is also unenforceable, something which the Germans - already facing a third Greek bailout - will be quick to point out.

Which is why tomorrow, after Tsipras is finished with the meeting with the Troika, he will have a new homework assignment: revise the "final final" proposal and come up with much less in tax hikes, much more in spending cuts: something which the already furious hard-line elements within Syriza will have a field day with.

And that is precisely what happened. As WSJ reports, creditors have decided to stick to their “red lines” after all: 

Put simply, the IMF has decided  that allowing Greece to wriggle from under the troika's thumb by substituting unenforceable tax hikes for actual, sustainable fiscal reform would send the wrong message to Spain and Portugal ahead of elections this fall where Podemos in Spain and the socialists in Portugal may well score decisive victories at the ballot box. 
So it's back to square one
Of course that means the terminal Greek bank run — which had already driven the Greek banking sector's remaining deposits to a level below the Eurosystem's total claims on Greece — will officially restart after taking a breather on Wednesday morning. Sure enough, despite reports earlier in the day that Greece had not requested an ELA increase, the ECB has now raised the limit again in anticipation of further withdrawals. Via Reuters:

So as we've said all along, the troika will get its pension cuts and VAT hike come hell, high water, or Grimbo, because that's the only way to keep the Syriza germ from spreading and it's also the only guaranteed way to ensure that any and all "radicalists" are purged from the Greek government. 

That is, if you thought The Left Platform was upset on Tuesday, you haven't seen anything yet, because when Tsipras comes to parliament with a deal that looks identical to what the troika put forth months ago, political upheaval will follow in short order and either Syriza will be transformed into a party that will accept Greece's fate as Germany's debt serf, or Greeks will demand a new government and a Grexit — either outcome is ultimately preferable, from the troika's perspective, to giving the rest of the EU periphery hope that austerity (or what passes for austerity in Europe) is negotiable. 

 So, either the Greek negotiators will finally enact the "dreaded" pension cuts and VAT hike (in its originally proposed form), or else the Troika will be able to wash its hands of a Greek default and blame it all on Greek intransigence while sending a strong message to political sympathizers that they will get nothing from the institutions.

Reinforcing this point is the following from Bundesbank board member Joachim Nagel (via MNI):

Bundesbank Executive Board member Joachim Nagel said Wednesday that he opposes another debt relief for Greece at this point, arguing that such a move could encourage other EMU countries to follow the example.

A debt relief for Greece "sets the wrong incentive for other countries," Nagel said at a conference in Frankfurt. "At this stage, a second debt relief would set the wrong incentives, especially for governments that are already weak" and struggling with growing opposition to austerity.

The sparse expanses above Alaska are a little more crowded this month as nearly 200 military aircraft are taking part in an annual training exercise.
Nearly 6,000 military members from all four branches of the military are taking part in Northern Edge 2015, which includes naval exercises in the Gulf of Alaska and some operations involving ground troops. The U.S. Pacific Command exercise, coordinated by command leaders in Alaska, tests the readiness of the nation's troops and isn't in response to any increased tensions with any other nation, said Lt. Col. Tim Bobinsky, who is helping lead the exercise.
Northern Edge is normally held every two years, but this is the first exercise since 2011. The government shutdown, or sequestration, forced the cancellation of exercises in 2013.
Bobinsky said Alaska offers the military a unique training opportunity, including 65,000 square miles of air space.
"As everyone knows, Alaska is very large," he said Tuesday. "And because of that we have some great opportunities to have some large training air spaces that give us awesome opportunities to conduct things that we can't do in very many other places, not just in the United States but around the world."

The American-EU disaster brought upon poor Ukraine as a pseudo attack on Russia is not working out as planned. And neither did the Minsk agreement, which has been turned into an instrument of torture for the endlessly suffering Donbass people. The West fiddles as Donbass burns, as does Syria, under the grotesque American justification of “pursuing our interests”.

The ceasefire violations by Kiev, many done by its uncontrollable Nazi and Nationalist battalions, have unwittingly let loose an army of neo-Frankensteins upon the already victimized land, with 500 civilians killed so far. Lost in that statistic is an even sadder one, the 1500 civilians who are missing in Donbass areas controlled by Kiev during 2015.

The Minsk agreement continues its sleepwalk, but to what and where no one seems to know. Kiev has slowed its implementation down to a snail’s pace. The end game special status that Donbass wanted enshrined in the Ukraine constitution seems like a mirage now, all talk and no action. Although France and Germany guaranteed Kiev’s compliance in implementing the Minsk accords, they have literally done nothing to reign in Kiev’s ceasefire violations using the nationalist battalions.

This make-believe Minsk process is of course completely endorsed by the West. As General Breedlove told the wavering EU delegates at the Munich conference, he wanted them to help arm Kiev, despite knowing that it cannot defeat Donbass militarily, but to keep the war going in order “to give the sanctions against Russia time to work.” That goal has become as much a bad joke as Obama talking about Russia’s growing isolation.

While Kiev plays its waiting game, it is somewhat tied to that of the US and NATO, where the 6,000-man ready reaction force could be increase to 40,000 at the NATO conference next week. Four divisions is a major offensive move. Much of this force is headed to the Baltic States who have made a huge strategic blunder by offering themselves up for Western cannon fodder. The citizens there need some new and better leadership, and quickly, like most of the rest of us do.

Moscow is also buying time to complete its military modernization and to complete building with China and India the Eurasian integrated economic and military defensive Great Wall of Asia that will be able to defend itself via mutually assured destruction. Yes, the Western leaders are taking us backwards to that situation.

China is mounting a serious effort to challenge U.S. military superiority in air and space, forcing the Pentagon to seek new technologies and systems to stay ahead of its rapidly developing rival, Deputy Defense Secretary Robert Work said on Monday.

The Pentagon’s chief operating officer, speaking to a group of military and civilian aerospace experts, said China was “quickly closing the technological gaps,” developing radar-evading aircraft, advanced reconnaissance planes, sophisticated missiles and top-notch electronic warfare equipment.

While hoping for a constructive relationship with China, the Pentagon “cannot overlook the competitive aspects of our relationship, especially in the realm of military capabilities, an area in which China continues to improve at a very impressive rate,” he said.

United States has relied on technological superiority for the past 25 years, but now “the margin of technological superiority upon which we have become so accustomed … is steadily eroding.”

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