Greece Effectively Defaults To IMF Using SDR Reserves To "Repay" Fund; 1 Month Countdown Begins

When Monday’s Eurogroup meeting concluded without an agreement between Greece and its creditors, it should have been game over for Athens. With pensioners at their breaking point and with local governments reluctant to comply with a decree mandating a sweep of excess cash reserves, the idea that Greece would somehow be able to scrape together €750 million euros to make a scheduled payment to the IMF today seemed far-fetched at best which is why we asked the following question Monday afternoon:

Where, if not from local governments who have been extremely reluctant to comply with Athens' cash sweep decree, and if not from the IMF which will apparently not be paying itself tomorrow after all, is Greece going to get three quarters of a billion euros in the next 12 hours?

We now know the answer to that question. As Bloomberg reports, citing Kathimerini, Greece tapped IMF reserves to pay .. well, to pay the IMF:

Greece used up ~EU650m reserves from its SDR IMF holdings account to meet loan payment of ~EU750m due to Fund today, Kathimerini newspaper reports, without citing anyone.

Reserves kept in IMF holdings account need to be replenished within one month

IMF agreed over weekend for their use, given Greece’s liquidity situation; without use of those reserves, payment due today wouldn’t be possible.

Reuters has a bit more color:

Greece tapped emergency reserves in its holding account at the International Monetary Fund to make a crucial 750 million euro (539 million pounds) debt payment to the Fund on Monday, two government officials said on Tuesday.

With Athens close to running out of cash and a deal with its international creditors still elusive, there had been doubts whether the leftist-led government would pay the IMF or opt to save cash to pay salaries and pensions later this month.

Member countries of the IMF have two accounts at the fund - one where their annual quotas are deposited and a holding account which may be used for emergencies.

One official told Reuters that Athens used about 650 million euros from the holding account to make the payment.

"We made use of money in our holding account in the fund," the official said, declining to be named. "The government also used about 100 million of its cash reserves."

This explains why Yanis Varoufakis was so confident that the payment would be made and also why the language around the payment confirmation was so bizarre (recall that the heading was "Greece said to have given order for IMF repayment"). It also underscores the degree to which this entire ordeal has now careened into sheer absurdity because disbursing bailout funds that you know will immediately be sent right back where they came from in the form of an interest payment is one thing, but literally paying yourself is another, and the IMF seems to have done the latter on Monday. 

Given this, it’s certainly not surprising that Christine Lagarde and company are not thrilled about the prospect of participating further in what has become an outright farce and as El Mundo reports, the fund has now told the ECB and the European Commission that it does not wish to be a part of a new program for Greece.

Via El Mundo (Google translated):

The International Monetary Fund (IMF) has shown the Eurogroup their desire not to be part of a possible third bailout of Greece, which would amount to 50,000 million and would be vital for the survival of the Hellenic country. The absence of really emotional action by the executive with whom Tsipras contain spending and tackle the deficit, as well as the challenges it has done in recent weeks, as the readmission of public employees has caused the agency wants let all the weight of aid to Greece in the hands of the Eurozone and the ECB.

The fact that the IMF wants to stop being part of the bailout of a country is particularly serious, not in vain this institution is always the last resort of economies whose situation is more complicated. Therefore, the IMF has priority over other creditors in the order for recovery and, in all history, only Zimbabwe, Somalia and Sudan have failed to fulfill their obligations to it. However, given the difficulties to unlock a new rescue aid tranche that matures on June 30, the Washington-based organization fears that Greece will become the first economy in a developed nation it incurs a default, as They have confirmed to THE WORLD sources familiar with the process.

For Germany (where lawmakers are already pressuring Angela Merkel to cut the Greeks loose) this may be the final straw.

• SCHAEUBLE SAYS IMF MUST STAY INVOLVED IN GREECE AID PROGRAM

Greece is now reliant on a similarly ridiculous circular funding scheme to pay public sector employees whereby pensioners will only receive payments if the government is successful at tapping pension funds for cash.

Via Bloomberg:

Greece may be able to meet end-May salaries and pensions payments, if pension funds, municipalities commit more of their cash reserves.

And because all of the above isn't preposterous enough, Greece will depend on the disbursment of the €7.2 billion left in its current program (about half of which is set to come from the IMF) to replenish the funds it raided from its SDR holdings:

Greece assumes that an agreement will be reached by end-May for disbursement of bailout funds, so that it can replenish holdings account reserves.

In sum: the IMF paid itself on behalf of Greece and will now be forced to pay itself back for paying itself later this month. Or, put differently, Greece has prepaid the IMF with IMF money it doesnt have.

Meanwhile, Greek pensioners are set to adopt a similarly ridiculous self-payment scheme in a matter of weeks even if they don't entirely appreciate the sheer insanity that's taken hold in Athens. 

And just to prove how dire the situation now is, Market News just reported the following shocker:

• GREECE CASH RESERVES STAND AT APPROXIMATELY EUR 90 MILLION - EUROSYSTEM SOURCES

The Greek endgame is now upon us.

http://www.zerohedge.com/news/2015-05-12/greece-effectively-defaults-imf-using-sdr-reserves-repay-fund-1-month-countdown-begi

Greek Cleaners 1 - 0 Troika

Having approved the so-called 'democratization of the public service' law, which reinstated 13,000 Greek civil servants, Troika officials expressed their dismay,

"this is clearly against the spirit of reform agreements with the troika of the IMF, European Central Bank (ECB) and European Commission."

Nevertheless, Greek cleaners across the nation are celebrating....

Cleaners from Greece’s ministry of finance, laid off in 2013 under the country’s austerity program, on Monday celebrate a new law that gives them back their jobs along with those of thousands of other public-sector staff. The cleaners had been protesting since the layoffs - in an action known as the longest demonstration in Greek histor - setting up a camp that became a symbol for those who feel the poor have borne the brunt of the crisis.

Greece’s new prime minister Alexis Tsipras received some of the protesters at his office on Thursday, after parliament passed legislation giving the cleaners their jobs back. Syriza’s decision to rehire the cleaners resonates with many Greeks, but the government’s wider moves to reinstate laid-off public-sector workers has angered Greece’s creditors, who see it as a reversal of economic reforms.

Source: WSJ

*  *  *

But, as KeepTalkingGreece reports, not everyone is happy...

She sat in front of the television set Monday morning and watched the party of the cleaners who have been hired again by the Finance Ministry. She watched the smiling faces of the 595 women who had been protesting outside the ministry in downtown Athens for 20 months. She watched deputy finance ministerNadia Valavani bringing them sweets and stating “I do not know what they are owed, if they realizethemselves that the workers’ movement owes to them in a very difficult time. I don’t know if they realizewhat each of us personally owes to them ….” and some other stuff Eleni did not quite understood. She didn’t care. She felt tears flooding her eyes and envy biting her heart. She looked around at the small living room full with bedsheets and pillows, and children’s’ clothes.  She wished, she was a fired cleaner at the Greek administration, she wished, she a cleaner’s job for 500 euro. She wished, she could have shared the festive mood. But she couldn’t.

Monday morning: Protesting cleaners and Public Administration Minister Katrougalos

Eleni is 55 years old and without income since March 2014, when together with her husband, 59, decided to close down the small business they operated for the last 12 years: a mini market in one of the suburbs of Athens. Until 2010, the mini market had a daily turnover of 1,600 euro.  Then the economic crisis came and turnover started to drop day by day, month by month. By middle of 2013, the shop could not cash more than 150 euro per day.

Debts to state and social security had already mounted, the same did the unpaid bills to utilities and suppliers who suddenly demanded payments in advance.

The low middle class world of Eleni and her husband had collapsed. Together with their four children 14-22 years old, the couple moved to the 2-bedroom apartment of her mother.

Eleni and and husband hoped to find new jobs. But the reality was hard “Getting a job in times of crisis is impossible, mostly due to our age!” she says.

But Eleni does not give up hope. She attends Computer courses offered by the Municipality, she has applied to enter Employment Agency’s (OAEED) short-term programs for unemployed, funded by the EU.

“Honestly, I don’t care what these programs are and the majority of them are crap,” Eleni says .”Main thing is I do something, I bring some money home and I don’t go crazy.” These programs are scheduled to last 5 months, the attendees receive 450-500 euro per month, payment is done after the courses have ended.  Then they are free to return to a labor market that has no job offering for them.

“At our age? We’ve been thrown to Kaiadas*!” Eleni says with a deep bitterness in her voice. She feels still strong to work. She currently seeks one or several jobs as a cleaner in offices or as caregiver to elderly. Her only skills in this “profession” is the experience she had with her own mother when she was severely sick and her cleaning skills as housewife and mother.

“Money has to come in. One of my sons got just recently a grotty part-time job for 250 euro, no security whatsoever, of course. I still have two children at school, third son is still in the army.”

Eleni is just an example of the many unemployed women of the Greek private sector. She does not belong to any union or political party. In a country with no benefits or any kind of aid for the long unemployed. Eleni is just an example of the many jobless middle-aged women who still need at least 10 working years to go into retirement. Eleni is just a number in the ELSTAT statistics showing that 21.5% of women 45-64 are unemployed and have mostly no chance to ever return to labor market.

Eleni has no private connections to powerful or well-situated people to get her a job in the old Greek style. She is left on her own.

And then here is Maria. Divorced. 49 years old, three children 26-29 years old. She got fired from the restaurant she was working for last ten years in 2012. Meanwhile, she  lives on food and some basic needs packages from the charities. She occasionally cleans a home here and another there, maybe jumps-in to take care for a bed-ridden elderly in the neighborhood, when the caregiver has day off. She is too young to go in retirement,  has not enough social security stamps for access to health care. Her two daughters and the son have low paid jobs and live with their own families. Maria shares an apartment and costs with her partner. She is seriously considering to return to her village that she left when she was 25.

“I could live in the old family home. At least, I can grow some vegetables there, have some chicken… I don’t know… I may find some job in the area as a cleaner or caregiver,” she says adding with a laughter “Or just lay down and die.”

She says too that she got envy about the cleaners and the political and media support they had during their long protest. “Ehm… the cleaners have a lobby. I wish, I had one too,” she says with the same bitterness in her voice like Eleni.

http://www.zerohedge.com/news/2015-05-11/greek-cleaners-1-0-troika

Russia Asks Greece To Join BRICS Bank

As if the discussions in Brussels and Athens were not mired in enough uncertainty, Bloomberg reports that a Greek official confirms:

• *STORCHAK ASKED TSIPRAS FOR GREECE TO JOIN BRICS BANK: OFFICIAL

The pivot appears to continue. Reportedly, Tsipras was pleasntly surprised by the proposal.

As Bloomberg reports,

Russian Deputy Finance Minister Sergei Storchak spoke with Greek PM Alexis Tsipras today, proposed that Greece become 6th member of New Development Bank set up by Brazil, Russia, India, China, South Africa, a Greek govt official says in e-mail to reporters.

Tsipras said keen to discuss matter in St. Petersburg Economic Forum June 18-20, with leaders of BRICS countries.

Tsipras was pleasantly surprised by proposal.

http://www.zerohedge.com/news/2015-05-11/russia-asks-greece-join-brics-bank

Merkel Under Pressure To Let Greece Go As Default Risk Rises

In case you forgot, Greece is on the brink of insolvency and without an agreement with creditors in the very near future, will default on its obligations to either the IMF, the ECB, its own citizens, or all of the above. The most pressing concern is a €750 million payment due to the IMF on Tuesday, a payment Greek FinMin Yanis Varoufakis says Athens will make, although it doesn’t seem as though anyone has a clear idea about exactly where the money will come from.

The important headlines from last week included an apparent split between the IMF and the rest of the Troika on what constitutes an acceptable list of reforms, a report that Greek banks were being cut off from interbank trading, and news that Varoufakis had distributed a Greek recovery “blueprint” containing estimates and assumptions that bore little resemblance to figures presented by PM Tsipras and his reshuffled negotiating team. 

Now, with less than 48 hours to go until three quarters of a billion euros comes due to the IMF, Greece faces marathon negotiations on Monday with eurozone FinMins including the incorrigible, hot-tempered Wolfgang Schaeuble who made a splash on Saturday when he suggested that Athens may default “by accident” if the government continues to vacillate. 

Via FAZ (Google translated):

Federal Finance Minister Wolfgang Schäuble has warned of the possibility of surprising Greek default. "Experiences elsewhere in the world have shown that a country can suddenly slip into insolvency," Schaeuble told the Frankfurter Allgemeine Sonntagszeitung (FAS). He wanted a date in his first newspaper interview since detailed months but not speculate.

When asked whether the government had made preparations for such an eventuality, he said: "There are issues that can not answer a sensible politician. Otherwise there will be misunderstandings. Jean Claude Juncker once said, one must not take it then sometimes the truth always as accurate. I see these things more complicated. Therefore I say to prefer nothing at all. "

And while Schaeuble indicated that if Greece left the euro it would not be “because of” Germany, Bloomberg is reporting that Chancellor Merkel’s own party bloc now supports a Greek exit. Here’s more: 

Members of Merkel’s Christian Democratic bloc are openly challenging her stance of keeping Europe’s most-indebted country in the 19-nation currency region. Even some officials in the Finance Ministry are leaning toward the conclusion that the euro area would be better off without Greece, two people familiar with the matter said.

“The euro would be strengthened if Greece left,” Alexander Radwan, a Merkel-affiliated lawmaker who voted for granting Greece a temporary extension of its bailout in February, said in an interview. “The other countries could then move closer together and apply the rules more strictly.”

With European finance ministers due to resume talks on Greece on Monday, hardening sentiment in Germany risks sending mixed signals to investors as Prime Minister Alexis Tsipras’s government attempts to reach a deal with creditors.

Merkel has repeatedly voiced public support for keeping the country in the euro, partly for geopolitical reasons. Other officials in her government view Greece as a rule-breaker and a drag on the region’s economy, said the people, who asked not to be named discussing the deliberations.

Finance Minister Wolfgang Schaeuble, a prominent German advocate of European unity for decades, has given plenty of signs of exasperation with Greece since Tsipras and Finance Minister Yanis Varoufakis took office in January on an anti-austerity platform.

Clearly, any statement from the Eurogroup on Monday has the potential to move markets, but we would also note that the ECB last week reserved judgement on hiking haircuts on collateral pledged by Greek banks for ELA until after tomorrow's meeting. So although there's probably room to extend and pretend from a political perspective, any move by the ECB to tighten the screws on the Greek banking sector could cause the situation to deteriorate rapidly and indeed, if an ECB ELA decision that's ostensibly designed to push negotiations forward inadvertently causes a bank run with negotiations still stalled, Schaeuble's "accidental" insolvency may well become reality. 

http://www.zerohedge.com/news/2015-05-10/merkel-under-pressure-let-greece-go-default-risk-rises

Schäuble Warns of “Sudden” Greek Default

Wolf Richter   www.wolfstreet.com   www.amazon.com/author/wolfrichter

The governments of Greece – new and old – screwed up. Other debt-sinner countries are able to borrow at near-zero or negative interest rates, simply taking money from investors with a promise to return it on a given day in the future if investors give it new money to do so. These investors, it must be said, had their brains washed by the ECB and other central banks in order to allow this to happen. But the governments of Greece somehow missed that gravy train.

Now, no one wants to lend Greece money at negative interest rates, least of all the Greeks themselves, who know their governments better than anyone else on the planet and have less trust in it than anyone else on the planet: they’re yanking their euros out of their banks even as the ECB is propping them up with fresh euros that ultimately belong to taxpayers elsewhere.

This weekend, representatives of the “institutions” – the unmentionable “Troika” – are trying the hash out a reform package with the new team from Greece that does not include Finance Minister Yanis Varoufakis, who’d been shoved aside. On Monday, the finance ministers of the Eurogroup will meet in Brussels.

Without an agreement on the implementation of the reforms, Greece won’t get the outstanding relief funds of €7.2 billion. And then what? The government has practically no funds left. Time is running out. Monday is it. The Big Day. Again.

“I don’t see that everything will be solved by then,” German Finance Minister Wolfgang Schäuble said in an interview in the Sunday edition of the Frankfurter Allgemeine Zeitung, one of Germany’s largest papers, throwing cold water on any hopes. He doubted that the Greek government even knew what exactly was going on in its finances.

“Such processes also have irrational elements,” Schäuble warned. “Experiences elsewhere in the world have shown that a country can suddenly slide into insolvency.”

On the principle that a country is slowly zigzagging down that path paved with lots of good intentions, false hopes, and lofty promises and, BAM, suddenly, it’s over. So maybe Monday? Or next month? He refused to nail down a specific point in time.

When asked if the German government has made preparations for such an eventuality, he said:

“There are issues that a prudent politician must not answer. Otherwise there will be misunderstandings. Jean Claude Juncker [President of the European Commission and former President of the Eurogroup] once said that sometimes you must play fast and loose with the truth. For me, these things are more complicated. Therefore, I rather say nothing at all.”

That’s a resounding “yes.” Germany is prepared. The financial markets have no doubts and refuse to get panicky. The German government is going to handle this just fine, they’re saying.

But in August 2013, during the run-up to the general elections in the fall, when the cost of the Greek bailouts to German taxpayers was one of the themes, Schäuble had this to say, thus playing fast and loose with the truth:

“One thing is certain: there won’t be a second debt cut for Athens.”

The first one having been the 70% haircut imposed “voluntarily” on private-sector bondholders in 2012. The second one would hit public institutions, such as the ECB and the bailout funds, and ultimately taxpayers in Germany and other countries.

The “one thing” that was certain in 2013 before the election is now out the window. A Greek default would almost certainly entail some kind of debt relief for Greece, hence a haircut for taxpayers in other countries. They just haven’t been told yet.

But Germany would “do everything to keep Greece under responsible conditions in the Eurozone,” he said. “It must not fall apart because of us.” On this issue, he and Chancellor Angela Merkel are in complete agreement, he said.

There have long been voices that confirmed that if Greece defaults, there could be a haircut for public bondholders in some form (swapping existing debt for zero-interest debt with a 1,000-year maturity?) while Greece remains in the Eurozone. That appears to be the direction the German government is heading.

And Schäuble defended his best buddy Varoufakis. Few people have managed to rise to such media adulation and then plunge from it as quickly as Varoufakis. Whatever he was trying to do, it didn’t work. Forget game theory. “We both are finance ministers and bear responsibility, so we work well together,” Schäuble said. “First, the media make Varoufakis into a superstar, now they’re writing him off. The one is as wrong as the other.”

With this immaculately-timed interview, the German government acknowledged that it’s ready for Greece’s insolvency and default, whenever it may come, including Monday, after having denied it for years, and that it would continue working with Greece to keep the Eurozone together. What’s sacred for the Merkel government is the Eurozone, not its taxpayers. They already got shafted.

But here is the thing: the Greeks could solve the crisis on their own, if they wanted to. Or do they know something that others don’t? Read…  If Greeks Did This, the Terrible Crisis Would Be Over

http://www.zerohedge.com/news/2015-05-09/sch%C3%A4uble-warns-%E2%80%9Csudden%E2%80%9D-greek-default

The Situation Escalates – Greece Is Now Taxing Cash Withdrawals

The saga (or drama, if you like) in Greece is continuing and even though the country was able to make a 200M EUR interest payment to the IMF earlier this week, markets shouldn’t be too optimistic just yet as that payment is less than 5% of the total cash amount it has to pay in the next 4-5 weeks.

Indeed, Greece has just 3 days left to find 750M EUR to meet the requirement of a principal payment to the IMF which is due next Tuesday, and we consider it to be quite impossible for the country to meet this demand without finding additional sources to generate cash from.

There’s little doubt the 200M EUR was mainly funded by Athens’ radical request whereby the public agencies were ordered to wire the majority of their cash resources back to the central government in Athens. This was a very clear indication the Greek treasury was running on fumes as it could not afford to pay the salaries of government employees so there’s little hope the country will be able to repay the 750M EUR to the IMF next week without reaching a new bailout deal with its lenders.

The the population of Greece is understandably getting nervous as the negotiations between the Greek government and the European Central Bank, IMF and the European Union are still ongoing. Prime Minister Tsipras already had to remove his Finance Minister Varoufakis from the negotiation table as he was despised by the other side. Additionally, Varoufakis is also taking a lot of heat inside his own country after revealing how rich he really is. Whilst the Greek population is very clearly suffering, Varoufakis thought it was a good idea to show the French magazine Paris Match how rich he really is.

The banks in Greece once again feel a lot of pressure as thousands of people have started to withdraw cash. The European Central Bank once again had to step in by increasing the Emergency Liquidity Assistance to the Greek Banks as it had to raise the ceiling by another 2B EUR. The banks are still trying to pretend there’s no bank run going on, but all other evidence suggests the opposite is going on.

The Greek government is now proposing to instate a tax on withdrawals from ATM’s in the country and aims to raise 180M EUR in additional fees due to this measure. This is clearly aimed at containing the current ‘soft’ bank run that’s going on in the country. Additionally, all wire transfers of in excess of 1,000 EUR will also be subject to the tax.

With this idea, Greece is effectively introducing a capital control in the country, and it obviously would not do that if the situation didn’t demand for drastic measures to be taken. The clock is ticking, and Athens only has a few days left in its negotiations. Someone will have to crawl through the sand to make this story have a happy end (until it starts all over again in a few months)

http://www.zerohedge.com/news/2015-05-10/situation-escalates-%E2%80%93-greece-now-taxing-cash-withdrawals

Commodities Gone Wild

It's that time again...

Silver surges, crude crushed...

And gold of course...

Charts: Bloomberg

http://www.zerohedge.com/news/2015-05-04/commodities-gone-wild