Eurozone: It's (never) too late?

Another last-minute stunt from Tsipras could not avoid the end of the bailout programme and Greece missing the reimbursement of an IMF loan. Never a dull moment. The events in the Greek crisis over the last 24 hours once again had interesting twists and turns but this time around the hard facts remained unchanged: Greece has missed its payment to the IMF, the bailout programme has expired and the referendum is on track. Greek Prime Minister Tsipras pulled another rabbit out of his hat yesterday, submitting a new proposal to the Eurozone creditors. The proposal was a request for a two-year programme funded by the ESM (without IMF involvement). This programme would cover all Greek financial needs and would also include debt restructuring. According to media reports, the proposal did not include any new reform measures. Tsipras’ proposal came hours after reports that the European Commission had suggested that a new compromise might still be possible. Whether Tsipras’ move was a kind of late self-persuasion or just standard brinkmanship remains unclear. In our view, it was a last attempt to gain the upper hand in the ongoing blame game between Greece and the Eurozone, showing Greece’s so-called willingness to compromise. In a telephone conference last evening, the Eurozone finance ministers quickly discussed the proposal but the conclusion was clear: nice try but far too late. Eurogroup chairman Dijsselbloem said that “the political stance of the Greek government doesn’t appear to have changed”. Requests from Tsipras for an extension of Greece’s bailout programme or debt relief were not possible. Nevertheless, the Eurogroup will have another conference call tomorrow. All of this means that Greece will not reimburse an IMF loan and the official bailout programme has expired. As regards the IMF loan, we stick to our view that this will not trigger a credit event. According to the IMF rules, missing a payment will now start an entire procedure with several steps which after a period of up to 24 months could lead to the expulsion of Greece from the IMF. In addition, after one month, the EFSF would have the legal possibility to reclaim all already paid loans to Greece. Something, which in our view would only happen if the political will to keep Greece within the Eurozone at that moment in time would have entirely disappeared. All in all, missing the reimbursement of the IMF pushes Greece into the same league as Zimbabwe, Sudan and Somalia, but it would not lead to further crisis escalation ahead of the referendum. The same holds for the expiration of the second bailout programme. Technically-speaking, nothing will change in the short run. However, the fact that the programme has officially expired means that, legally, it cannot be extended anymore. No matter what the outcome of the referendum and consequent steps of the Greek government will be. From a legal and technical perspective, any new compromise would now start from scratch and would have to be a third bailout programme. In sum, yesterday’s events marked another symbolic step in the Greek crisis but also confirmed that the issue between Greece and its Eurozone creditors goes beyond numbers and substance. It’s the clash between an ideologically-driven government and a consensus-driven and compromise-oriented Eurozone. Even if it is tempting, we will refrain from sharing our memories of famous songs referring to “too late” but one thing is sure: only a miracle could solve the current stand-off in the Greece crisis before this weekend’s referendum.