On June 30th the debt financing program
expired for Greece and officially the country is without any financing. It also
missed the payment due to the IMF for 1.7 billion euros, and is now in payment
in arrears. The country was not officially proclaimed in default, since the
board of directors of the IMF extended the payment due, and is in arrears, and
the only agency that can declare a country bankrupt is a credit rating agency.
What this also means is that the Greece owes billion
euros to the ESM (European Stability Mechanism) and they can be demanded
callable. The ESM is an international organization in Luxembourg, and established
as a permanent protection wall for the Eurozone to safeguard and provide
instant financial assistance for member states in financial crisis.
The Greek government left the negotiations last Friday,
with many European countries claiming, and charging the Greek authorities, that
it was not in their intention of the Greek government to negotiate, that
concessions were made, like the value added tax, that the Greek government was
so adamantly opposed to, in tourism (amid a tourist season), in catering –
restaurants, further cuts in pensions, and most of all, debt restructuring.
Meantime on Saturday as the news were announced and
that a referendum would be held for the Greek people to decide if they want to
accept the EU’s proposal, many people started lining up outside the ATM
machines of many banks, before the government announced that capital controls
were imposed. Banks have not opened since Monday, and lines are everywhere at
the ATM’s, with a minimum withdrawal per day of 60 euros.
The president of the EU gave a new proposal to Greece,
the government turned it down, while people will vote on Sunday (unless it is
revoked..) on a proposal that was rejected. And if not is not enough, the Greek
Prime Minister sent a reply to the EU president, accepting his proposal (which
he turned down), but the institutions turned it down, saying it is late due…
Fitch and Standard and Poor’s downgraded Greece and
the Greek bonds to selective default, to CC, since there is no agreement, and
Greek bonds are now less selective. The European Central Bank (ECB) decided not
to increase the emergency liquidity assistance to the Greek banking system,
since there is no agreement, and thus the ECB does not accept Greek bonds and loans
as collateral in return.
The Greek banks are closed until Monday, and are not
sure they will open if no new agreement is in place to provide liquidity. The
Greek people are divided; there is discord between those who will vote NO and
those who will vote YES. One side claims that if they vote YES austerity will
continue, while the others claim that those who vote NO, the government will
lead Greece out of the Eurozone and bring back the drachma.
There is also division among the political parties,
with European parliament members of the ruling party, Siriza, calling on the
Prime Minister to either, call of the referendum, or campaign for a YES vote,
and accept the agreement offered. There is also a break in ranks from the other
party in the coalition, with four deputies calling that they are against the
referendum and that they will vote YES.
Bill T. Alexandratos
Billalex60@gmail.com
