Friday, 05 June, 2015

Greece Raises Stakes in Showdown as Payment to IMF Deferred

(Bloomberg) — Prime Minister Alexis Tsipras raised the stakes in Greece’s showdown with creditors, rejecting demands for more austerity to receive bailout funds and opting for an unconventional deferral of International Monetary Fund payments. Tsipras told German Chancellor Angela Merkel and French President Francois Hollande during a midnight call Thursday that a list of demands needed to unlock bailout funds hammered out earlier this week by officials from the IMF and the euro area can’t be a basis for a deal, said a Greek official, who asked not to be identified discussing private talks. Greek stocks and bonds fell on the unexpected IMF delay. The Greek decision to bundle upcoming IMF payments and transfer them all at the end of the month was a 180 degree turn by the government and caught many by surprise. Tsipras told reporters on Wednesday not to worry about Greece making the Friday payment, and IMF Managing Director Christine Lagarde said earlier on Thursday that such a move wasn’t in the cards. “The delay in the payment to the IMF is an escalation of the confrontation,” said Nicholas Economides, an economics professor at New York University’s Stern School of Business. “It increases the risk of bankruptcy and a Grexit.” The benchmark Athens Stock Exchange plummeted as much as 4.9 percent and was 4.6 percent lower as of 1:50 p.m. local time. The yield on Greek 10-year bonds added 40 basis points to 11.31 percent, the biggest increase since May 18. The 10-year yield is still down from this year’s high of 13.93 percent and a record 44.21 percent in 2012. The two-year yield rose 186 basis points to 25.11 percent. Bundling Payments Greece notified the IMF on Thursday that the 300 million-euro ($337 million) payment due Friday would be deferred and bundled with three more payments at the end of June. While bundling the transfers doesn’t constitute a breach of IMF rules, the deviation from standard practice adds to signs that Greece may be readying for a potential breakdown of talks after a four-month-long impasse. The government issued no official confirmation of the bundling request. The delay wasn’t related to a lack of funds as Greece has enough cash reserves to make the payment due Friday, said a person familiar with the country’s financing position. The official asked not to be named as he wasn’t authorized to discuss the matter publicly. “If they come up with alternatives on our proposal, it should be financially correct and wise from an economic perspective,” Jeroen Dijsselbloem, who leads the euro-area group of finance ministers, said in the Hague. “We’re waiting for their reaction. We were hoping to get it by today.” Parliament Speech Tsipras will address lawmakers Friday evening in Athens, after a week of frantic talks with European leaders failed to yield a breakthrough which would pave the way for the disbursement of emergency loans necessary to avert default. Merkel and Hollande have spoken with Tsipras several times over the last week to try and resolve the standoff. The conversations “naturally are constructive,” Steffen Seibert, Merkel’s chief spokesman, told reporters in Berlin. He declined to comment on the substance of Thursday’s call. Tsipras is speaking by phone with Russian President Vladimir Putin Friday afternoon to discuss cooperation between the two countries. Odds Rising As the stalemate drags on the odds of Greece exiting the euro area have risen to about 20 percent from between 10 percent and 15 percent previously, Royal Bank of Scotland Group Plc estimates. The nation is likely to hold new elections, during the course of which support for the single currency may wane, the bank said. “Elections now appear very likely,” RBS strategists including Marco Barncolini wrote in a note to clients Friday. “Either PM Tsipras will opt to force the measures through (likely triggering a collapse in his parliamentary majority) or go to new elections.” Half of Greeks said the Syriza-led government should abandon its so-called red lines if creditors don’t accept them in order to have an agreement, according to a poll published Friday by the newsit.gr website. Almost the same number, 47 percent, said they disagree with the way the government is conducting negotiations. A strong majority, 74 percent, of those polled said they wanted Greece to remain in the euro. The poll was conducted on June 3 to June 4. “The agreement and solution which both Greece and Europe so badly need requires the immediate convergence of institutions to more realistic proposals, which will advance economic growth and social sensitivity,” the Greek Finance Ministry said in a statement. Archr LLP is Authorised and regulated by the Financial Conduct Authority (FCA reference 617163). Archr LLP is not covered by the Financial Services Compensation Scheme (FSCS). Archr is registered in England and Wales No. OC371018. Registered office Chancery House, 30 St Johns Road, Woking, Surrey, GU21 7SA This message may contain confidential or privileged information. If you are not the intended recipient, please advise us immediately and delete this message. The unauthorised use, disclosure, distribution and/or copying of this e-mail or any information it contains is prohibited. This information is not, and should not be construed as, a recommendation, solicitation or offer to buy or sell any securities or related financial products. This information does not constitute investment advice, does not constitute a personal recommendation and has been prepared without regard to the individual financial circumstances, needs or objectives of persons who receive it. You are receiving this email because you are a valued client of Archr.