6 Apr 2015
Brinkmanship in Athens, two key events ahead - BBH
FXStreet (Barcelona) - With Greece having submitted four different reform proposals yet still no end to its discussions with the creditors, the government is feeling the pressure, and the brinkmanship game is still on, notes Brown Brothers Harriman as they share the two key events for the week ahead for the country.
Key Quotes
“In this game of brinkmanship, it is in the interest of both sides to claim a brink is at hand to try to force the other into new concessions. Some Greek officials have emphasized the week ahead is such a brink. There are two key events.”
“First on April 8, Greece will auction 6-month T-bills. Greek banks can only buy a limited amount, given the restrictions on what they can do with ELA funds (namely not finance the government). Greek officials appear to be hoping from additional good will gestures by China and, perhaps, Russia.”
“Reports indicate that since the Greek government relented in its opposition to privatization, especially the leasing of the port of Piraeus to a Chinese company, China may have bought more than 100 mln euro of Greek bills at a couple of auctions. A little money from Russia could also go a long way. Greek officials have been talking with both countries.”
“Second, on April 9, Greece has a 360 mln SDR payment due to the IMF. Greece has a currency mismatch and the euro's depreciation the past year has increased the cost of servicing its debt. The 5% appreciation over the past couple of weeks is a small consolation.”
“There have been some threats that Greece would not make the payment. This is part of the brinkmanship tactics. Exploiting the legal grace period would not be surprising.”
“It now seems clearer that Greece will make good on its IMF payment. Greece submitted its fourth list of reforms last week, and each has been better received than the previous one. After this payment, the pressing challenge will be rolling over maturing T-bills before the end of the month "review" half-way through the four-month extension granted at the end of February.”
Key Quotes
“In this game of brinkmanship, it is in the interest of both sides to claim a brink is at hand to try to force the other into new concessions. Some Greek officials have emphasized the week ahead is such a brink. There are two key events.”
“First on April 8, Greece will auction 6-month T-bills. Greek banks can only buy a limited amount, given the restrictions on what they can do with ELA funds (namely not finance the government). Greek officials appear to be hoping from additional good will gestures by China and, perhaps, Russia.”
“Reports indicate that since the Greek government relented in its opposition to privatization, especially the leasing of the port of Piraeus to a Chinese company, China may have bought more than 100 mln euro of Greek bills at a couple of auctions. A little money from Russia could also go a long way. Greek officials have been talking with both countries.”
“Second, on April 9, Greece has a 360 mln SDR payment due to the IMF. Greece has a currency mismatch and the euro's depreciation the past year has increased the cost of servicing its debt. The 5% appreciation over the past couple of weeks is a small consolation.”
“There have been some threats that Greece would not make the payment. This is part of the brinkmanship tactics. Exploiting the legal grace period would not be surprising.”
“It now seems clearer that Greece will make good on its IMF payment. Greece submitted its fourth list of reforms last week, and each has been better received than the previous one. After this payment, the pressing challenge will be rolling over maturing T-bills before the end of the month "review" half-way through the four-month extension granted at the end of February.”