Economics Greece update: Tsipras moving, but too slowly ● Insufficient progress: Talks between Greece and the Brussels Group institutions Key Macro Views reports resume today. Key issues on pension cuts and labour reforms remain unresolved, just 10 days before Greece may miss its first payment (€301m) to the IMF on 5 June. Greece can, apparently, pay all monthly public sector wages, pensions and Understanding Germany welfare benefits. However, it probably cannot pay the total of €1.6bn due to the ––– a last golden decade IMF in five instalments from 5 to 19 June without fresh money from its creditors. ahead ● Having made three impossible promises in his election campaign, Prime 13 October 2010 Minister Alexis Tsipras still refuses to get real and strike the kind of deal that Euro crisis: The role of could end the recession and unlock the money needed to keep Greece afloat. the ECB Cracks in Athens: At a Syriza central committee meeting late on Sunday, 95 ● 29 July 2011 members voted for a Tsipras-backed “compromise” that includes “red lines” on pensions and labour reform that lenders cannot accept. Seventy-five members Saving the euro: The voted to ignore lenders altogether and risk Grexit if they continue to set case for an ECB yield cap conditions. 26 June 2012 ● Chances are that Tsipras will eventually have to choose between serving his ECB ABS purchases: country or the strong left-wing of his party , as this Syriza meeting shows. At its expanding the toolbox core, the Syriza strategy has so far been to threaten a Greek economic suicide in 8 May 2013 order to scare lenders into granting more money on more lenient terms. ● As the Riga summit late last week has shown once again, Greek hopes for a soft Mind the court: the top “political deal” with European leaders that ignores the IMF, ECB, EU and ESM event risk in Europe experts will be disappointed. It is correct that European political leaders very 31 May 2013 much want to keep Greece in the euro and are ready to offer serious financial support. However, they will only do so if Greece by and large returns to the The lessons of the crisis: successful policies that underpinned the 2014 recovery. They will not support a what Europe needs government that chooses to turn its country into a bottomless pit. Parliaments in 27 June 2014 Germany and elsewhere would not approve such a deal. Neither side wants to pull ECB: question is not if, the plug for the time being. but when and what? ● Greek officials claim that a deal is close in the negotiations with the Brussels 2 December 2014 Group. Meanwhile, lenders detect little progress as Greece refuses to implement the reforms that could end the recession and make the country competitive. Euro Plus Monitor 2014: ● Money running out, but when? The Greek interior minister Nikos Voutsis said on from pain to gain Sunday that Greece does not have the money to pay the IMF instalment of €0.3bn on 5 18 December 2014 June, but government spokesman Gavriil Sakellaridis swiftly denied this. Greece does Global Outlook 2015: Oil, not seem to have sufficient funds to make all four June IMF instalments of €1.6bn. Putin and Greece Delaying the inevitable, it may ask for permission to make them in one go in late June. 6 January 2015 ● Our best guess: Mr Tsipras is very gradually edging towards a less unrealistic stance. But far too slowly. He is still not ready to ditch his unaffordable election QE works: lessons from promises and confront his left wing. Thus, negotiations will drag on for a while, the UK and US meaning Greece may miss its first payments to the IMF in June. If so, the IMF, EU 16 January 2015 and ECB would probably react only slowly to that, de facto giving Greece time Greek electionelection:: the until late June to get real. reality shock ahead Even late June is not a firm deadline: But once a payment is missed, the risk of ● 26 January 2015 escalating trouble, such as open bank runs and major political upheaval in Athens, will rise. If the Eurozone does not extend the bail-out at least pro forma, it would be ever Greece What if? more difficult to avoid capital controls after June, forcing Tsipras into a decision. 19 February 2015 ● We maintain our core views. Syriza gets real: but can o 70% probability that Greece will stay in the euro, possibly after some political the deal hold? trouble (new coalition in Athens, with To Potami replacing the Syriza left wing; 23 February 2015 and/or referendum). o 30% risk of Grexit. o For the Eurozone economy and the euro, the current heightened uncertainty is a modest drag on business confidence. Once resolved either way, that negative confidence effect will fade. o In the risk scenario of Grexit, contagion risks would be very limited thanks to ECB contagion control. 26 May 2015 Dr Holger Schmieding Chief Economist +44 20 3207 7889 [email protected] Economics Disclaimer This document was compiled by the above mentioned authors of the economics department of Joh. 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