GreekWatch (Day 3 of 13) : Greece leaving the euro “absolutely not”/”entirely ridiculous”

The IMF and EU review mission teams in Athens are remaining tight-lipped as they assess Greek progress to date and the feasibility of new austerity and privatisation plans. They must be the only people in this drama that are remaining tight-lipped.

First up, the ECB. Executive Board member, Jose Manuel Gonzalez-Paramo called yesterday for a repeat of the Vienna Initiative in 2009 which saw private lenders roll-over maturing debt. Next up, governor of the Dutch central bank and ECB governing council member, Nout Wellink expressed confidence in Greece’s ability to comply sufficiently with the wishes of the EU/IMF to see the release of the next drawdown. Greek central bank governor, Giorgos Provopoulos rowed in behind the positive sentiments of his colleagues in the ECB and described the possible exit byGreece from the euro as “entirely ridiculous” and he too expressed confidence in the success of the present efforts by the Greek government to comply with the bailout terms.

In Washington yesterday, the IMF’s weekly press conference was dominated by questions over Greece’s woes. The IMF’s Director of External Relations, Caroline Atkinson was adamant there was no question of Greece leaving the euro – “absolutely not. I would just point that I think there’s a broad view has been expressed about the absolute importance of Greece being a part of the Eurozone” but seemed more defensive than usual about the need for funding assurances from Greece (or the EU) before the IMF would release the next tranche of funding (tranche 5, totals €12bn of which the IMF’s contribution would be some €3.3bn) – “the other part of the discussion [the present review mission] is the financing part, including our own financing”. Now to be clear, Caroline didn’t say that Greece or the EU needed to provide assurances, for example on the funding of maturing debt in 2011, but she also didn’t dismiss the notion of the IMF requiring assurances which seems to give legs to suggestions in recent days that the IMF is seeking assurances from the EU that the EU will fund maturing Greek debt in 2011, and in the absence of such assurances, the IMF may withhold the next tranche of funding.

Elsewhere yesterday, the European Director of the IMF and the boss of Poul Thomsen (Greece and Portugal) and Ajai Chopra (Ireland), implied that the release of the next tranche would not be contingent on the EU putting funding in place to deal with Greek maturing debt in 2011 and 2012. However the same Reuters report claims that “he EU is preparing a new aid plan that would meet Greece’s funding needs in 2012 and 2013”

There was a rare meeting of Greek political leaders earlier today under the auspices of the Greek president. The last such meeting was in 2009. The publicly stated objective of the meeting was to secure consensus across all political parties to the proposed austerity measures and privatization programme. The meeting has ended without any such consensus. The Greek prime minister has stated that he will press ahead with the measures and will not seek early elections, as had been rumoured. There were public protests inAthenslast night and in some other key cities, smaller than the previous night due to heavy rain but the protesters say they will be back on the streets after 6pm this evening.

From the safety of the sidelines, economists Paul Krugman and the ECB’s former chief economist Otmar Issing seemed to be in agreement at a conference inCopenhagen that Greek default or restructuring was a very high probability event.

It was reported on Greek news service Capital.gr citing Dow Jones Newswires says that Greece is seeking an additional bailout package totaling €60bn on top of the existing €110bn package agreed last May 2010. It goes on to say “Greece expects to receive that next installment of aid, about EUR12 billion, by June 29. The government says it has enough cash on hand to continue operating until July 15”. Remember that the Review Mission presently on the ground from the IMF and EU expect to conclude their work by 6th June 2011 and it is expected that there will be a view by then as to whether the tranche draw-down will proceed. That’s why this GreekWatch series will conclude on 6th June.

In terms of explaining a bit more about the Greek domestic measures that are causing all the bother; today, the privatization of OTE (Organisation Telecoms Ellenos or Greek Telecoms Organisation), a major provider of telecoms in Greece and other south east European countries (Albania, Serbia, Bulgaria, Romania). The Greek government owns a 20% stake in the company that is worth an estimated €800m. German telecoms giant, Deutsche Telekom (DT) owns 30% of the company and the likelihood is that DT will buy whatever stake is put up for sale by the Greek government. OTE employs some 30,000 people and the unions and employees are not happy with the “privatization”. In fact they have now scheduled strikes for the start of June 2011 to make their feelings clear. The latest suggestion is that Greece will not dispose of the 20% stake but will sell an “option” for the future purchase of 10%, that is half the stakeholding.