The US and the IMF are in the driver’s seat again in the Europe political arena. Berlin has no alternative besides accepting the US-IMF proposal for Greece. After Sunday’s referendum in Greece, the country leaving the Euro seems immanent, but since Monday some very odd and unexplained things have happened.
It could be that Tsiparis and Varoufakis suddenly started to understand that the greatly hailed BRICS bank only has a fund of 100 Billion, which is a fraction of the 700 Billion ESM fund. The ESM fund was created by the European Monetary authorities to stabilize the Euro.
The 53 Billion euro Greece urgently needs will immediately drain the BRICS bank fund by more than 50%. Russia and China do not like to see their hailed BRICS bank fund being halved within the same week of its creation.
It is also possible that someone with higher authority than the Greek populace has explained Tsipras and Varoufakis that they are treading in dangerous waters and have to change their course.
After the referendum it seems some invisible hand forced Varoufakis out of office. The same Varoufakis who vowed to resign in case of a “Yes” vote, surprised everyone as he promptly resigned after Greece overwhelmingly voted the opposite.
On July the 8th, The Wall Street Journal wrote: “U.S., IMF Step Up Calls for Europe to Restructure Greece’s Debt”. Before the referendum the IMF published an estimation that Greece needs an extra 53 Billion Euro’s bail out.
One day later, Tsiparis flip flopped and submitted the proposal that was so overwhelming rejected by the Greek people in the referendum that was held on june the 5th. The proposal includes the IMF recommendation to give Greece an extra 53 Billion Euro bail out.
On July the 10th, the new Greek minister of finance announced that the EMS could buy the Greek debt holdings by the ECB; a clear sign that they are already preparing the IMF debt restructuring recommendations.
This is exactly the plan we outlined in our previous post. The EMS acts as an SPV that buys all kinds of worthless sovereign debt. As the ESM is guaranteed by the euro members, it is able to recycle the debt and issue it in the form of new bonds.
The ESM is probably able to write down the debt without this having any effect on the value of the bonds it issued. As 36% of the EMS investors are Central Banks, Government and Sovereign Wealth funds and 42% of the investors are private banks, banks who are directly dependent on their Central Banks nowadays, there is not a real market for ESM bonds. A Haircut or restructuring of the Greek debt as is now “ordered” by the IMF will be done at the balance sheet of the EMS leaving the ECB holdings untouched.
It seems that everything is now in place to execute the IMF plan as proposed a week before the referendum. We do not expect Germany to reject the plan, but if they do it will be a clear signal of a German revolt against the Washington elite.
From the internet
Tsakalotos: ECB-held bonds will be moved to ESM Source Ekathimerini 2015-07-10
Greece will succeed in transferring bonds currently held by the European Central Bank to the European Stability Mechanism, the finance minister told parliament on Friday, a long-standing demand by Athens as it races to seal a bailout deal.
Greek PM Tsipras seeks party backing after abrupt concessions Source Reuters 2015-07-10
Greek Prime Minister Alexis Tsipras appealed to his party’s lawmakers on Friday to back a tough reform package after abruptly offering last-minute concessions to try to save the country from financial meltdown.
