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Greece: August 20 will not be the day of reckoning


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Tuesday Greece raised EUR 5 bn T Bills to reimburse an ECB loan coming due August 20. The situation is however deteriorating further.

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Greece: August 20 will not be the day of reckoning

  1. 1. Greece: August 20 will not be the day of reckoningAfter The ECB rejected a proposal by Greece to delay 1 month a EUR 3.2 bn bondrepayment, Athens issued EUR 5 bn worth of 13 wk T-Bills August 14, includingnon-competitive bids, which was bought by local banks on a meager 1.36 x cover ratio(the worst to date) which really shows that even short term financing is becoming difficult.These banks will probably use the T-Bills as collateral with the Greek central bank toaccess its emergency liquidity assistance (ELA).Below is the current schedule of T Bills redemption until year end, i.e. EUR 15.2 bn.The situation remains most precarious. The lack tax collection, in particular due toa continued fall in the GDP y0y and to some extent persistent fraud, does not bold well forthe Greek budget. The debt is again on the increase with a sharp EUR 23 bn QoQ:after investors wrote-down EUR 105 bn in March, reducing the debt to EUR 280 bn, endof June it was back above EUR 300 bn at 304 bn.The budget execution is rather dismay, revenues being 24% behind plan for theperiod January-July 2012. Looking at it in more details, the PIB item is againmanipulated this year in the turn EUR 1.4 bn to present an acceptable bottomline picture.Despite the debt write-down, interest payments remain as elevated as last year but in linewith the budget.With no GDP improvement in the foreseeable future, and the troika requesting EUR 11.5bn additional spending cuts in order to provide further financial assistance, the squeezewill continue on the population. This being said, even if Greece does not abide by itscommitments, I have no doubt that they will get additional financial aid from the EZ (Inmy opinion the objective is until the 2013 German elections, but I doubt markets will allow 1
  2. 2. without the ECB jumping in full gear by buying EZ sovereign debt in the primary andsecondary markets with no limit).Source:Greek Ministry of Finance: Budget Execution Bulletins,fileResourceObject,arrayOfFileResourceTypeObject/topicNames/budgetExecutionBulletin/resourceRepresentationTemplate/contentObjectListAlternativeTemplate 2