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May 2, 2015

Default Looms Large Over Greece

The situation in Greece has been dire for quite some time and no resolution appears to be on the horizon. At best the Greece people can hope for a sideways movement, just getting by and just getting along. Unfortunately for them, things appear to be going from bad to worse.
As I’ve previously written about, the Greek government is nearing a catatrosfic default. They are running out of cash and running out fast. Just last week, it was reported that the Greek government was pooling what little cash it could scramble together to maintain pension funds and government employee’s paychecks. This in addition to the payments it owes to the IMF.
In the short term, it appeared that they were going to be able to just get by and have the required funds needed in the short-term. At least that is what the Greek government stated. Fast forward to today, and what do you know? It looks like they lied, no shock there.
According to Bloomberg, the Greek government is short 400 million euros of what is needed to pay both its pensions and its government employees, this after they attempted to basically steal funds from local municipalities, which failed horribly and is causing serious backlash towards the government.
Adding to the confusion and uncertainty, some Greece officials state that they have the required funds, while others say they don’t. In reality, they most likely don’t. The Financial Times reports on the situation and the flip flopping by officials:
The Greek government was struggling on Thursday to complete payments to more than 2m pensioners after claiming that a “technical hitch” delayed an earlier disbursement.Elderly Athenians waited at branches of the National Bank of Greece, the state-controlled lender handling the bulk of pension payments, which are staggered over several days.On Tuesday, the main state social security fund, IKA, delayed pension payments by almost eight hours. The heavily lossmaking fund relies on a monthly subsidy from the budget to be able to cover its obligations.“I went to the ATM in the morning before going to the supermarket but the money wasn’t there . .. I went back at eight in the evening feeling quite anxious but it had arrived,” said Socrates Kambitoglou, a retired civil engineer.Dimitris Stratoulis, deputy minister for social security, said a technical problem with the interbank payment system caused the delay. Payments were made normally on Wednesday, a senior Greek banker said.But an official with knowledge of the government’s cash position denied that a technical hitch had occurred. He said the payments were held up because the state pension funds “were still missing several hundred million euros on Tuesday morning”.Another official said inflows of €500m on Wednesday had eased the situation and €300m was due to be paid on Thursday. “We’re probably going to make it this month,” he said.
Even if the Greece government is able to pull through and scrape together the funds to meet its obligations this month (which it likely will), given how hard to was and how many tricks needed to be performed to obtain the required money, what does this mean for next month? Will Greece be able to pull off another miracle? It appears unlikely.

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