Eurogroup demands its reforms before it releases cash to Greece

The Eurogroup of finance minister meeting in Riga Latvia had harsh words for Greek Finance Minister Yanis Varoufakis as they refused his bid to find a shortcut to get badly need financial aid.

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Jeroen Dijsselbloem, the chair of the euro-zone finance ministers, ruled out any partial aid payment, such as Varoufakis has requested, in exchange for fewer and narrower reforms:“It was a very critical discussion and it showed a great sense of urgency around the room,” Dijsselbloem said at a press conference after the meeting. Asked if there was any chance of a partial disbursement, he said, “The answer can be very short: No.”Also, Dijsselbloem told reporters at the end of the Riga meeting: "I'll be quite frank - it was a very critical discussion. We had hoped to hear a positive result..we are still far from that."Varoufakis was severely criticized for not bringing forward and implementing the "reforms" demanded of creditors including to pensions and the labor market even though such changes are termed by the Greek government as "red lines" that cannot be crossed. Perhaps the government is intending to show the Greek public that any reform is impossible within the EU. However, there seems to be little or no planning by the government for a possible Grexit or exit from Greece. Given the situation, and the positions of each side, it is hardly surprising that no agreement was reached at the meeting in Riga Latvia yesterday. The discussion on Greece at the meeting lasted little more than an hour. Dijsselbloem made it crystal clear that no funds were forthcoming unless Greece delivered on the reforms demanded: "A comprehensive and detailed list of reforms is needed. A comprehensive deal is necessary before any disbursement can take place ... We are all aware that time is running out."He also warned that if there were no deal completed by the end of June, the 7.2 billion euros in the loan would no longer be available and that creditors would not talk about longer term funding until a full interim agreement was reached.

An anonymous person familiar with the talks said that the finance ministers described Varoufakis as behaving irresponsibly in the talks, and being a gambler, time-waster, and amateur. In spite of this, Varoufakis himself said the two sides were now "much closer together" and that Greece was intending to achieve a deal as soon as possible. The president of the European Central Bank(ECB), Mario Draghi, threatened to even increase the pressure on Greece and warned that ECB policy makers might review the conditions set for emergency funding of Greek banks. The council governing the regulations is said to meet as early as May 6.Some ministers accused Varoufakis of backtracking on commitments he had made and failing to understand the deep differences that divide the Greek government from the position of Greece's creditors. Many eurozone officials believe that without new funds, Greece could default on debt by the middle of May. However, no one seems to know for sure.

The finance ministers were angry that the Greek Prime Minister Alexis Tsipras had met with German Chancellor Angela Merkel on Thursday a day before their meeting in an attempt to get her to approve financial aid and bypass them. He also met with French President Francois Hollande as well. Merkel said that she is not prepared to override the controls requiring that the finance ministers approve any release of funds. Greek Finance Minister Varoufakis also irritates the finance ministers by sending contradictory messages and little detail about the Greek financial situation. Varoufakis described the Friday talks as "intense" and told reporters after the meeting: “The cost of no solution would be enormous, not only for us but also for all."

The situation is becoming so critical that some finance ministers including from Germany and Slovenia have said that the group is considering plans as to what should be done if no deal can be reached with Greece by the end of June when the present bailout loan expires but large Greek debt repayments become due over the summer.

Greece tackling impossible task of keeping election promises and pleasing creditors

Greece said it will keep election pledges to end austerity measures even as its creditors demand pension and labour market changes that go counter to those pledges.

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Deputy Prime Minister Yannis Dragasakis said Greece wanted a viable solution with the euro zone but still would not budge from their red lines. It is because Greece has not been willing to budge much from these red lines that the Eurogroup and the European Commission, European Central Bank, and International Monetary Fund(IMF), the Troika, have not agreed that Greece has met the conditions of the bailout loan with the reforms presented so far.

Other Greek officials were equally defiant in refusing to countenance cuts in wages, pensions, selling state assets or increasing taxes. Energy Minister Panagiotis Lafazanis said the country won't agree to any privatizations, a position at times contradicted by other officials. It would appear the privatization of Piraeus port is going forward. Lafazanis also claimed creditors were trying to blackmail the government to force it to take measures that would hurt the working class, but the government would not betray the mandate of the people. Spokesperson for the major government party Syriza, Rania Svigou, said:“The Greek government has presented a realistic reform plan that doesn’t contain recessionary measures or burden the weaker layers of society, yet gives the economy breathing space. The government will exhaust all possibilities for a solution that respects the mandate of the Greek people.”That may be the case, but it does not meet the terms of the bailout loan Greece agreed to and as understood by their creditors and until they meet those terms there will be no further cash forthcoming from the loan.

Greek banks so far still are eligible for Emergency Liquidity Assistan according to Mario Draghi, the head of the European Central Bank(ECB), but there has been a heavy withdrawal of funds and transfers outside of Greece as depositors worry about a possible exit of Greece from the Euro zone. However, Draghi ruffled markets and spooked some investors when he said financial buffers were sufficient to prevent any contagion should Greece default on its debt. He also warned that if Greece defaulted on its payments the EU would be entering "uncharted waters."

Draghi urged Greece to work out and implement detailed reforms that would satisfy creditors and release funds. Draghi told reporters in Washington on Friday at a meeting of the International Monetary Fund that much more work needed to be done:"It's urgent. We all want Greece to succeed. The answer is in the hands of the Greek government."Even US Treasury Secretary, Jacob Lew , joined the chorus of those urging Greece to reach a deal, and warned a default would "create immediate hardship for Greece."

Some observers, such as Der Spiegel, are suggesting Russia's Putin will come to the rescue of Greece. As Zerohedge puts it: According to Spiegel, citing a senior figure in the ruling Syriza party, Greece is poised to sign a gas deal with Russia as early as Tuesday which could bring up to €5 billion into the depleted Greek coffers.Russia needs an alternative pipeline that would bypass the Ukraine.and bring Russian gas to Europe through Turkey and Greece. Greece would not need to repay the advance until after the pipeline began to operate about 2019. While these funds may provide a temporary stopgap, Greece will still require more cash later this summer and so the Russian injection would simply be another stage of kicking the can down the road, but at least could buy Greece some further time to work issues out. The deal with Russia could be a sign that Greece is willing to begin moving away from the EU orbit into a closer relationship with Russia.

Syriza not even able to win symbolic victory but tops in rhetorical flourishes

Mario Draghim, president of the European Central Bank(ECB), told Greek officials in Brussels that the Greek government must allow technical representatives representing the European Commission, the ECB and the IMF to start work in Athens on Wednesday.

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These three institutions are the Troika charged with overseeing Greece's compliance with the terms of the bailout agreement. The European Commission and the International Monetary Fund(IMF) had the same message. Originally the Greek government claimed it would not negotiate with the Troika and the group did not go to Athens as is usually the case. Instead of being referred to in most documents as the "Troika," the new term is the "institutions" even though the reality is exactly the same. The Greek government was able to move the meetings discussing the proposed reforms to Brussels rather than Athens. However technical personnel from the Troika insist they need to go to Athens to examine the government books. Greece has given in and agreed to that.

Jeroen Dijsselbloem, chair of the Eurogroup of finance ministers said:“The important thing is that we’re starting the technical work between the troika institutions and the Greek government. It needs to start to bear fruit.”

Note that Dijsselbloem sneaks the term "troika" back into his description as if to remind the Greek government of the reality that they are still dependent on the Troika whatever the rhetoric from the ruling party Syriza. Dijsselbloem said the list of reforms presented by Greece last week was far from complete and not enough. He also complained that Greece was not moving quickly enough to implement what had been already agreed and wasted time arguing about where meetings should be held: "We seem to be losing time now - since the last eurogroup little has been done in terms of future talks, in terms of implementation. We have spent the last two weeks discussing who will meet who, where, and in what configuration. It’s been a complete waste of time."

The problem for Prime Minister Alexis Tsipras is that he is trying to salvage at least some of his campaign promises and get relief from some of the austerity policies imposed upon him by conditions of the Greek bailout. While there are some reforms that are at least agreed upon in principle by the two sides, such as tackling corruption, and tax evasion, even on these issues there are disagreements about some policies. However, with respect to some other issues such as privatization and humanitarian issues such as raising minimum wages, and rehiring government workers, the two sides disagree entirely.

Greece could face a cash crunch in a matter of weeks. Even to make a recent payment the government had to "borrow" from social security funds and issue more treasury bills. Greek sovereign debt is no longer eligible to be used as collateral in liquidity operations. The interest rate on treasury bills is higher than it would be if they could participate in the sovereign debt purchase operations to obtain funds.

While Greece has not even achieved a symbolic victory, since the Troika are going to Athens to examine the books, the Greek Finance Minister spins the situation to suit the demands of his constituency back home: “The troika is a cabal of technocrats that used to arrive in Athens and enter the ministries with a kind of power play that smacked of a colonial attitude. That practice is finished. We shall endeavor to do whatever it takes to provide the institutions with whatever information they need.”Who does he think the people are that he just agreed could go to Athens to look at the books?

To give Varoufakis even a symbolic victory is just too costly as far as the Dijsselbloem is concerned. Hundreds of Greek officials would need to be flown to Brussels to do the work there. The troika cabal of technocrats will return to Athens even if Varoufakis will not call them that. He agreed that the technical people could start Wednesday. German Finance Minister Wolfgang Schaeuble agreed that if the Greeks want it the troika could be renamed "the institutions":If Greece wants that, one can of course negotiate with the three institutions which we should no longer call the troika, but which is the troika,”The Troika smells just as sour by any other name. Notice that in the video appended only the term "institutions" is used not the Troika. This is a great semantic leap forward for Syriza.

The stock markets are declining in Europe and also North America. Gold has come off its lows in reaction to increased concern that Greece may default on its loans soon.

Mario Draghi ECB president optimistic about future of euro zone economy

Mario Draghi, President of the European Central Bank(ECB) gave a positive optimistic outlook for the euro zone economy during a press conference in Cyprus.

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The euro zone economy is receiving a stimulus from lower prices for oil. The fall in the value of the Euro also improves the situation for exporters. Finally, the ECB is introducing a policy of quantitative easing(QE) through the purchase of sovereign bonds. This should improve liquidity and stimulate the economy. The Bank will begin the bond buying program on March 9.

The ECB will purchase $66.48 billion in bonds each month until September 2016. The program could continue beyond that date if the goal of raising inflation to around the two percent level is not reached. ECB economists provided support for Draghi's optimism with predictions of 1.5 percent growth in 2015,1.9 percent in 2016 and just over 2 percent in 2017. Although prices actually fell in January and February of this year, they are expected to rise by 1.5 percent next year, and 1.8 percent in 2017. In total, the ECB plans to buy $1.2 trillion in bonds. Draghi claims that the program will result in the euro zone's fastest growth rate since 2007 and boost inflation.

There was no good news for Greece in Draghi's remarks. There was no waiver of the requirements for being eligible to participate in the bond buying program for Greece. This will make financing for the Greek government a continual struggle since it will need to issue more treasury bills that will have a high interest rate. As one article described the situation in a rather weird metaphor: In short it may be about to rain money in Europe, but Athens is holding an umbrella.However, Greece does not have enough sovereignty to throw away the umbrella. It must get permission from its creditors to do so.

In an earlier speech before the European Parliament in late February Draghi noted that unless countries gave up some of their independence and created more institutions governing the entire zone its future would be at risk. Draghi complained that the euro zone had not yet become a real monetary union:“In the medium to longer term, we need to move from a system of rules and guidelines for national economic policy making to a system of further sovereignty sharing within common institutions so as to strengthen our economic policy governance. A common rule is only as strong as the common institution that can enforce it.”

Draghi said that if Greece showed that it was willing to stick by the conditions of the bailout, the ECB would again accept Greek government bonds as collateral. Draghi left the parliament even before debate was finished to the annoyance of a number legislators. Sceptics claim that improving economic conditions may have more to do with the much lower cost of oil and the lower value of the euro that has stimulated exports:Bundesbank President Jens Weidmann, said the euro-zone economy would enjoy an uplift anyway after oil prices fell by half, the euro tumbled, and stimulus in recent months such as interest-rate cuts take effect.