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by Mish

The Greek parliament holds a pension reform vote on Monday. The vote is expected to pass but perhaps barely. Syriza has a slim three seat majority in the 300-seat Greek parliament.

Also on Monday, the Eurogroup called an “extraordinary” meeting in Athens to discuss the state of play of the macroeconomic adjustment program for Greece.

“Extraordinary” is a euphemism for “emergency”. More demands on Greece are coming up. Greece is way off projected (and mandated) budget surplus targets.

Protesters have gathered outside parliament in Greece ahead of a vote on further austerity measures in return for more international bailout money. The rally coincides with a three-day general strike against the introduction of tax and pension changes.

The BBC reports Greece Protests Ahead of Vote on Pension and Tax Change.

Once again protesters have gathered in Syntagma Square, just outside Greece’s parliament, as lawmakers debate tax and pensions reforms inside the building. Thousands marched in Athens on Saturday – but Sunday’s rally is expected to be even bigger.
The changes expected to be approved by MPs include tax hikes and pension cuts. Greece has been unable to unlock the next loan installment of €5bn (£4bn) after clashing with its creditors over the need for more reforms.
The nationwide strikes are the fourth series to be called since Prime Minister Alexis Tsipras’s government won re-election after organising a referendum on the country’s bailout.
Greece is already looking to implement spending cuts that will amount to 3% of the country’s gross domestic product or €5.4bn euros by 2018.

Third Bailout

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Emergency Meeting

An Extraordinary Eurogroup Meeting has been called for May 9, conveniently timed to coincide with a Greek vote on pension reform.

Discussions will cover a comprehensive package of policy reforms as well as the sustainability of Greece’s public debt. Both elements need to be in place in order to finalise the programme’s first review and unlock further financial assistance to Greece.

Agreed Primary Surplus Path

  • -0.25% in 2015
  • +0.50% in 2016
  • +1.75% in 2017
  • +3.50% in 2018

Fairy Tale Math

Achievability of that path is such an amazing fairy that even the IMF recognizes the problem.

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On May 6, I noted Showdown! In Leaked Letter IMF Tells Germany “Debt Relief for Greece or IMF Drops Out”.

Christine Lagarde’s letter was conveniently leaked to coincide with the convenient timing of the emergency meeting which in turn was conveniently timed for the same day of the pension vote.

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In the letter, Lagarde stated “Third, going forward, we do not expect Greece to be able to sustain a primary surplus of 3.5 per cent of GDP for decades to come.

Instead of conducting an emergency meeting, I suggest a meeting with the church lady.

Lagarde now proposes a primary surplus of 1.5%.

That is nearly as unlikely as a surplus of 3.5%. And at a rate of 1.5%, it will take decades longer for Greece to pay back the hundreds of billions of euros it owes in these programs.

Outright debt reductions or default is coming up. But don’t expect the eurogroup to come to that conclusion. Instead it will demand still more budget cuts as soon as the next set passes.

It’s the Debt, Stupid!

The budget cuts and reform are surely needed. The problem is over €300 billion in debt that Greece cannot possibly pay back.

Of the first two bailouts of €215.9 billion in Greek aid, only €9.7 billion went to Greece. The rest went to banks and other creditors.

For details, please see It’s the Debt, Stupid!

The third “bailout” adds another €86 billion plus bridge loans to the mix.

Default still looms and the totals keep ratcheting up.

Mike “Mish” Shedlock