I was probably more optimistic when I wrote the Greek case will come back on the top of news in few months. Actually, it could be earlier. Greece’s latest cycle of talks with its creditors started with a quarrel, as officials argued over what prior commitments the government has yet to implement in order to tap emergency loans next month.
Technical experts from the ECB, the IMF and the European Commission are in Athens to negotiate with their Greek counterparts on the list of policies that must be implemented over the next three years in exchange for emergency loans of as much as 86 billion euros.
A so-called Memorandum of Understanding would need to be agreed upon in the next two weeks, so that a bailout can be in place before a payment on bonds held by the ECB comes due. Failure to do that might force another short-term bridge loan to avert default.
The latest talks will focus on changes to the pension system, labor market, fiscal policy, and market regulation. A Greek Finance Ministry official on Monday told reporters that Greece has already voted through Parliament all the prior measures it needed to implement. But creditors disagreed, saying that more reforms are expected as part of the statement from the Greek authorities.
In the meantime, confidence in the banking system will not restore tomorrow. According to Moody’s Investors Service, Greece’s new bank-failure law puts uninsured depositors at risk because it ranks them below state claims in an insolvency or resolution.Greece last week rushed bank-resolution legislation through parliament. The law is “credit negative” for bondholders and uninsured depositors because of the limits on using public funds for bank resolution and because of the burden-sharing for all unsecured creditors starting next year, Moody’s said.Nonperforming loans are likely to rise to well over 40% of banks’ loan books this year, from 35% at end-2014, the analysts wrote.
The Greek case is far to be over. The only thing we know for sure, it is not going to be a happy end whatever the scenario.