Greek Clock Goes Tick-Tock

08.02.2012 12:11

WSJ: One of the golden rules of political communications is to not set a goal you are likely to miss. For example, don’t declare deadlines to reach agreement with the Greek political leaders. You won’t make them, and the failure will be public.

When you’re the troika –the European Commission, European Central Bank and International Monetary Fund- exerting public pressure on the wayward bailout-receiver is an obvious strategy.

The drawback is that the financial markets are watching closely and when the deadlines–that you were hoping would pile on pressure–are missed, the delay is priced in and cue stories about how the Greek stalemate is hitting trading.

Three weeks ago, we published a blogpost headlined “46 Days To Avoid Greek Default.”  In it, we outlined the main steps that needed to be taken between the date of publication (January 16) and March 20, the date when Greece has to repay a €14.4 billion chunk of maturing debt. There are now 31 working days left on the clock and none of these steps has been completed. Another blogpost published today also outlines the immediate next moves on the Greek chess-board.

In fairness, we should point out that policy-makers, negotiators and others are working weekends too now, and Greece has a grace period of one week to make the payment, so the absolute deadline in March 27.

Last Friday a leaked copy of a “tentative” timeline was put on Dow Jones Newswires. An EU official said the emphasis was on the word “tentative”; another conceded the schedule was “tight.”

Key dates from this document are as follows, taken from Costas Paris’s Friday story:

February 5

The European Commission, the European Central Bank, the International Monetary Fund, Greece and the European Financial Stability Facility submit a draft memorandum of understanding on private-sector debt restructuring, or PSI, that is expected to be completed by Monday. Also due are details of further aid from the EFSF and its disbursement.

February 6

Eurogroup of 17 euro-zone finance ministers, plus the ECB and IMF, discuss the documentation submitted on Sunday, as well as IMF’s updated debt sustainability analysis on Greece’s debt. Greece’s political parties submit written commitments to reforms to the finance ministers.

February 7

Commission together with the ECB adopts the proposal for additional EFSF funding agreements.

February 7-8

EU member nations approve the required increase in EFSF guarantees as well as the PSI documents.

February 9

Eurogroup gives final approval to the PSI package. Adoption of collective-action clauses by the Greek parliament.

February 10

All parties sign all key documents related to the bailout. Prospectus Supplement of bond-swap offer submitted to Luxembourg stock exchange for approval (if not approved earlier).

February 13

Greece launches its bond swap offer to its private-sector bond holders, a transaction expected to provide Greece with €100 billion in debt relief.

March 6

Settlement of the bond exchange between Greece and its private-sector creditors and disbursement of the EFSF loan.

As you may notice, the first two items on the list have been missed. Which is why Amadeu Altafaj Tardio, the spokesman for EU economics and monetary czar Olli Rehn, said Monday that Greece had “missed a deadline.”

In the course of writing this blogpost, a crucial meeting between Greek caretaker prime minister Lucas Papademos and the leaders of the three political parties that support his government due to take place today was postponed till Tuesday. There goes another deadline, with the domino effect on the next deadline, which is a eurogroup meeting tentatively planned for Wednesday, now looking unlikely to take place that day.

With all these “must-do-by dates” now public, it’s fair to expect another month of missed deadlines, botched plans and late-night meetings as the Greek euro-thriller escalates.

Of course in negotiations, time is one of the main pressure points. In this occasion, however, the fact that the deadline (March 27) isn’t set by one of the negotiating parties but by an external circumstances means that it weighs equally heavy on the Greeks and the troika.