Greek Risk Timeline: Dates to Watch

Greece Risk TimelineJuly 20 is Crucial

Bloomberg Intelligence Economist David Powell

Greece probably has until late July to come to an agreement with its creditors before the process of leaving the monetary union would begin.

Possible delays in payments to the International Monetary Fund in June shouldn’t prompt the European Central Bank to shut off vital liquidity to Greek banks.


By contrast, a default on marketable debt -- specifically the failure of the Greek government to pay 3.5 billion euros due to the ECB on July 20 -- would put Greece close to the exit.


The Greek government and its creditors are still likely to reach a deal on a list of reforms before that crucial date.

The following is a list of all the relevant dates:


June 24: The Eurogroup has met to discuss the latest proposals submitted by Greece and adjourned with no agreement having been reached. Alexis Tsipras is reportedly meeting with the heads of Greece’s creditor institutions late into the night.


June 25-26: Negotiations between finance ministers are set to continue tomorrow ahead of the arrival of heads of state for a European Council meeting in Brussels later on Thursday. Unless an agreement is reached between finance ministers, the heads of government will probably use this meeting to continue discussing Greece, even though it is not on the agenda.


This seems like a medium- to high-risk event. There’s a good chance that proposals will not have advanced very much by the time the heads of state arrive. They will then have an incentive to make this meeting seem like Greece’s last opportunity to come to an agreement. The scaremongering could lead to an acceleration of deposit flight from Greece. In reality, this is unlikely to be the last date for a compromise to be found because the Eurogroup -- the collective of euro-area finance ministers -- will meet again on July 13, ahead of the the most important deadline of July 20. And of course, further Eurogroup meetings can always be added to the schedule.


June 30: The extension expires for the “Master Financial Assistance Facility Agreement,” as Greece’s bailout is known. This will probably be a medium- to high-risk event. If, after this date, Greece were no longer officially in a bailout program, the ECB could decide to re-assess its collateral rules linked to Emergency Liquidity Assistance, though the most likely outcome of this soft -- and arbitrary -- deadline is an extension if an agreement remains elusive.


In addition, Greece must make a payment of 1.2 billion SDRs to the IMF on this date after having opted to bundle its payments for June into one. That equals about 1.5 billion euros.


IMF Managing Director Christine Lagarde has said there will be no grace period for Greece beyond June 30, though the immediate consequences of missing a payment to the IMF would be limited –- after all, the next step is a strongly worded letter.


July 1: The ECB’s Governing Council will hold a non-monetary policy meeting in Frankfurt.


This is a high-risk event. The policy makers are likely to discuss how to react to the events of June 30, which could include the expiration of Greece’s bailout package and the country having missed a payment to the IMF. In an extreme scenario, the ECB could decide as a result to cut off access to ELA, though that seems unlikely.


On May 28, ECB Vice-President Vitor Constancio showed some flexibility saying that “there is no automatic -- and I underline the word -- connection between a default of the Greek government and the insolvency of Greek banks.”


July 8: Greece will sell 26-week bills.


This will be a low-risk event because local banks have been willing buyers of short-term debt throughout the crisis.


July 10: Greece must roll over 2 billion euros of Treasury bills. This is a low-risk event.


July 13: Greece will have to make a payment of about 360 million SDRs to the IMF. That equals about 448 million euros.


This is a low-risk event. If Greece has made it this far and is already in arrears, missing another payment shouldn’t be a big event. If it isn’t in arrears, it could once again ask for its payments to be bundled into one, due at the end of the month.


July 13: The Eurogroup will meet. This will probably be a medium-risk event. It is the last scheduled meeting ahead of the July 20 payment to the ECB.

In other words, this may be presented as the last opportunity for the finance ministers to agree on the disbursement of funds ahead of that date. In practice, meetings can be added as required in the run-up to July 20.


July 14: Greece must repay 11.67 billion Japanese yen in yen-denominated loans. That equals about 84 million euros. This is a low-risk event.


July 16: The ECB’s Governing Council will hold a monetary policy meeting in Frankfurt, followed by a press conference.


This seems like a medium-risk event because the policy makers appear unlikely to adopt a change in stance ahead of the July 20 deadline. Journalists would be likely to drill Mario Draghi on how the ECB would react to a default on its marketable debt.

This meeting is an obvious candidate for the ECB to signal its intentions on ELA, should the July 20 payment be missed. An announcement that the ELA facility would be closed in the event of a default would cement that date as the deadline for a deal to be reached.


July 17: Greece must roll over 1 billion euros of Treasury bills and pay around 71 million euros in interest. This is a low-risk event.


July 19 and 20: Greece must make the largest coupon payments of the month -- about 199 million euros and 104 million euros, respectively -- on government bonds.

The total for the month is 810 million euros. In addition -- and more importantly -- Greece’s 3.5 billion-euro bond held by the ECB matures on July 20.


This is a high-risk event. A default could cause the ECB to cut off Greek banks’ access to ELA. That would probably be the first step to an exit of the beleaguered country from the monetary union.


July 31: Moody may review Greece’s sovereign debt rating. This seems like a low-risk event because, with Greek bonds already rated as junk by Moody’s, any decision on this date is likely to be unimportant.


Aug. 1: Greece will have to make a payment of about 141 million SDRs to the IMF. That equals about 175 million euros. This is a low-risk event. Greece may already be in arrears and it could again ask for its payments to be bundled into one due at the end of the month.


Aug. 5: The ECB’s Governing Council will hold a non-monetary policy meeting Frankfurt. This seems like a low-risk event because most of the substantive decisions regarding access to ELA will have been already made. In addition, Greece will sell 26-week bills.


Aug. 7: Greece must roll over 1 billion euros of Treasury bills. This is a low-risk event.

Aug. 14: Greece must roll over 1.4 billion euros of Treasury bills. This is a low-risk event.


Aug. 20: Greece must make the largest coupon payment of the month -- about 194 million euros -- on government bonds. The total for the month is 211 million euros.


In addition, Greece’s 3.2 billion-euro bond held by the ECB matures. The riskiness of these events is path-dependent. If Greece has managed to secure bailout funds by this date, the payment shouldn’t create a problem.

If it hasn’t secured the funds, Greece will probably have defaulted on its July 20 payment to the ECB already and this second payment might be immaterial. If Greece hasn’t secured bailout funds, but managed to somehow make the July 20 payment, this would be a high-risk event.


General Risks Without Specific Dates

Capital controls


At any point deposit flight could accelerate so quickly that the Greek government is required to impose capital controls. Greek banks are said to have enough collateral to access 93 billion euros in liquidity. That’s only 8.9 billion euros above the latest cap leaked to the press of 84.1 billion euros.

As the Cyprus example showed, the introduction of capital controls shouldn’t have any direct implications for Greece’s membership of the euro, but could exacerbate political risks in Greece by prompting civil unrest.




Government collapse

The fragile coalition led by Syriza is made up of a disparate group of parliamentarians. At any point their differences could become too great for them to remain united in a coalition. The prime minister would then have to find a new coalition partner or hold fresh elections in the event that a government cannot be formed.

Negotiations with creditors would probably be postponed and some temporary extension granted in this event.



Referendum risk


If Greece’s Prime Minister Alexis Tsipras feels that he is unable to negotiate a deal in line with his campaign promises, he could at any point announce a vote on whether Greece should remain in the euro area, given the terms and conditions on offer.




ELA

Though the ECB appears highly unlikely to shut ELA off suddenly, the Governing Council could take that decision at any time. The shut-down of ELA would probably be signaled in advance and linked to a specific event -– to prevent accusations that the choice of deadline is arbitrary.

A good candidate would be if Greece misses its July 20 payment to the ECB.




Eurogroup meetings

The finance ministers of the euro area could announce new meeting dates at any point. They have frequently added to their list of pre-announced meetings in the past.


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Greek Risk Timeline: Dates to Watch

Economy & Finance

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