Negotiations between Greece and the EU are playing out in line with our last report (see SGH 7/31/15, “Greece: September Elections and a Deal”). It remains possible that an agreement on the new MOU may not be finalized until AFTER the deadline set for August 11 (now slipping to August 13) by EU officials as the last day that would allow an ESM disbursement to be made in time for Greece to meet the August 20 ECB bullet payment deadline.
If so, that will be complicating, requiring a Bridge Loan, but will not ultimately matter, as most importantly, the Greek government is working in good faith to meet that deadline, and that is for two reasons:
1 – Athens clearly wants to avoid another political battle over prior conditions that may or may not be needed for a bridge loan, and;
2 – Greek Prime Minister Alexis Tsipras is putting in an all out effort to passing the remaining legislation as quickly as politically feasible (within reason) in order to secure an ESM disbursement of a significant size — Athens hopes it will be 25 billion Euros but we suspect that may be aggressive for a first tranche and have not heard such a figure from EU officials. He is also aiming for a full disbursement of the first tranche of the program as opposed to a bridge loan to accelerate the time frame for re-opening the financial system as quickly as possible, and then to ride the momentum to a victory in September elections.
If there is no MOU agreement in time to allow for disbursement by the self-imposed deadline of the August 20 ECB bullet, instead of voting on the MOU, the Greek Parliament will vote on August 17 or 18 when it comes back from a one week break on an agreement for a new EFSM bridge financing, together perhaps with the third, most controversial, set of “prior actions” related to Farm Taxes, which we expect to pass (and which could be voted on earlier than that).
We continue to expect Tsipras to survive any defections from the Left Platform of Syriza, and his hand to be further strengthened by elections that look all but inevitable now for September.