Who'll take charge of the ruins after Sunday?
Photograph by Bloomberg via Getty Images
By Geoffrey Smith
April 20, 2015

Greece is approaching default. Don’t panic: it’s happened before, on six separate occasions since the country gained independence from the Ottoman Empire in 1832. But, admittedly, this time will be different.

Greece is hardwired into the world’s biggest trading bloc through its membership of the Eurozone and E.U., and a disorderly default could unleash powerful destructive forces in that ageing, stagnating bloc, sending shockwaves through the world economy. However, there is still plenty of scope for politics (and good sense) to resolve the crisis, or at least mitigate it.

Despite the hardening rhetoric, the politics of default are still fluid: for the first time last week, financial markets elsewhere in Europe are starting to take fright; that may increase the Eurozone’s willingness to compromise.

Meanwhile, in Athens, Prime Minister Alexis Tsipras can still at any time dissolve his government and call new elections, or hold a referendum on Eurozone membership (which would amount to the same thing). There’s a small chance that a new coalition with a party (such as the centrist To Potami) would create the space for a face-saving compromise. But the real point of a referendum or new elections would be to provide an explicit mandate for leaving the Eurozone–the one thing that the voters have shied away from giving so far.

One thing is sure: trying to keep track of every turn in the drama between now and July, when the matter has to be resolved, is a fast track to madness. So here’s a quick rundown of key dates and events to watch out for:

April 24: The Eurogroup, the college of Eurozone finance ministers, meets in Riga, Latvia. This was the meeting where it was originally hoped that the Eurozone and Greece would agree on which parts of the bailout agreement could be swapped out and replaced with measures proposed by Athens. But negotiations so far have gone nowhere, and the government has actually taken the two sides further apart, pumping up pensions and widening requirements for collective wage bargaining: just the opposite of what the bailout agreement requires.

April 29: The ECB’s monthly monetary data will show how much money left the Greek banking system in March. If it’s another large number, then tension in the markets will ratchet up another notch. Over 15% of deposits in the system fled in January and February. Another big number will test the will of the ECB to keep filling the funding gap, especially if Greece’s Finance Minister Yanis Varoufakis goes too large on the default threat in Riga (where ECB President Mario Draghi is almost certain to attend).

May 1: Public holiday in Greece and most of the Eurozone. If the ECB does decide to pull the plug on the banks, either by cutting funding or by acting in its capacity as supervisor to shut them down, then this three-day weekend is an obvious choice to do it, giving bankers and policy-makers an extra day to sort things out before they reopen on Monday. However, it’s an extreme move and if the Riga meeting still leaves any chance of a deal, it’s unlikely they’ll pull the trigger so early.

May 6: The ECB’s governing council has one of its regular meetings to discuss things other than monetary policy. Strictly speaking, most things related to ‘Grexit’ would fall under ‘monetary policy’ but ad hoc decisions can’t be ruled out.

May 8: €1.4 billion in Treasury bills falls due. Regular treasury bill redemptions are the least problematic aspect of the government’s funding requirements as it can lean on domestic banks and investors to renew or ‘roll over’ their holdings to put off the day of reckoning. Any trouble in rolling over such debts would be a sure sign of heightened stress.

May 11: With Germany’s Wolfgang Schaeuble and European Commissioner Pierre Moscovici both saying a deal in Riga is effectively impossible, this is now the meeting which (in Moscovici’s words) “must certainly be decisive”. (If things go badly in Riga, it wouldn’t be surprising if another meeting gets scheduled between these two dates, but this would be more likely to be the conclusive one.)

May 12: €775 million repayment to the IMF: This is the payment at the heart of last week’s market volatility. Stocks around the world fell after it emerged that Greece’s finance minister Yanis Varoufakis had asked IMF head Christine Lagarde for a grace period. If there’s no deal at the Eurogroup the day before, Greece will have to choose between paying the IMF and paying public sector wages and pensions. Bear in mind that sovereign default is always about the willingness to pay as much as it is about the ability to. If Athens is still inclined to play chicken at this stage of the game, it can gamble that defaulting on the IMF would put more pressure on the Eurozone (through market volatility) than on itself. That’s also a gamble that the ECB won’t have the courage to shutter Greece’s banks in response to the acceleration in deposit flight that will certainly follow a default to the IMF.

May 15: €1.4 billion in T-bills due.

May 20: Another ‘non monetary-policy’ ECB council meeting.

May 25: Pentecost holiday in most of the Eurozone: this is another one of those three-day weekends that could be used for radical action. However, Pentecost isn’t until June 1 in Greece because of the Orthodox Christian calendar, so if they choose this weekend to act, it’s because they fear a regional meltdown, rather than just a Greek one.

June 1: Pentecost in Greece. Capital controls day? Quite possibly.

June 3: ECB council meeting.

June 10/16/19: Three instalments to the IMF–of €310 million, €581 million and €348 million (a total of €1.24 billion)–fall due. If these debts (and €3.6 billion in T-bills on June 12 and €1.6 billion on June 19) are serviced, it’s because PM Alexis Tsipras is trying to keep the plates spinning until…

June 25-26: EU summit: History suggests only the E.U.’s heads of government can actually take decisions as momentous as debt forgiveness or forcing a country out of the Eurozone. Even the ECB would rather not do anything too radical until it’s quite sure of political backing at the highest level, and this is where the key political decisions are most likely to be taken.

July 10: €2 billion in T-bills due.

July 13: €465 million instalment to the IMF.

July 20: D-Day. The day when the outcomes become binary. It may just be that the Eurozone can put off a final decision even on June 26 (and schedule another emergency summit in early July). But this is the day Greece has to redeem €3.46 billion in bonds held by the ECB. It can’t finance that from its current budget. Default would strip the central bank of any remaining justification for funding the country’s commercial banks. For the government, withholding an equivalent amount from the population would almost certainly drive the domestic situation out of control. And even if, by some miracle, the two sides manage to give the can one last kick, there’s….

Aug 20: Another €3.2 billion due to the ECB.

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