Programmatic statements are over, now back to work

The new budget and the bargains for the haircut under the gaze of the Troika heads, who will get to work again today in Athens, will ultimately determine the fate of the Greek debt and whether our country will stay in the euro or not.

Paul Thomsen, Matthias Morse and Claus Masuch will announce the new demands of the creditors on the government and ask for clarifications and political commitments. At the same time, the technical teams of the Troika are already working on the budget and finding big faults.

Since the start of the cabinet meeting this morning, Evangelos Venizelos has been presenting the "strangest" state budget, which provides for primary surpluses within 2012, but under conditions of severe recession and unemployment.

It will have two basic scenarios for the deficit, with a "standard" estimation of 7% of the GDP (against 9% -9.2% this year), and an optimistic provision of 4.5% -5% if the agreement goes well for the haircut of the Greek debt (PSI), which will unburden the new state budget and the Greek taxpayer by 4 to 4.5 billion euros.

Nothing is certain however, since the holders of Greek bonds have entered the discussion on the PSI. All eyes are now turning to Frankfurt and to the discussions on private participation in the new support program.

Foreign banks and pension funds are involved that will aim for a haircut of 50%. As it seems, bondholders will push for a shorter haircut and higher yields ("coupon") in the new Greek government bonds that will replace those of the 2012-2020 period.

The foreign bankers will demand a higher interest rate - of about 8% - which will connect with a "development clause" on the Greek economy, while the Greek side insists on an average interest rate of 6%. Bankers argue that this way the final haircut they will receive reaches 70%, which is something they cannot accept.