Greece updates - October 16 , 2013 - third bailout for Greece looms - but what will the fourth bailout look like ? More news of the day for Greece !

http://www.zerohedge.com/news/2013-10-16/what-third-greek-bailout-will-look

What The Third Greek Bailout Will Look Like

Submitted by Tyler Durden on 10/16/2013 08:30 -0400

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Mere weeks after the Merkel re-election, it will come as no surprise to anyone that Greece is to be bailed out for the third time. Germany's Die Zeit newspaper notes the government is assembling a Greek bailout plan which essentially has four gimmicks to fill the "high-single-digit-billion" budget shortfall. Despite having been told time and again that the worst is over, Greek Bailout III will entail shifting cash from the bank recap fund, Bill sales to specific banks which can be instantly collateralized with the ECB, possible extensions of credit by existing creditors, and reduction in interest rates on existing debt. Of course, we will be told that this is the last time and that Greece will emerge victorious in just 1 or 2 more years...but after a few weeks of epic strength, the Athens stock index is giving some back in the last 2 days.

Via Bloomberg,

German government is assembling Greek bailout plan involving shifting funds, ECB assistance, expanded credit and outstanding-debt reduction, Die Zeit newspaper reports, citing unidentified finance officials.

• Creditors to shift unused Greek bailout funds earmarked for bank recapitalization in current program to fill 4 bln euro funding gap
• Amount in current program could be topped off by funds raised in short-term government debt sale to private banks, which can use the bills as collateral through the ECB
• Creditors weighing additional financing to Greece to 2016 after current bailout ends next year; IMF program to end then
• "High single-digit billion’’ sum needed to finance Greece through beginning of 2016
• Creditors considering extending credit maturities and lowering interest ratesto help Greece carry debt burden

Seems to us that if the bank recap fund is greatly rotated into government funding then all that hot money flows into Greek banks may be a little caught offside?

and more from Greece.....

New austerity measures could lead to elections, says health minister If Greece’s lenders ask the coalition government to implement more horizontal cuts the country could go to a new round of general elections said Health Minister Adonis Georgiadis, speaking on Skai television on Wednesday morning. Georgiadis’s comments came in the wake of reports that Greece was facing the possibility of further austerity measures next year due to larger then expected fiscal gap.

ekathimerini.com , Wednesday October 16, 2013 (13:26)  Bond spread declines to levels unseen in the last three years  A recent visit by Prime Minister Antonis Samaras (left) to the US played its part in bringing down the spread between the yields of the Greek benchmark 10-year bond and the German bund, according to observers. By Sotiris Nikas The spread between the yield of the Greek benchmark 10-year bond and the 10-year German bund declined on Tuesday to levels unseen in the last three years, while for the first time since the start of the crisis Greece has dropped to sixth place on a chart of countries most likely to default in the next five years. In the last few days the Greek bond market has been having a good spell, with the spread and the yields going down and the prices going up. The change in the atmosphere is mostly attributed to the news about the primary surplus (which if confirmed will lead to measures for the lightening of the debt), the better course of gross domestic product and the shrinking of the recession. A recent visit by Prime Minister Antonis Samaras to the US also played its part, according to market sources. In that context the spread has gone down to 667 basis points. The last time it was at that level it was on October 14, 2010 (at 666 b.p.). Bond prices, meanwhile, grew to 63.3 percent of their nominal price, a level last seen in May, when the market also recorded a mini-rally. Before May, that kind of level had been last achieved in April 2011. The yield of the bonds fell yesterday to 8.5 percent, which is the lowest seen since June 2010 (at 8.44 percent). Another bit of good news was Greece’s drop to sixth place on the default likelihood chart, according to data by S&P Capital IQ CDS. The possibility of Greece going bankrupt in the next five years stands at 44.5 percent. In the last assessment Greece had ranked fourth, after a long period during which it was by far the chart leader. Argentina currently tops the chart with a 77.8 percent likelihood of defaulting. ekathimerini.com , Tuesday October 15, 2013 (23:17)  Samaras pleads for solidarity in Brussels but third program looms for Greece  Greece's Prime Minister Antonis Samaras delivers a speech on "The Necessity of Europe" at the European Parliament in Brussels, on Tuesday. With Greece facing the possibility of further austerity measures next year and with its looming financing gap making a third bailout – and subsequent consolidation program – appear highly likely, Prime Minister Antonis Samaras traveled to Brussels Tuesday to plead for greater solidarity from its lenders. Speaking at an event held in honor of the late Constantine Karamanlis, Samaras stressed that Greece and its people were making a big effort to live up to its commitments. He expressed his hope the Greece’s creditors would also stand by the country. The prime minister’s visit came a few hours after a meeting of eurozone finance ministers in Luxembourg, where European Central Bank executive board member Joerg Asmussen suggested that Greece would need to make further savings or increase its revenues next year to cover a fiscal gap. Greek Finance Minister Yannis Stournaras insisted that Asmussen did not repeat this claim, made to reporters, during the Eurogroup. But sources told Kathimerini that Greece might have to find an extra 2 billion euros next year on top of about 4 billion it has already planned to save in the draft budget. The next stumbling block is the financing gap, which Asmussen suggested could be as high as 6 billion euros. The ECB official ruled out the possibility of the bank, or other eurozone central banks, rolling over the Greek bonds they hold to cover the gap. Greece has suggested that it could roll over 4.4 billion euros in bonds held by Greek banks. The notes, given to the banks by the Greek government in 2009 in return for preferential shares, mature next year. Exchanging them for new ones could provide the government with a breather. However, sources told Kathimerini that the ECB would likely block this move as well. The reason is that these bonds have been recorded on banks’ books and if the government does not pay out, it will impact the ratio of a lenders’ core equity capital to its total risk-weighted assets, which is known as the Tier 1 capital ratio. Sources said that the rollover would push two Greek banks’ Tier 1 ratio under the 9 percent demanded by European banking rules. This would lead to those lenders requiring further recapitalization, which would come at the expense of the Greek state and would defeat the purpose of the initial bond swap. This leaves Greece with limited options and the possibility of a third bailout program, which would require further measures to be adopted, looking ever more likely. ekathimerini.com , Tuesday October 15, 2013 (22:17)  ELSTAT finds economy contracted by 6.4 pct in 2012 Last year’s recession amounted to 6.4 percent as gross domestic product shrank to 195.2 billion euros, according to the first official estimate by the Hellenic Statistical Authority (ELSTAT), released on Tuesday. This means that from the start of the crisis in 2008 up to end-2012 the Greek economy contracted by 27.5 billion euros, or 12.3 percent. ELSTAT figures show that last year’s recession was mostly due to the dramatic decline in investments, although all main economic elements contributed in the drop of GDP with the exception of imports. Investments shrank by 19.2 percent last year compared with the year before, after a 19.6 percent fall in 2011. Private consumption declined for a fourth consecutive year, by 9.1 percent on a yearly basis, which is the highest contraction rate since 2009. Public (state) consumption contracted by 4.2 percent. Exports declined by 2.4 percent from 2011 having grown by 0.3 percent in 2011 and by 5.2 percent in 2010. Imports dropped by a considerable 13.8 percent owing to the reduced demand for commodities, although this led to an improvement in the course of the trade balance as the deficit has decreased. ekathimerini.com , Tuesday October 15, 2013 (23:22)   Private sector umbrella union calls strike on November 6 Greece’s umbrella union for private sector workers, the General Confederation of Greek Labor (GSEE), on Wednesday announced a 24-hour strike on November 6. Both GSEE and ADEDY, the umbrella union representing Greek civil servants, have called a series of strikes to protest austerity measures imposed by the coalition government in return for bailout funding from the country’s international creditors. The November 6 industrial action is billed as a protest against a new unified property tax which unions fear will prove higher than previous imposed levies as well as fears of new salary and pension cuts. The national seamen’s union (PNO) is expected to join the 24-hour walkout leading to disruptions in passenger and cargo ferry schedules on the day. ekathimerini.com , Wednesday October 16, 2013 (15:45)