The Collapse Clock Moves One Minute Closer To Midnight

Clock ticks on Greece's bailout deadline

ATHENS (Reuters) - Greek Prime Minister Lucas Papademos faces a critical task of convincing international lenders and political party leaders on Sunday to agree to the stringent terms of a 130 billion euro ($171 billion) rescue plan to stave off looming default.
Greece on Saturday warned it had just one day left to clinch the bailout plan with political leaders and impatient lenders who accuse it of dragging its feet on promised reforms.
"There is great impatience and great pressure not only from the three institutions that make up the troika but also from euro zone member states," said Finance Minister Evangelos Venizelos on Saturday after what he called a "very difficult" conference call with euro zone counterparts.
"The moment is very crucial. Everything should be concluded by tomorrow night."
Papademos, who failed to resolve all issues in talks with lenders on Saturday, is due to call in the socialist, conservative and far-right party leaders in his coalition on Sunday to seek their blessing for reforms in the bailout.
Athens has wrangled without success for weeks with lenders and private bondholders on the bailout package and a debt restructuring plan, putting itself dangerously close to bankruptcy as 14.5 billion euros of debt falls due in mid-March.
In an apparent warning to Greek political leaders opposing key reforms, Venizelos said the patience of European partners and the International Monetary Fund (IMF) footing the bill for Greece's bailout was wearing thin.
Euro zone finance ministers told Greece on Saturday it could not go ahead with an agreed deal to restructure privately held debt until it guaranteed it would implement reforms needed to secure a second financing package from the euro zone and the IMF.

My view:

While Athens burns, the emperors are fiddling.

Greek politicians are still trying to kick the can down the road as the Troika attempts to impose austerity measures that are so unpalatable that no party can stomach them.

With Greek debt to GDP exceeding 170%, this plan to drop it to 120% is a restructuring plan with no hope of working.

My own calculations, taking into account the terrible trade deficit Greece has, indicate that from a repayment standpoint after default, debt to GDP probably should not exceed 30%.

The severity of the Greek problem can mean only one thing.

As some point soon, out of a sense of self preservation, the Greeks will default on virtually all of their debt and return to the drachma.

Such an uncontrolled default is likely to cause much disruption in the banking industry in Europe and spill over into the United States and other nations.

While I doubt the next 24 hours will bring on such a calamity.  It should become apparent to the markets even is a temporary deal is reached within the next few months, that the Troika, central banks, and sovereign governments have greatly exaggerated their ability to resolve this crisis.

I note that over the past couple of weeks, even Libor and Ted have been dropping, showing the high level of complacency that exists.

The stock markets are probably very headline sensitive at this point with their low volumes and high degree of institutional manipulation.

In a few weeks, I anticipate some type of flash crash once a large enough headline grabbing story shocks investors into reality.  Until then stocks may whipsaw about as they grind a little higher.