Greek - EU Rift Spells Danger

Rift talk may be self fulfilling prophesy

The Greek government has submitted the long-awaited list of reforms to the lenders but the initial signs do not point to an agreement anytime soon that could open the spigots of liquidity to the cash strapped economy. Fully aware of the difficult choices ahead, some in the government obviously think they could strengthen the country’s negotiating position by raising the specter of a breakup in the negotiations with the lenders that could even lead to a euro exit. However, these tactics weaken Greece’s position further rather than strengthening it and should be abandoned.
 My view:

The new Greek government is determined to end austerity it seems at nearly any cost.

It appears that instability is growing as depositors continue to move their money out of the country's banks.

Contagion may set in soon depending on the velocity of the flight of deposits.

The governing party Syriza does have a back up plan to introduce a new drachma in the event of a Euro exit although this is not their first choice.

As more loan payments are due to the EU and IMF, we will soon see the true liquidity position of the Greek government.

It is our suspicion that they are nearly out of cash and that the market has discounted this at its own peril.