Gold is seeing gains in early a.m. trading on Wednesday on safe-haven demand over concerns of a possible Greek default. The EU and International Monetary Fund are accusing Greece of dragging its feet attempting to force creditors into releasing stimulus without Greece implementing real reforms. Gold last reported a.m. is $1188.10 and silver is $16.06
German Chancellor Angela Merkel said, “the goal is to keep Greece in the eurozone, adding where there is a will, there is a way.” She insists it’s up to Tsipras to show the willingness to move forward with credible reforms.
Greece has until the end of June to come up with an acceptable proposal when it is also scheduled to pay around 1.6 billion euros to the IMF.
According to Zero Hedge, while the Greek government has wasted the past 4 months experiment with game (and hope) theory-based negotiations with the Troika, debating what reforms it should implement, what the budget surplus should be, and how much of a pension and wage haircut the local workforce should undergo just to keep the trickle of European money flowing and “allow” the IMF to repay Greek IMF obligations and the ESM to repay the ECB, the Greek economy has slammed into a brick wall because according to Greece’s retailers association, about 59 businesses close down and some 613 jobs are being lost each day.
Unfortunately, that number does not give justice to the total economic collapse that has happened in Greece over the past 5 years, just so the myth of the doomed “common currency” could be maintained one day at a time.
It is not just the country’s domestic businesses that are shuttering down at a dramatic pace: even projects once funded by the European Union, such as motorway construction and which served as a source of jobs for many local contractors, have been mothballed.
When construction of four 6.5 billion euro toll roads across Greece resumed last year, Greek and foreign businesses rejoiced. The motorways, largely funded by the European Union and built by companies including Germany’s Hochtief, France’s Vinci and Greek firms Ellaktor and GEK Terna, had been halted in 2010. Last year, work resumed after the Greek government paid part of a fine to contractors for the four-year delay.
Now, work has slowed once more. With aid from its bailout programme frozen, the government has used its last cash to pay public sector wages and pensions, and service debt. That has left it without 230 million euros it needs to contribute its part of the financing for the road.
The hole has put the entire project at risk again, one of many business ventures suffering amid the uncertainty of four months of negotiations between Athens and its international creditors.
“As a country, we need to move as quickly as possible to strike a deal that will resolve issues being faced by big and small (infrastructure) projects,” says George Sirianos, head of the association for big Greek construction firms.
Reuters tells the story of Paul Arnaoutis, whose firm sells imported medical supplies to Greek hospitals, has been waiting four months to be paid 1.3 million euros the state owes, nearly as much as his company’s entire 2014 sales of 1.7 million.
The Greek insolvency, which had been masked with European liquidity, is finally being appreciated by the vendor chain, and as a result, Arnaoutis’ Chinese suppliers are now demanding cash up front because of the risk of doing business with Greece. Previously they gave 30-60 day receivable terms. “He fears a doomsday scenario in which the government quits the euro and pays its bills with IOUs, which foreign suppliers will not accept.”
“If there is no deal and the government decided to take Greece out of the euro, all Greek importers would be ruined.”
Meanwhile, his company is expected to pay tax on 335,000 euros in reported profit from last year, even though it still hasn’t received most of the money for the sales: “The profit is virtual”.
To make matters worse, these statistics don’t include the repeated bank runs in Greece as depositors pulled another 700 million euros from the system today.
Perpetual debt ensures eventual economic collapse and as nations remain on a debt binge, it’s only a matter of time before other nations follow Greece into insolvency.
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