REPORT: Germany is preparing for a Greek default with time for a last-minute deal running out
The bottom line is that it has not been good.
On Thursday evening the International Monetary Fund (IMF) effectively walked away from bailout talks, citing "no progress" on the "major differences" with the Greek government.
Now Germany's BILD tabloid reports that Berlin is now increasingly resigned to a Greek default, making preparations for debt haircuts and capital controls.
The Greek government is still scrambling to unlock billions of euros as part of a deal which would allow it to make debt repayments - but would also require austerity measures and economic reforms that the new far-left government was elected in opposition against.
At least one Greek minister is still hopeful of a deal by the time of the next Eurogroup meeting, when eurozone finance ministers gather on June 18. After that, Athens has "bundled" payments to make to the IMF on June 30, and further massive ones in July to the European Central Bank.
Even if a deal was reached by June 18 (which now looks less likely), it may not be enough. Here's what Bank of America Merrill Lynch analyst Athanasios Vamvakidis said on Monday (emphasis ours):
Greece and its creditors will have to finalise the deal by the end of this week, the Greek parliament will have to approve the deal the following week, and the European parliaments will have to approve it during the last week of June (assuming away problems with the summer recess). Such a deal will have to include at least €5bn to repay the IMF by June 30 and the ECB bonds that mature on July 20 - to cover all IMF and ECB payments during the summer, Greece needs about €10bn.
We're now at the end of the week and are, if anything, further way from a deal.
Though the hard deadline is still weeks away (and could be as late as July 20 according to some Greece-watchers), as BAML's Vamvakidis notes, a tentative agreement would take weeks of processing and back-and-forth. The later that comes, the more chance that some spanner is thrown into the works, or that Athens simply runs out of cash before everyone signs off on the deal.
Peter Spiegel, Shawn Donnan and Kerin Hope at the Financial Times report that a deal was all but agreed earlier this week, during the head-to-head talks between Greek Prime Minister Alexis Tsipras and EU Commission chief Jean-Claude Juncker.
After the four-hour session, Mr Juncker thought he had a deal: Mr Tsipras had accepted new budget surplus targets that were tougher than Athens had hoped but lower than the existing bailout programme...
Members of Mr Tsipras's radical Syriza party angrily denounced the plan as soon as they caught wind of the details. Faced with a political firestorm back home in Athens, Mr Tsipras cancelled a follow-on meeting with Mr Juncker and instead delivered a strident rejection of the plan before the Greek parliament, calling it "absurd" and containing "irrational, blackmailing demands".
Meanwhile, Olaf Gersemann, business editor of Germany's Die Welt reports that the IMF negotiating team were effectively left twiddling their thumbs, stuck in a Brussels hotel for two weeks.
If the FT is correct and Tsipras really is as beholden to his party as that version of events suggests, there could be massive issues ahead. Juncker has already said that this was his "last attempt" - if Syriza can't bear whatever details it includes on pension reforms or other red-line issues, it may not get any compromises from now on.
As Dan Davies says, the Greek saga is now really into "squeaky bum time."