Greece Out of Money by October 17; Greek Banks Refuse to Fund Government T-Bills; Greece Freezes All Disbursements Other than Wages and Pensions

Inquiring minds have watched Greek 1-Year bond yields approach 100%. 2-year Greek bonds yield 55% (assuming interest and principal is paid - but it will not be).

Greece will be out of money no later than October 17 unless it gets the next trance of money as noted in Prospect of empty coffers looms large.

The government is facing the possibility of not being able to pay wages and salaries in October if its international creditors do not approve the pending 8-billion-euro sixth installment immediately.

The country�s foreign lenders have made disbursement conditional on the government�s adoption of new measures that will target the collection of at least 1.7 billion euros. Without the sixth tranche, the public purse will be 1.5 billion euros short on October 17.

The prospect of a freeze in payments appeared even more serious on Thursday, after Greek commercial banks failed to cover the sum of 300 million euros of supplementary, noncompetitive bids for Tuesday�s auction of T-bills, providing only 155 million. The shortfall is interpreted as a clear message by banks to the government that they are unwilling to fund future issues of T-bills.

The gravity of the situation is indicated by the fact that the government has frozen all disbursements apart from salaries and pensions.

Greece and the EU better get a plan in place to deal with the consequences of default as well as a Greek return to the drachma, its previous currency.

I suspect the currency will be given a new name.

Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com
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