Greece getting close or further away?

Right now, it's more difficult then ever to understand exactly what is going on with meeting after meeting being rescheduled. All we know for sure is the PSI debt restructuring is not done, the coalition ruling government in Greece is deeply divided and now Germany murkies up the waters even more.

As I have talked about time and time again, the bailout of $130bn euros, agreed on in October, is already too small as the Greek economy has contracted faster then anticipated in October, leaving it $15 bn Euros short (needing $145 bn Euros), but the second tranche being discussed is still $130 bn euros.

There is no deal with private creditors as of yet and as the IMF has been pushing the ECB to take a non-private sector write down on their Greek bond holdings, this violates their mandate as they are expressly forbidden from financing sovereign debt. So the new talk is that the bonds may be transferred from the ECB to the EFSF, which is as strange as it gets as the EFSF was supposed to raise cash to buy bonds, not become a store house for some of the most undesirable bonds in the world, it remains unclear what effect that would have on the EFSF's ability to raise capital as it seems like it is being transformed before our eyes.

Talks again have been delayed, this time it is Germany. Initially it sounded encouraging, the ECB may actually participate in Greek debt restructuring, however, the German delay is a signal that this is far from a done deal.

First the Germans will be voting on whether they will back the next tranche of aid, $130 bn Euros which is very unpopular domestically as Der Spiegel's article pointed out yesterday. Second they will be voting whether to allow the transfer of th ECB bonds to the EFSF, and lastly, a vote regarding guarantees on new Greek bonds should the debt restructuring get done.

There are a lot of "ifs" here. First whether Germany supports any or all of these measures, secondly, it seems to me that the PSI debt deal on Greek debt is not being finalized as private sector holders wait to see if the ECB will get involved, there's no point in agreeing to a 50-70% haircut if the new bonds are just as unworthy as the old ones. There's a clock ticking on this deal as it will take time even after an agreement is potentially reached. For the Troika's part, they seem to be waiting to see if the PSI deal gets done and whether the coalition government will agree to the terms being set out and changed weekly by the Troika. Everyone seems to be waiting to see what everyone else will do first. The fact that Germany is voting on the matter itself is a bit scary for the deal as the ECB/ESFS transfer seems to be a logical solution to ECB involvement without violating their mandate, the fact Germany is dithering on it is not good, but Germany has never supported the ECB being involved in the debt restructuring.

In essence, there are now more players then ever that are in a position of, "Making up their minds". The clear cut draft that was supposed to have been penned yesterday of what is needed for Greece to get the next tranche, is no longer so clear cut as Germany now becomes a wild card in 1 day, whereas just yesterday their stance was well known and understood, today not so much.

The issue that most investors least understand and where the media coverage is the weakest, is the real ticking time bom.. which is the clock itself. Even if everything falls together, it takes time for the debt swap to be effected and Greece is already way past the deadline of what was considered a reasonable amount of time to get it done. Now Germany won't vote on these measures until next week, so we and Greece won't even know what they are discussing until then.

Until then, tick, tick, tick; every tick brings Greece closer to the title of "First developed nation is 65 years to default on their debt'