Central Banks Should Limit Bank Deposits

Waterfall symbolizing the
Alan Greenspan Theory

There is something called the "transmission effect" meaning that when the central banks infuse liquidity into the banking system it sooner or later comes out into society. Alan Greenspan, former Fed Governor, described it as pouring water at the top of a mountain. You know it will eventually get to the valleys but you do not know when and which ways it will take. During the crisis of 2007-2009 the transmission effect stopped functioning. We discussed with central banks about it and we found that some did find other ways to get liquidity out in the none banking system and some did not. We are again seeing that the transmission effect does not work. Banks deposit a huge amount of its cash with the central banks, which in effect are bank runs and the central banks need to put even more money into the bank system in a vicious circle. This must now stop. One way might be to limit the amount each bank can hold with the central bank forcing the excess liquidity out to the real economy. Just a thought... 

Responsibilities of Strongest Chain

The effects of the present credit crunch and new regulation is putting a huge strain on the weaker companies in the supply and demand chain. The strongest parties have for many years outsourced capital expenditure and costs to the weaker parties and the chain is not stronger than its weakest link. Unfortunately we still see strong, cash rich companies holding onto cash for much longer than the payment terms say, all for improving its own working capital. Large corporations proudly present how they have been able to shrink the cash conversion cycle simultaneously forcing other parts of the chain to expand its number of cycle days. This will not be possible any longer since this credit crunch risks becoming a systemic shift substantially reducing the cash availability for corporates and only those with high ratings might be the only ones able to find sufficient funding. Pushing the payment terms unilaterally to suppliers will not any longer work, alternatives have to be presented. We already have reverse factoring and dynamic discounting and new models are being developed, such as web auctions of account payable. 

In the short term however the strongest parties have to consider the cash conversion cycles not only for themselves in isolation but for the whole chain. In the longer terms we need to develop solution to replace the cash that has disappeared when regulation forces banks to leave us.

In Important London December 6-8

Next peer group meeting will be in London 22-25 May 2012 and we are planning the program details to be sent out to all members shortly. 

The peer group and this blog is receiving very much interest from all over the world. Our aim is to voice the corporate perspective and present what, from a financial perspective, is important for the corporate society. During the next six months we have to focus our attention on the regulatory framework since it will be set in stone next summer. We need to change it before then. The more followers and support we get from you, the more we can voice our opinions. Joining the peer group is a good way to show your support.

In preparation of the meeting and following up the great interest from the London group treasurers and other parties Susanna and me will come to London next week. Looking forward to meet you all. If we haven't contacted you and you want to meet contact us here please.

Marie-Antoinette Governs EU?

The best with falling
is getting back up.

I have repeatedly referred to "blunders" made by the EU politicians and bureaucracy leading up to the debt crisis and coming recession. Some examples include:

• Basel III pushing the banks to allocate its investments to sovereigns and leaving the corporates. The Basel III framework is by some described as an act of war against the corporate society and the whole corporate world is now discussing ways to build up a new financial system without the banks. Because we need to be able to offload financial risk and borrow and invest cash disregarding of the regulation. The banks are also leaving the EU sovereign debt instead investing directly in the ECB to protect themselves further escalating the crisis. Remember that the previous crisis started in the regulated part of the financial industry.
• Censoring the rating agencies making investors unsure what risk each EU country's debt represents. Most investors have investment policies using official rating as the basis for allocating capital. 
• Introducing a Tobin tax taking away the liquidity of the markets forcing the corporates to find natural or strategic hedges, which in one way is good but may force some to move even more operations to the growing markets where the business is. The Tobin tax will definitely make corporate business more risky since fewer risks can be hedged instead borne by each individual corporation.
• There is a discussion and worry that corporates will not be exempt for the central clearing of OTC derivates. The concern is what such a clearing would require in respect of collateral forcing the corporates to tie up even more capital leading to cancelled capital expenditure.

Slipped too many times now

On top of all this there is now circulating a rumor that during the discussions of a rescue package for Greece the Elite decided that the CDS (Credit Default Swaps), being an insurance against default, should be worthless as part of the 50 per cent hair cut on Greece debt. The background is that the large funds managing our pensions and savings and the banks had invested in Greek debt and had bought CDS to cover for the risk of Greece defaulting or the risk of loosing money in a hair cut. By making the CDS worthless the investors who do not want to take the risk of default of e.g. Greece and Italy have now left the market, which dried up liquidity and further escalated the crisis. 

We need to stop this Marie-Antionette behavior by the Ruling Elite instead starting a dialogue so the corporates can avoid loosing too many jobs rampaging growth completely. The corporates are pragmatic and needs to act to mitigate for the political decisions, which now in all ways adversely affect their business.   

Delay Tax Collections - Save Jobs

The double effects in Europe of many severe blunders by the ruling elite leading to investors withdrawing from Europe and the severe effects from Basel III is making corporate funding more difficult for each and every day. The construct of Basel III strives to crowd out corporate lending instead favoring sovereign debt since corporates' are charged with full capital requirements and sovereigns with none. This means that we URGENTLY need to take constructive actions easing the situation for corporates. One such effective measure is to improve the cash flow by delaying tax collections. Many countries did that already in the previous crisis, some made the delays permanent some did not. Now it is time to consider delaying tax collections even more since the basic fact is that if there are no funds there are no jobs. Our Precious Ruling Elite, make a few smart moves now please, for a change. 

Cash Cushion Makes Sense?

Singing in the rain?

Two weeks ago we had a great meeting with a peer discussing capital structure strategy. Is there any idea having a cash cushion? We all know it costs in negative interest carry and it distorts key indicators calculated as percentage of total asset. Is that price worth having a considerable cash balance, or cash cushion, for a rainy day?

In my previous discussions with peers we have come to the conclusion that it is necessary. But now this peer challenged our conclusion. He had drawn his conclusion from the previous meltdown in 2007-09 that we have a credit risk both ways. Both when we borrow and when we invest. Having a bank counterparty going bust means trouble. A bankrupt bank wants to get its lending back and cannot repay what we have deposited with them. Either way we turn the credit risk on the banks remain. Maybe keeping the old-fashioned capital structure of lean balance sheets, repaying and taking up new debt to cover for your cash flow swings, might not be so bad after all. It is necessary though to be very close to your banks and keeping their performance in focus and updated with yours. Something you need to do anyway especially in Europe where the results of the stress tests have not been disclosed as in the US. In Europe we have no clue what state the banking sector is in.

Where to invest and
where to borrow?

Some peers have chosen to borrow from one bank group and deposit with another to safeguard this risk of off-set. However it does not protect from a systemic crisis.

The corporate sector is pragmatic and adapts fast, the banking sector is locked in by rules and regulation so hard they can’t hardly breath and the sovereigns default on us. Where to invest and where to find the funds?

Sell Assets to Repay Debt

Organizations that can afford these kind of offices
must be very profitable and valuable -
let's disinvest

The EU is in deep financial problems and we must sell assets to repay debt. Last week I passed through Brussels and I got an idea. During the past few decades there has been huge growth of city center expensive and luxurious offices filled with the EU administration. 

Considering how fancy the buildings are and the fact they are located downtown in the most exclusive locations, I conclude the local produce has to be immense and thus the value of the assets enormous. Being bad times and all we should expect fire sale prices but remember it is not only in  Brussels we own these kind of operations so we are actually very rich despite lower prices. Think about it, I'm serious. We would not only be able to earn a fortune we would cut costs too. For instance we have only one currency and 18 central banks. Maybe we can sell one or two to Zimbabwe? 

Eating silver is not healthy,
better to sell it

I realize it is going to get tough and we need to survive without large parts of our bureaucracy. Just realize how much the poor Belgian people having had to suffer from not having a government for over 500 days in a row. It must have been tough for them, but they have endured. If you loose all your money, you need to dispose of your silver ware. Maybe China is interested? They have lots of money, I've heard. Maybe we could even ship the buildings like we did to the American tycoons years back?

We must find cheaper and easier ways to keep the EU and the EMU. The EU administration should learn from the corporate sector how to continuously improve efficiency and effectiveness and quality of its services and management. Europe will no longer afford these huge public apparatus. 

Treasury's Largest Challenge is Increasing Sales

"Treasury's largest challenge is increasing sales" was the opening statement from a treasurer I met last week. Isn't that a statement issued by a business leader nothing is. The ability to think broader than the financial remit is the characteristic and so is having the guts to address key strategic issues pragmatically. 

I had a very interesting discussion the other day with another peer working in a company in financial distress where he tried to find remedies to the symptoms created by lack of strategic response to high financial leverage and declining revenues. We discussed at length the actions the company would need to take, for instance replace loans with new equity and decrease the costs levels. Actions being obvious and necessary but not taken since the executive management must have been in some state of shock or despair. (I know that feeling having been there myself). Many might fear authority and believe top managers are some kind of supermen and women.

I tell them we all look the same in the shower and anyone can be paralyzed for some reason or another and that strategy does not have to be complicated. If you know the conditions of the company and its market, the strategic choices are clear for most. But no strategic decision is easy to implement, and there is where the differences lay. Making the decision is 1 percent of the success. Seeing the strategy succeed through hard times, obstacles and failures is what management is all about being 99 percent of the effort.  I encouraged the treasurer to develop a strategic plan based on getting the cash flow positive and derive all actions therefrom. He should present the conclusions and recommendations consistently over time to all he met and to all management. He should prepare to present underlying analyses and scenarios but only if asked for. If proper actions are not taken by management you have anyway tried and should be proud and trust having high integrity will always benefit you in the end."The winner never quits and the quitter never wins".

A very successful example was when a peer succeeded to transfer the credit risk on the distributors over to the banking system, which also increased predictability of the collections and making the banks grateful for the new customers. Treasury has very many opportunities to take a strategic role redefining the business.

Going to Paris - ECB Must Develop Tool Boxes

Nice-Cannes Riviera Marathon,
my first full marathon 42,2 km.
Arrived in Cannes after 4 h and 8 m.
Next time sub-4.
(Sculpture bonbon drapeau Grèce)

Susanna and me are leaving lovely Riviera for great Paris today with peer meetings in the following days. 

I fear the coming weeks will be very turbulent since EU foreign investors are exiting the market after the extreme blunders by the EU leadership. Putting a ban on independent rating was outright stupid as is fighting the investors with a tax on financial transactions. The complete ignorance from the EU leadership is very worrying. First of all they make Europe something investors shy away from and they do absolutely have no interest in understanding the corporate positions. I hear basically everyday of corporates decreasing capital expenditure, postponing investments since there is no financing available. Some peers even have to turn down orders for that reason! I believe that the European central banks do not always have a proper tool box (Bank of England being the exception) to assist corporates, instead they expect pouring money on the banks means it will eventually reach the corporates at some time. We know from the previous credit crunch that the so called "transmission mechanism" does not work. The European Central Banks therefore urgently need to implement a toolbox for buying commercial papers etc. Bank of England implemented such a toolbox already 2008  (hurrah!)  and should be a role model for the other central banks. This is urgently needed, we do not have time for lengthy discussions. We need leadership and action! 

The  EU central banks urgently
need to develop tool boxes
for corporate financing. 

We still have some time slots next few days in Paris if you are interested in a meeting. Please call Magnus +46704809900 or Susanna +46705206124.

Corporates Have No Financing - Let's Introduce the Tobin Tax

The French revolution took place in 1789 when the old kingdom was overtaken and replaced by la République. After many years of very poor management the people basically got fed up of the king's and his courts' bad policies leading to starvation and impoverishment for anyone but the ruling elite. The last queen, Marie-Antoinette beheaded in 1793, was told to have asked: "If the people do not have bread, why do they not eat pastries?" symbolizing the ignorance.

Anyone finding a similarity with: "If the corporates have a problem finding working capital, why do we not implement a tax on financial transactions?"

More and more of us treasurers just shake our heads in despair to the actions the European leadership takes to solve the crisis: Tobin tax, censoring credit rating agencies, Basel III as just a few examples. Not very impressive.

On Tour in La Belle France

Today I started in Brussels, Belgium with a great meeting with a young group treasurer who definitely understood the rules for becoming a business leader. It will be very interesting to follow him and his career in a highly leveraged company. I hear more and more from treasurers in all kind of companies, regardless of leverage ratios, business models etc that funding gets increasingly difficult. The corporate sector suffers from crowding out by sovereign debt and banks suffering from too much PIIGS bonds. We are returning to a situation similar to 2008-09 fast, in Europe anyway. No wonder when considering how the EU leaders are failing to solve the debt situation.

After Brussels Susanna and me are going to France, first stop is the Riviera where we will have a peer dinner on Saturday and I will run my first full marathon on Sunday. The race starts in Nice and ends in Cannes and it must be one of the most wonderful marathon races in the world. I just love France and have spent the past more than 15 summer vacations there. Next week Susanna and me will have lots of meetings in Paris, returning to Brussels and then back to Amsterdam. 

Peer discussions are always energizing and provide plenty of material to blog on. Thank you all for taking time to meet with us.

Searching for Fiscal Discipline

Professor Jeffrey Frankel
Harvard Kennedy School

A very kind peer pointed me in a direction of an interesting recent paper by Jeffrey Frankel, professor at Harvard Kennedy School. Here is the abstract:

"The paper studies forecasts of real growth rates and budget balances made by official government agencies among 33 countries.  In general, the forecasts are found: (i) to have a positive average bias, (ii) to be more biased in booms, (iii) to be even more biased at the 3-year horizon than at shorter horizons.    This over-optimism in official forecasts can help explain excessive budget deficits, especially the failure to run surpluses during periods of high output:   if a boom is forecasted to last indefinitely, retrenchment is treated as unnecessary.  Many believe that better fiscal policy can be obtained by means of rules such as ceilings for the deficit or, better yet, the structural deficit.  But we also find: (iv) countries subject to a budget rule, in the form of euroland’s Stability and Growth Path, make official forecasts of growth and budget deficits that are even more biased and more correlated with booms than do other countries.   This effect may help explain frequent violations of the SGP.  The question becomes how to overcome governments’ tendency to satisfy fiscal targets by wishful thinking rather than by action."

Basically the EU governments (generally speaking) has avoided compliance to the stability and growth pact by saying: "We won't comply this year, but we'll do that next year" and supplied budgets not being serious in the first place with largely overestimated surpluses. Frankel again: "political leaders meet their targets by adjusting their forecasts rather than by adjusting their policies." My immediate reflection is that we need to implement similar governance discussion in the political sector as we have in the corporate sector. In the present environment a political elite can bring a whole nation to the brink of disaster without any repercussions and there are no contingency measures in place.

Jeffrey Frankel concludes that the best way to mitigate improper budget practices as those in the EU, independent advisers need to do the forecasting and adhere to practices without being controlled by the political sector. In the EU we have bureaucrats employed by politicians and paid by the people. Maybe it should be the other way around, anyway we need a tight leash on them both.

Boat is Leaking - Trim the Sails

There is a hole in the boat. Maybe
we shall start by fixing the hole? 

It doesn't matter if the implementation is impeccable you will anyway fail if the strategy is wrong from the start. Obviously I talk about the financial regulation having the strategy that avoiding banks to default will lead to financial stability and prosperity. The corporates realize this isn't logical and therefore they are reluctant to participate in the discussions of the final revisions of the Basel III framework being passed in only about six months. 

The peers are contacted by banks, and the peer group is contacted by banks to assist in making the regulators agree to minor adjustments of the Basel III. The regulators have been hearing from banks that the effects of liquidity quotas etc will make it much harder for corporates to lend and off load financial risks. The regulators then requests the banks to come up with corporates to discuss the last details in Basel III. The banks fail finding corporates wanting to assist and then they become more and more frustrated. 

"No no, we shall trim the Sails"

The question is why are not the corporates participating? Well the reason is that why discuss a regulatory system that starts from a wrong platform and with the wrong target? Having a bank centric model, aiming to save the banks with higher capital requirements for corporates only (not for sovereigns or real estate investments) will lead to yet another disaster. This is actually an insult by the regulators and politicians supporting Basel III. The whole framework very bluntly says that banks should reach a bankrupt remote position through limiting risk taking on corporates. Instead they should pour money into public sector spending and real estate speculation. Why do they not understand that corporates just turns around and leave and prepare for a system where banks have less importance for their funding? The corporates do not trust committed credit facilities any more, instead they have cash at hand, and they postpone or abandon leveraged growth since they cannot rely on bank funding. This is the implication of the financial regulation and how would minor alterations change that fact?

We are in the same boat and it is leaking like crazy. The corporates being in the real world say "we must fix the leak". The bankers and regulators focus on "trimming the sails". I believe that the only way to get the corporates interested in any discussion is when politicians and regulators are prepared to discuss the strategy, not only minor details: 

A reasonable strategic platform for financial regulation according to me:

1. Provide financial conditions to promote global trade and wealth creation for MNC, SME in rich and poor countries
2. Encourage fiscal discipline by sovereigns
3. Encourage balanced investments in community infrastructure

Value of EU Rating

The EU commission is preparing to limit the CRA (Credit Rating Agencies) such as Moody's, Standard & Poor's and Fitch, abilities to independently apply a rating to an EU state. There is a very high risk it will backfire. The last thing you should do when being in a financially distressed situation is to decrease the transparency. It signals, actually screams, that you have no control of the situation and only want to buy time. 

Consider how it would work in practice. A CRA performs a rating exercise and concludes that the rating should be A, which it presents to an EU body approving ratings. Since A in this example would mean a downgrade the EU body does not approve of the rating, instead saying it is to be AA. What should the CRA do? Issue an AA rating inflicting on its integrity? If I would be a CRA I would sincerely consider abandoning the market of EU state rating. It would be a severe loss of revenues, but the other alternative would jeopardize the business altogether. An independent CRA issuing ratings not complying to professional rating standards will sooner or later go out of business. 

A much better way out of the EU financial disaster would be to increase the transparency and clearly point out a credible way to prosperity. Unfortunately the EU leadership is constantly failing doing so and has also sent a strong signal threatening the CRA if they were to expose the failures. What happens if the CRA refuse to rate EU states? How would the public sectors attract investors to buy all the bonds they need to issue without any credible rating?

I'm sure the investors are starting to question EU states' ratings already and it will affect their investment decisions. Consider how investors in North America or in Asia interpret the situation. Rather safe than sorry, I would presume.

France Top Rated

Today I heard rumors the French state sent
the Légion Étrangère to
pay the office of the S&P a courtesy visit.
Making them "an offer they can't refuse" or
"it's your name or your brain on the paper", or
“I would prefer to have our AAA maintained”.
 Love that movie…

Standard and Poor's unintentionally issued a note to some subscribers that "France credit rating has been changed" and immediately after denied it referring to a technical error. The newspapers quoted the French Finance Minister Francois Baroin having said: "We will not allow any negative message to pass". Relate it to the recently released plans by the EU commission of censoring the rating institutions and you can't avoid becoming suspicious regardless of which country in question. Now it happened to be France and I have no reason to believe the top rating is anything but correct. However if we are seeing the birth of a strategy of demolishing the thermometer to fix the fever we should clearly state it as being unprofessional and definitely not worthy of democracies. In that case we would be talking of restricting the freedom of speech. Blaming the banks or the rating institutions would not be trustworthy. The ruling elite remain responsible for the state of affairs in Europe, that can’t be questioned.

It isn’t easy being a rating agent. Remember the Enron collapse and the questioning of the rating institutions being too late to downgrade and that the rating never showed the true state of Enron. But of course Enron was a corporation and they shall always have a true or lower rating. Another example could be if I would be an investor managing the pension holdings for thousands of future retirees. If I had invested in 7 year PIIGS debt a few years back I would today be very disappointed of the high ratings the PIIGS had at the time. However all that is suddenly forgotten and we have a new rule book for ratings:

 

Corporations – downgrade frequently and willingly and be reluctant when upgrading and only do so when it cannot be avoided.

Sovereigns – well since they by law are totally risk free, always give them AAA.

Banks – give them the highest possible rating according to circumstances and never touch it again. We want to avoid run on banks at all costs. 

Shame on me! I’m definitely too cynical now. Obviously yesterday’s unfortunate mistake was just a technical flaw that never should have been able to happen but did anyway. Puih! We can rest assured that a sovereign downgrade in Europe is even more unrealistic than a will-never-happen technical error.

Strategic or Natural Hedging is the Trend

Prepare for Mr Roubini being right.

The liquidity risk in the derivatives’ market is increasing substantially. This trend is created through new regulation and banks reducing proprietary trading. This means that prices will not be available at all times, spreads will increase and bigger tickets become harder to trade. Other factors negatively affecting costs and abilities for hedging commercial flows are the Tobin tax and the high volatility in the markets. In situations of severe stress many markets will stop working in the same way as during the darkest periods of 2008-09.

As always corporates adjust to new conditions fast and pragmatically in order to survive and stay competitive. We will find ways to counter for the reduced efficiency in the financial markets. Effectively it means that strategic or natural hedging becomes more important by changing our risk structure, e.g. in what currencies we procure and sell. Just be careful not to offload your risk on weaker parts in the supply chain making the costs return in other ways or in worst case as defaults of suppliers or distributors. A demand and supply chain is obviously not stronger than its weakest link and extreme working capital practices might be counterproductive in the long term.

A frequent guest in treasury
waters.

Strategic hedging of credit risks includes managing the sovereign default risks that may spread into a counterparty risk with banks, customers and vendors. Therefore keep financing flows in the secure countries; as well as cash pools and top accounts. Adapt the payment terms to suppliers and customers dynamically as conditions change. Keep surplus cash in bank accounts in stabile country with stabile banks. Be sure your investments (e.g. investment funds) do not have any embedded unintentional sovereign risk and remember to borrow from stabile banks.

The conditions are changing fast and sometimes without control. Hedging and risk management are important issues we return to regularly in the peer group. The treasurers role is to prepare rather than to predict.

Visiting DACT Tomorrow

I'm ending a very energizing and positive week in the Netherlands by visiting DACT's (Dutch Association of Corporate Treasuries) annual meeting tomorrow Friday. Hope to see you there.

Greece Requires No Capital

Wait a minute...

If a bank lends to Greece, the bank is not required to put up any capital in a risk buffer. You see, during the present financial world order sovereigns are totally risk free despite any hair cuts and state collapses.

When a bank lends to a solvent, profitable, well run corporation the bank is required to put up maximum capital in a risk buffer according to the so called capital requirements.

What is it I do not get? Can it be that the public servants setting up the rules wanted their employers to have a secure backstop if the tax collection did not suffice for their remuneration so they decided transforming the banks into cheap ATMs for public spending? Anyway the current financial world order is questioned by the corporate treasuries.

I'm still in the wonderful Netherlands having great meetings and discussion. Thank you all for sharing.

Secure Your Cash

Today I learnt that some huge corporations have entities with a bank status using that as an opportunity to put their cash balances with the central banks to secure it. The crisis has transformed the banks being the credit exposure and the corporates the lendors. The regulation is continuously pushing the corporates stop lending from banks. The end effect is that the corporations sit with the risk of banks losing creditworthiness with its sovereign investments, which the regulation pushed them to make. What a strange world and when will the policy makers do anything that favors the corporates? Maybe the policy makers need to raise their horizon.

On Tour in Beautiful Netherlands

Today I started on a tour meeting peers in the Netherlands. There are few things so inspiring and enriching as discussing with professionals, topics close to the heart. The peer group is growing fast and we have new members every week. It is a private network of like-minded individuals who want to learn from each other. We share the common interest of also sharing our failures and mistakes, which we definitely learn more from than success stories. The role of this blog is also becoming clearer. It is a channel to funnel and present the corporate view and position in the society. Today we had a record day hitting all time high on readership. For those who have followed us for a while know that the present regulation is a huge problem, outright discriminating corporate lending and risk-taking from the banks. And Basel III will even make the situation worse. Therefore please use this blog to share your experiences and also to take a stand to improve the conditions for corporations globally. After all it's us that create growth and prosperity. One way is to join this site as "Follower". Thanks

Best Practice Hedge Accounting

DONG Energy of Denmark
has developed a revolutionary
model to manage the situation
when hedge accounting practices
create a Catch 22

Hedge accounting is a practice many times creating Catch 22 situations. You should hedge to secure cash flow risk and operational contingency but you do not achieve compliance with hedge accounting standards. Therefore many corporations either abandon hedge accounting and/or even hedging. DONG Energy of Denmark has launched a very interesting solution abandoning hedge accounting, while continues to hedge and provides accounts showing business performance and IFRS in parallel. DONG (short for Danish Oil and Natural Gas) was not able to use hedge accounting practices since it restricted sensible hedging practices of commodity risks. From my discussions with treasury peers I know they are not alone.

DONG's solution is as simple as it is clever. DONG presents the IFRS results and then creates separate accounts they believe better depicts the actual state of affairs. They present the IFRS and "Business Performance" in parallel in the official accounts.

Read here how DONG does it

PIIG Reflection

Greece has just received 100 B€ in a gift from the people of the EMU. The Greek people rejects it. Maybe it was too embarrassingly large or Christmas is too far away?

Actually announcing a referendum was probably the smartest thing to do. All those opposed now need to come up with a better alternative. All populist states have a large part of the population just saying NO to every necessary change without having the responsibility to present another way forward. If we are lucky the referendum will shorten the time for the Greek population to start realizing one cannot spend more than you earn. It took Sweden 20 years to wake up to realization from 20 years of extreme populist policies. Greece have had those policies for 40 years. They can't wait that long.