Jun 202012
 
 June 20, 2012  Posted by at 2:38 pm Finance


Yay! Greece has a new government. Well, you'd better down that celebratory ouzo real fast. We've now had two instances in just the past week, the €100 billion Spain bank bailout and the Greek elections, where market euphoria died in nanoseconds. Who would wager that the (re-)election of the guys who pushed Greece over the edge will have a longer effect?

And besides, we need to get rid of the notion that in today's economic climate rising markets mean something good for any nation's man in the street. Markets rise only, and ever shorter at that, when still more of that man's money is doled out to financial institutions by his "leadership".

The Greek election was between those parties that promised to stick to the bail out agreement (memorandum) with the troika, and those that refused to make that promise. In fact, Alexis Tsipras and his SYRIZA party said they would not honor the bailout terms, because Greece would not be able to meet the terms. Instead, they wanted to renegotiate, and come up with an agreement that would actually be affordable for Greece.

For this, Tsipras et al were vilified by their opponents, by EU and US politicians, and by western media, who consistently label him "extreme left". The way they were phrasing it, Armageddon would be just around the corner if Greeks would dare elect such heresy, and the country would be thrown out of the eurozone and the EU, and for all intents and purposes, be thrown off the planet.

So what's the first thing newly elected but old and trusted western henchman Samaras of "New" (sic) Democracy (sic again) said once his victory was announced?

Here, this is from Louise Armitstead and Alex Spillius at the Telegraph:

Greek government will be forced to seek third bail-out

Greece is expected to ask for a third international bail-out agreement as soon as a government is formed, ramping up the pressure on Germany and Brussels to back the eurozone or break it.

While Antonis Samaras, leader of Greece's New Democracy party, scrambled to forge a coalition with Pasok, his officials admitted their first task would be to renegotiate the €130bn (£104.4bn) bail-out agreed in May.

Dimitrios Tsmocos, a senior economic adviser, said Mr Samaras intends to "honour Greece's contractual obligations but will actively and aggressively renegotiate the memorandum". Another senior aide warned of a "social explosion" in Greece if the bail-outs terms were not relaxed.

Athens has to reduce its budget deficit to below 3pc of GDP by 2014 and find a further €11bn in public spending cuts from 2014 to 2016. But spiralling economic woes have already driven Greece off course.

However, experts warned Greece will need another cash injection if the terms are relaxed. Joerg Asmussen, executive board member of the European Central Bank, said: "If one is pressing to shift fiscal targets, one should be so honest to also say that as long as a country is running a primary deficit, extending the fiscal targets will automatically mean that there will be an additional external financing need."

Ergo, Samaras and his western European friends will now do precisely what Tsipras said needed to be done, not what they insisted prior to the elections should and would be done (stick to the terms of the memorandum). It was clear ages ago that Greece needed a "new deal". Here's what I wrote on Sunday, before the election results came in:

[..] a new deal is necessary anyway, because the Greek economy is fast deteriorating, and the country can't possibly fulfill all conditions the "old” deal demands, no matter how austere it gets. Moreover, banks deposits have plummeted through capital flight and domestic withdrawals, so all banks are -again – teetering.

Everybody in the know knew what was up. But nobody wanted to deal with the one guy who spoke the truth all along. He's not one of them. He’s closer to the people, and the dealmakers wants to talk to the people, they just want to take their money. The Greeks have been punked and scaremongered once again, and it's hard not to hope they get out into the streets tomorrow morning and stay there till Samaras is gone.

This stuff is laughable and ridiculous. What's worse, they just keep at it, like in this foolish editorial from Bloomberg yesterday:

Germany Must Make Greece’s Vote Count

Sunday’s narrow victory for pro-bailout parties in Greece offers heartening proof that voters can reject comforting delusions — such as the defeated Syriza party’s idea that Greece could renege on its bailout terms and stay in the euro — provided that politicians take a clear stand to explain reality, warts and all.

Again, the only person who explained reality was Alexis Tsipras. But now that he lost, the others are all of a sudden going to start being honest? Ironically, one thing New Democracy and PASOK will do is renege on the bailout terms. Only they will do it WITH Merkel, Obama and Hollande's consent.

 

The election won no more than breathing space for Greece. The victory for the conservative party, New Democracy, won’t fix the euro’s flaws or make it any more realistic for Greece to bounce back from recession if the letter and timetable of its austerity package stay unchanged. [..]

Still, something potentially important has changed. It will be clear that any decision for Greece to default and leave the euro will be made not just by recalcitrant Greeks, but also by creditors, in particular Germany, who refuse to make the program feasible. So if — and that’s a significant “if” — Merkel and her Christian Democratic Union want to keep the euro area intact, they’ll have to make decisions they’ve resisted, and for which they’ll pay a price at the ballot box.

Greece will now need more money, much of it German, if its new government is to last more than a few months.[..] The economy froze solid as banks leached deposits and taxpayers withheld payments, fearing a return to the drachma. Germany’s leaders bristle at any mention of renegotiating Greek bailout terms, but that’s what’s required whatever name is given to it. At a minimum, the agreement’s timetable will need to be lengthened to provide more time for budget cuts. [..]

Greece remains the euro area’s smaller problem, but the positive outcome of the election is a great opportunity for Europe to make a wider change of course [..]

Bloomberg's editorial staff claims that Tsipras is – albeit comfortingly – delusional and it's a very good thing he lost the elections. So what did his delusion consist of? He told Greeks he would keep the country in the eurozone and renegotiate the bailout terms to a level that would actually be bearable for them. And he told them that Samaras was one of the old guard guys, responsible in large part for the crisis itself, as well as for the bailout terms themselves, and they would be wrong to think Samaras would now turn around and fight for their best interest. Delusional? Really? But hey, Bloomberg etc. rule the media, and yes, the Greek people did fall for it. Again. Job well done.

Anyway, it's all moot, because, as I also wrote on Sunday:

[Tsipras] knows he can't lose: if someone else wins this round, and the austerity plans are Greece's immediate future, he’ll have another shot at gold a few months from now, because there is no way it's going to work.

 

 

 

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    Yay! Greece has a new government. Well, you'd better down that celebratory ouzo real fast. We've now had two instances in just the past week,
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