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Monday, April 21, 2014

The Government in Athens Will Cease to Cooperate?

"Anyone familiar with basic math knows that Greece's debt is far too high. Something must happen. However, the EU-leaders are afraid to tell their tax payers face to face that the money is lost. Instead, they will lower the interest rates to zero and extend loan maturities until eternity. Everything points towards a third package for Greece. The Greek government has the budget under control in as much as they don't need fresh money for current expenses. This means that the EU will run out of leverage. The power has shifted. As soon as the last tranche is disbursed, the government in Athens will cease to cooperate".

Thomas Mayer, formerly Chief Economist of Deutsche Bank.

2 comments:

  1. Mr. Kastner,

    Samaras has put his signature on document saying that as long as he is in politics, he will obey the memorandum. Same for Venizelos and there is no indication (sadly), that New Democracy will do anything to upset Germany. Yesterday's newspapers revealed even the fact that during Merkel's visit, Samaras asked her about the "nazi forced loan" and Merkel replied that no german politician will ever agree to discuss this. The revelation is that Samaras and the goverment tried to keep Merkel's reply a secret.

    Schauble has "prophetized" a month ago, that he wants a 3rd package for Greece. Samaras has said that he doesn't need or sign one. How do you reconcile this? With the experiment of the "return to the markets". Greece may feign to avoid 3rd "official" program, while using "controlled" access to markets instead of loan, under the ECB's OMT umbrella.

    Samaras has also signed new, heavy pension cuts, in 2 tranches. One in summer and the biggest one in January 2015. Considering that in the last elections, the biggest part of Samaras' voters were those over 45 years of age, with absolute majority in those over 60, waiting for elections in spring 2015 means political suicide to Samaras.

    So, it seems, that Samaras, loyal to Merkel's wishes, is planning, to take a meaningless extension of existing loans in summer (before SYRIZA can come to power), go to elections in fall or Dec 2014 at the latest, lose while mitigating the losses and let SYRIZA take the hot potato, already bound by the summer debt restructuring.

    Germany has nothing to fear from Samaras. Recently a greek economics professor, explained that moving 198 bn of debt from 30 to 50 years (the rest can't be moved, because it's in ECB's hands i think), will give a modest gain of 14% reduction (to GDP ratio), so instead of 177%, debt will go to 163%, which is still non viable, but if Germany wants to do so, Samaras will do so...

    The article treats the situation from a merely economic point of view. It doesn't take into account a geopolitical reality. It is a bit like saying "Ukraine now that has seen how Russia acted in Crimea, won't be surprised a second time, she will move her troops pre-emptively to all eastern border and prevent any further trouble". Yes, you do that, but not when the other side is called "Russia".

    Even SYRIZA, right now is torn. The official position is "we stay in euro". However, there is the "left current" of SYRIZA, that is openly pro-dracma. What will happen is this: SYRIZA comes to power, probably forced to cooperate with some other minor party, maybe the "River", the new media sponsored party, built from the greek establishment to fill the gap of the collapsed PASOK and with intent to control both SYRIZA and ND future goverments. SYRIZA claims to "scrap" memorandums and renegotiate the debt. Alas, Samaras will eliminate this danger in summer. After that, SYRIZA will HAVE to "deliver". Will HAVE to prove the "change for the better" that promices. If fails, then the left pro-dracma current inside SYRIZA, will take over. Already, in polls, the pro-euro sentiment in general population is now 59% (compared to close to 80% 3 years ago). With the unemployment staying high, pensioners being "knocked out" of the game (nowdays the grandfather's pension is what makes survive entire families of unemployed) and all that in order to achieve 4,5% primary surplus and maintain it for eternity, isn't going to go a long way... If one sticks to that path, either Golden Dawn will become the 2nd biggest party and future goverment or SYRIZA to prevent total collapse will return to the dracma, with the left wing declaring victory over the "europeanist" wing.


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  2. Το put it in another way.

    1) Samaras will hastily try to close the deal with Merkel for a non-resolving debt extension, while he can (before the elections). Because, well, New Democracy is the last part of the old establishment (that is pro-euro), that can do it. SYRIZA is far too unpredictable and more prone to make harsher bargain with Germany.

    2) New Democracy, has 2 options ahead of it. Either go to elections before Dec 2014, after having satisfied Germany's terms and maintain whatever power she can or wait for spring 2015 (the election of new president of repubblic is likely to cause national elections), after having axed pensiones, raised pension years and age (after Samaras has said that "no more pension cuts will come") and even introduce a clause where "if there is a deficit in funds, there will be further automatic cuts in pensions in the future" and all this, because... Schauble one day, woke up and decided that Greece would have to maintain a 4,5% primary deficit... Can you imagine the electoral defeat New Democracy will suffer? And when the bulk of New Democracy's electorare are either pensioners or people in age that are close to pension? It will be a PASOK-like collapse and the biggest party in the "right" remaining, will automatically be... Golden Dawn.

    3) This is why the media magnates in Greece, previously sponsoring PASOK, have now created "the River", hoping to be able to control SYRIZA through it (in case SYRIZA won't be able to get enough votes to rule on its own, which is likely).


    P.S: Currently Samaras is ruling with 1 MP above the minimum limit. How far can you go with that?

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