Tuesday, July 14, 2015

There is No Greek Deal ? Will the Greek government fall?

Here's an interesting perspective:
From an economist named Meagan Greene of Manulife.
She certainly presents much food for thought 

BTW: Will the Greek Government "fall"?
You saw the headlines Monday about a deal for Greece? Well, there is no deal. There are a series of punitive and humiliating diktats from creditors that Greece must legislate into law by Wednesday or take a “time-out” from the eurozone.
Once these creditor demands are met, then Greece will negotiate a new bailout deal. That deal will very likely certainly be a failure for both political and economic reasons. So while the immediate risk of a Grexit from the euro may be slightly lower following this weekend’s summit of European leaders in Brussels, it is materially higher in the long run.
Absent from the all-night negotiations this weekend was any real buy-in from either side of the table.
Creditors have waxed on for years about how it is necessary for Greece to assume “ownership of the program” in order for it to succeed. Never has this been more the case than now. Any deal agreed for Greece will involve a fiscal adjustment so swingeing that Greece is likely to be in recession for at least the next two years. It will be extremely difficult for the Greek people to accept such an adjustment after five years of economic depression. The medicine will be particularly bitter for Greeks to swallow given that the majority of people rejected such measures a week ago in a referendum. Wolfgang Münchau sums it up best when he asks: “Do you really think that an economic reform programme, for which a government has no political mandate, which has been explicitly rejected in a referendum, that has been forced through by sheer political blackmail, can conceivably work?”
* * *
There is no real buy-in for a deal on the German side either. Finance Minister Wolfgang Schäuble went to the Eurogroup meeting of finance ministers this weekend with a proposal to give Greece a time-out. This proposal was kept in the Eurogroup conclusions — albeit in parentheses because not every country could support this approach. Even the language used, a timeout, is humiliating, as if Greece was a four-year old child that will be put on the naughty step for a few years if it does not behave. At the leaders meeting Sunday, Germany’s Angela Merkel and Tsipras concluded that a Greek exit from the eurozone was the only realistic option. This does not inspire confidence that the German Chancellor is committed to keeping the eurozone together.
Another consideration is the implosion of the Greek political scene the past few years. The center-right New Democracy and the socialist Pasok parties were obliterated in January elections, punished by voters for their involvement in the first and second bailouts. The Greek people gave Syriza a mandate to push back against austerity and stand up for Greek dignity.

In the past 48 hours, Prime Minister Tsipras has had to (no he didn't have to break every major election promise he made- he chose to break all those promises. He should have walked away) break every major election promise he made. The current government will struggle to survive this week, much less far into the future. It will almost certainly be unable to legislate the terms demanded by the creditors without support from the opposition parties.
A coalition of national unity, led by Tsipras, is likely to emerge by the end of the week with new elections in the autumn. Political instability will get in the way of trying to push through what will be extremely unpopular and difficult measures.
Is a coup by any other name ("national unity government") still a coup?
Even if there were buy-in from Greece and the creditors for a deal and the Greek government manages to legislate the demanded reforms, it is hard to see how a government that came to power vowing to push back against austerity measures will do a better job at implementing them than previous governments that were more amenable.
* * *
Beyond this general skepticism, I have two main concerns.
First, in order to hit its primary surplus targets, Greece must boost its tax revenues. Back in 2010, it was true that many Greeks evaded taxes and so there was the hope that the tax haul could be fairly easily increased by catching more Greeks in the net. After losing one-quarter of its economy over the past five years, however, Greece is so far along the Laffer curve that an increase in taxes will be counterproductive. The issue is no longer that Greeks won’t pay taxes; rather that they can’t pay them. Tax revenues are reported in a timely manner in Greece, so we will know fairly quickly if streamlining the VAT system and broadening the tax base has any positive effect on Greek tax revenues.
Second, part of the financing for a third bailout is set to come from a €50 billion fund financed by Greek asset sales. The European Stability Mechanism (ESM), the eurozone bailout fund, will recapitalize the banks if the financing isn’t in place on time, which it almost certainly won’t be. But still it is likely the privatization fund will not come up with the cash to pay back the ESM, and so the greek government in theory will have to. Privatization has been a notoriously thorny issue for the Greek government. There have been almost as many heads of the privatization fund as actual privatization deals over the past few years. Even if Greece manages to privatize all the assets earmarked for the fund, the revenues will likely come in below target given that there will be fire sales. 
The Greek government was badly outplayed in Brussels this weekend. Even if Greece avoids political collapse in the next week, legislates immediate measures and signs up to a third bailout with the creditors, it is unlikely that we will get too far before the third bailout goes the same way as all the others — off track. The tone and content of the negotiations over the weekend suggest it will only be a matter of months before we are back to sleepless summits in Brussels, but at that stage trust on both sides will probably be in even shorter supply than it is now.

The people of Greece are the victims. Tsipras is not.

Also: IMF claims Greek debt will reach a peak of 200% in the next two years (original headline)

Why would the IMF allow the leak of a 'secret' IMF report on Greece?

Reuters leaked the conclusions of a secret International Monetary Fund (IMF) report on Greece, which followed the punitive agreement signed by Greece this Monday. The report came hours following the conclusion of an agreement with Athens which, supposedly, averted Grexit.
The IMF expects the Greek debt to peak at 200% of GDP in next two years and concludes that Greece will be needing debt relief that goes “far beyond what the EU has been willing to consider.”
The conclusion is that either the creditors will transfer liquidity directly to the Greek budget or upfront “reprofiling” by granting a 30-year grace period.
In addition, the agency notes that anything below a AAA rating for Greece would cause an unsustainable debt dynamic for decades. This comes a day after Standard and Poor’s announcement that it maintains Grexit as its basic scenario. Although a medium term upgrading of Greece’s credit rating is expected from the current CCC-., Greek bonds will continue to be in the junk category.


  1. I have my doubts the Greek govt. will pass this deal from the devil and if they do Greece citizens will be right in shutting down the govt. and removing it's leaders for a new vote.

    If the Greek govt. vote No then Germany win because now they aren't the bad guy in the propaganda world press.

    I would love a No vote then move out of the eu overnight, throw out all western banks and NATO. The Russian have already said they would send fuel to Greece and the BRICS have also said they would help.

    If that happened it would show the liberal-neo-conns they over played their hand once again. The again they could over throw the govt. like the fine success record they have.

    1. Hey jo!

      I have an idea this won't pass because it wasn't designed to pass- but will see..
      If the Greeks vote no and don't pass this abomination, then the 'Germans will continue to be bad... because the propaganda is hot and heavy on German being the 'bad country' and allegedly forcing this on the Greeks.
      I actually saw a headline to the effect that the Germans are the aggressor in Europe, again A clear reference minimally to ww2, a meme Tsipras has preplanted with his reference to debt forgiveness after ww2

      Tsipras did not have to go back to Brussels, he chose to go back and I actually view him as the instigator in this drama.

      He had the support of the Greek people and should have walked away from the Euro nightmare- An overthrow is taking place as I type- as I mentioned a coup by any other name- Syriza is out- a so called" unity government" sans Syriza most strident elected members is a coup

      The people elected Syriza not a 'unity government'- in my book that's a coup

  2. First thank you for you relentles writing.Next about Greece , it's a shit hole of shit hole you can trust anybody in that country. Alexis is a sold out and the grek are lead to the giljotin. But still the populase the mobb haven't understoud. Longer the time goes less enery they have and less inteligence and possibility to mobilise any force. As long they are not alingened they will be a easy victium for the austeri forcing EU.
    For those how still think there exist democracy read about Alexis how he now defend his 180 degre turn.

    1. Hi anonymous 2:40

      You are welcome! Greece is a shit hole? Yah, that's a global problem.

      Here in Canada we just saw our government make laws to allow criminal/ corrupt corporations to access tax payer dollars- It's sick.

      From where I sit the Greek populace has more fire then my Canadian counterparts- I see the trade unions were organizing protests- I find that stuff distraction at best.

      The best case scenario would have been to leave the EU. Tsipras could have done it. It would have been difficult, but, I do believe the global populace would have rallied around the Greeks- and that would have been difficult for the psycho elites to deal with..

      I looked for any news on Tsipras's talk after his betrayal of the Greek people but couldn't find anything of substance
      Can you help
      btw: I found him manipulative prior to the referendum...
      Thanks for your comment :)

    2. Hello ! I found this link: http://www.zerohedge.com/news/2015-07-14/greek-pm-tsipras-interview-sunday-was-bad-night-europe-live-interview
      He protray himself that he fought a unbeatable beast, but what did he think after 6 month. Shouldn't he have taken that time to grow up. No this gay have something else in mind and we still don't know what.

    3. Hey Anon

      I went over and read the link- Yup, he definitely portrayed himself as the victim! Poor him.
      I'm not buying it.I do believe there is something else going on for sure.
      I started to work on something, but, it was so long. Gotta figure a way to make it short and sweet and to the point. Sigh... it won't happen this morning.
      Thanks for the info :)