Tuesday, February 21, 2012 6:10 PM
Hold your horses on that “finalized” deal. There are still numerous austerity measures to implement, details to wrap up, ribbons to cut, and bows to tie. Thus, the Greek Race to Unlock Bail-Out is on.
The Greek government is racing to complete a lengthy checklist of reforms demanded by international lenders before the end of February to unlock a €130bn bail-out agreed in the early hours of Tuesday morning after months of high-stakes bargaining.
The latest demands include dozens of “prior actions” that Greece must deliver as a condition of the rescue – from sacking underperforming tax collectors to passing legislation to liberalise the country’s closed professions, tightening rules against bribery and readying at least two large state-controlled companies for sale by June.
Andrew Balls, head of European portfolio management at Pimco, one of the world’s largest bond investors, said: “It is all an exercise in make-believe. Does anybody really believe any of the Greek debt sustainability numbers?”
In addition to the sheer volume of legislation the Greek government needs to pass, it will also be working against a backdrop of social unrest that has brought thousands of demonstrators on to the streets of Athens. Leftwing politicians, who have risen in the polls, have already vowed to challenge the deal ahead of expected April elections.
In what could set a precedent for future European Union rescues, the new deal gives the lenders extraordinary powers to monitor Greece’s policies and ringfence its revenues to ensure that foreign creditors are paid first.
Only Way Greece Can Win Is To Lose
The irony to this mad dash to hell is the only way Greece can win is to lose. To understand why please read Why Greece Must Exit the Eurozone, How it Will Happen (and Why Portugal and Spain Will Follow); Does the Euro Act Like a Gold Standard?
For an alternative angle with the same conclusion please consider Greek Bailout Or Deliverance? by Peter Tchir.
The Greek government has been a complete failure. They are represented in these negotiations [by someone] who owes his job to the people he is negotiating with. His job was not to represent the Greek people, but to force a deal down their throats. No work was done on alternatives to the bailout (until recently). He didn’t explore what options Greece had other than the bailout. All he did was create fear that without a bailout Greece would fall into total chaos and used that to get his job done – passing austerity measures imposed on the people by the Troika. The situation in Greece seems awful. The economy is collapsing. The human toll is growing, yet the puppet didn’t spend time looking for alternatives, looking for paths that might be good for Greece, but instead tried to promote irrational fear and get his job done.
Any attempt by Greeks to explore alternatives has been shut down. Remember when the last Greek leader had the silly idea of a referendum? Samaras mentioned that the April elections could change things, which led to some demands that the elections be changed, but ended (so far) with him just groveling for forgiveness. And that is a trend that is growing. This is no longer any attempt by one nation to help another, this is now about creating a pecking order. Too many things have been said that cannot be unsaid that hurt the dignity of the Greeks. If they had a leadership that had worked on alternatives to the bailout, maybe the PSI talks would already be over. Instead, there is a real risk they accept a deal and allow their dignity and sovereignty to be stripped away, all for a deal that probably isn’t in their best interests. The deal is in the best interest of the Troika – not Greece.
Deal In No One’s Best Interest
The last line in the snip above is “The deal is in the best interest of the Troika – not Greece.” Actually, that’s not quite right. Although that statement was true at one point, it no longer is.
Things have deteriorated so badly, the deal is in no one’s best interest.
Germany clearly understands that simple fact and has put up roadblock after roadblock hoping to find the right set of conditions that Greece would not accept or fail to meed if they did accept them.
At this point, no statements by Greek politicians or the Troika are credible. Rather, I suggest statements are made by everyone to prevent further capital flight. If Greece was working on a plan to return to the Drachma they could not say so.
Likewise, if Germany was attempting to force Greece to return to the Drachma, Germany too would have to deny it. And Chancellor Merkel has, as noted in Merkel’s Official Denial “I will have no part in forcing Greece out of the euro”; Schäuble Starts Salami Tactics on German Participation, Calls for Vote
Germany originally asked Greece to Cede Sovereignty to Eurozone “Budget Commissioner”.
When France objected, the German proposal was watered down to “I will Give You Money If You Give It Right Back” a Mathematical Scam to Prevent CDS Triggers
When Greece reluctantly agreed to that demand, the German Finance minister Wolfgang Schaeuble then asked Greece to suspend elections. The Greek president responded with an Attack on German Minister’s “Insults”
“I cannot accept Mr Schaeuble insulting my country,” said Papoulias, an 82-year-old veteran of Greece’s resistance struggle against the Nazi occupation of World War Two.
“Who is Mr Schaeuble to insult Greece? Who are the Dutch? Who are the Finnish?” he said in a speech at the Defense Ministry.
His comments marked a highly unusual foray into international controversy for Papoulias, who normally steers clear of daily political debate.
Resentment of the tough German stand on Greece’s failure to meet targets set by the EU and IMF in return for financial aid has become widespread in recent months.
Protesters burned a German flag last week and newspapers have run computer-generated pictures of Chancellor Angela Merkel in a Nazi uniform.
New Roadblocks at Every Turn
Imagine the outcry if someone proposed Germany to suspend elections or to dump Merkel in the first place for a puppet appointed chancellor.
Regardless, every time Greece agrees to anything, new demands are put in place. Thus, in spite of an announced deal, Greece still has a basket of items to complete and Germany is doing everything it can so that Greece will fail.
The perpetual placement of roadblocks suggests that Greece will not survive the Ides of March. If by some miracle Greece does make the March 20 payment, I still stick with Disastrous Piecemeal Breakup of Eurozone Likely in the Cards because nothing has been solved.
To answer the question posed by Andrew Balls, head of European portfolio management at Pimco, who said: “It is all an exercise in make-believe. Does anybody really believe any of the Greek debt sustainability numbers?”
The answer is: No, not even the Troika, and especially not Germany. The deal then is in no one’s best interest and cannot last.
Mike “Mish” Shedlock
- From Mish: Meaningless Greek Deal Supposedly Reached; Deal Won’t Hold (jhaines6.wordpress.com)
- Greece to get second big bailout (seattletimes.nwsource.com)
- Europe seals Greek bailout, but … (business.financialpost.com)
- Greece faces challenges (laaska.wordpress.com)
- Greece gears up for tough reforms (bbc.co.uk)
- Greek deal greeted with cautious optimism (cbc.ca)