Sunday, July 12, 2015

Pension reform or GTFO

Zero Hedge: "The Greek "Choice": Hand Over Sovereignty Or Take Five Year Euro "Time Out"."

The recently-resigned Greek Finance Minister was allegedly an expert on game theory.  How did that big bluff work out for you?


Acropolis Now said...

Indeed, because the EU isn't bluffing or posturing at all with this new, sudden, 100% serious compound demand. A demand that nobody ever mentioned in the last 5 years, or even last week.

"However, one senior EU official said there was no chance of "time-out" proposal surviving in any final document to be approved by eurozone leaders. Another official said there was no provision and therefore no legal basis for such an arrangement in the EU treaties."

How will the EU's sincere non-bluff work out if Greece announces that it is defaulting on the debt in its entirety, then copies Iceland's example? Or if Greece cuts a new deal with Russia or China? Think Putin would see any benefit in extending and strengthening his bulwark against the IMF and NATO? No need to wonder...

Petra News:
"Moscow is considering direct energy supplies to Greece, Russia's Energy Minister Aleksandr Novak has said, adding that the country wants to help Greek recovery by expanding economic cooperation."

Oopsah said...

Will there be Russian soldiers escorting said energy supplies, akin to all the armed Russians currently touring Ukraine?

Acropolis Now said...

Let's hope so. Somebody's got to enforce one of these "hard deadlines," like the one that just came and went this weekend.

But all the missed deadlines resulted in a deal, after the longest single-sitting summit in European history. The "time out" idea was killed completely. Germany gets the mandatory €50 billion rainy day fund it demanded. But Greece gets to oversee the fund, not the IMF, and it gets to use half the money to recapitalize. And, joy of joys, a NEW round of bailout negotiations begins at the end of the week.

Surprise, surprise; in the end, each side's most extreme position was a feint.

Tsimply Tsipras said...

What a bargain the Greeks got themselves when they elected that leftist. He digs in his heels for a long time, then dramatically calls a referendum to rally the populace against austerity, then turns and immediately agrees to a deal much more austere than what he could have had a few weeks ago.

I guess now the game begins anew of Greece not managing to do what they agreed, while begging for still another agreement.

Acropolis Now said...

And yet that leftist got more concessions from Germany's hardline position than vice versa, even in a deal Tsipras is going to have a hard time choking down. Europe got the better of the agreement, but Merkel took a severe hit.

Yesterday showed us how badly Greece needs money, and how desperate the EU is to avoid a "Grexit." Best of all, almost nothing has changed. They've kicked the can by making an agreement to make an agreement, while causing (or revealing) gigantic ruptures within the European "Union." As the Euro trades at $1.10, down from $1.47 in 2011 and $1.39 one year ago. With Portugal, Spain and Italy warming up in the green room.

The Greek Parliament could still kill the deal by declining to pass it. The EU could still kill it by taking any such rejection as the excuse to demand more punitive measures, or by making them central to the next round of bailout negotiations.

They're two grizzly bears, each with a death grip on the other's balls, saying "My final proposal is that you let go first."

Eric said...

What was the point of that referendum, the one where Greeks voted "no" for most austerity?

I'll link to it when I find it but today I read that Greece is so overextended, it would have had to make all these austerity measures even if the EU didn't step in. Essentially the EU is trying to make Greece realize there is no other way, and ease the way to avoid killing the Euro.

Personally, I think the EU is about to be suckered again into one more agreement that the Greeks will never comply with.

Tsipras' Tsurprise said...

And yet that leftist got more concessions from Germany's hardline position than vice versa...

I'm not sure we're talking about the same deal. The one I read about had Greek pension cuts, tax increases, no debt writedown, and Greece has to provide various assets as collateral. I don't think any of that was in the deal presented in the referendum.

None of which changes the fact that Greece will probably be unable to repay, which could turn out to have certain repercussions.

Acropolis Now said...

A day after the deal, IMF said explicitly that Greece's debt is "highly unsustainable" and thus unpayable. The introductory paragraph of IMF's report states "Greece’s debt can now only be made sustainable through debt relief measures that go far beyond what Europe has been willing to consider so far." It recommends either a 30-year delay on all debt combined with further assistance, or a 50% cut in the debt.

IMF also says that the numbers have deteriorated in the past few weeks, with "the closure of the banking system adding significantly to the adverse dynamics." Guess who's going to pay for the damage caused by that negotiation tactic? (Think deutschmarks, not drachmas.)