An early risk asset rally has faltered as traders turn their attention away from Greece and to rising Spanish bond yields. – Financial Times
TOO CLOSE TO CALL ended with pro bailout, conservative New Democracy party winning the election in Greece. The elites did, too, as did the banks, but it was a close one that leaves a path for their take down if people aren’t satisfied, which you can bet they won’t be. Austerity isn’t working for the people, because it simply does not work.
From Reuters:
With nearly 100 percent of ballots counted in the election, a re-run of a poll on May 6 that left no party able to form a government, New Democracy had won 29.7 percent of the vote, ahead of SYRIZA on 27 percent, and PASOK on 12.3 percent.
A 50-seat bonus automatically given to the party that comes first would give a theoretical New Democracy-PASOK alliance 162 seats in the 300-seat parliament, enough for a majority broadly committed to the 130-billion-euro ($164 billion) bailout.
“The result showed people want the euro, but society remains divided. SYRIZA will be a militant opposition, possibly complicating the new government’s efforts,” a senior New Democracy official said on condition of anonymity.
“The new government must deliver a positive development soon – an easing of the bailout terms or a positive sign in the economy – or people will lose trust in a week.”
As Sunday’s election neared, Antonis Samaras, leader of New Democracy, softened his pro bailout stance due to pressure from Alex Tsipras. Sampras saying he wanted to renegotiate the bailout deal and we’ll now see if it can be done. Tsipras is betting on a renegotiation, because if it’s not there will be another round that could be the tipping point.
According to Reuters, Germany’s foreign minister Guido Westerwelle said the substance of bailout terms are “not negotiable,” but did offer that timing could be adjusted due to campaigning time lost.
An excerpt below from at Business Insider, but also see UK Guardian:
This is the outcome that markets have most wanted to see, as New Democracy and PASOK have generally signalled a willingness to go along with the current bailout path, and not buck the rest of Europe. The leftist leader Alex Tsipras, on the other hand, had threatened to tear up the bailout agreement (though he had always promised not to leave the Eurozone).
So at first it all seemed good… but then around 9:00 PM in Athens, word came that the leader of PASOK, Venizelos, was threatening to withhold support for a new government unless SYRIZA also joined as part of a broad coalition.
The politics are understandable. It’s very easy for SYRIZA to gain popularity will staying in the opposition, railing against the establishment parties and the bailout without having to take any responsibility for what happens. The meme in Athens is that SYRIZA leader Alexis Tsipras didn’t even want to win, and always wanted to come back and run again in 4 to 8 months after the establishment parties lost standing.
Alexis Tsipras is not taking the elections on Sunday as a loss, quite the opposite. Coming so close the first time to the establishment has given him credibility and he’s refusing to join an all-party unity government, vowing to fight the austerity bailout plan that brought the citizens of Greece out into the streets to back Tsipras. As the saying goes, he’ll be back.
To bad he lost.
MSNBC crawl- “Crisis Averted In Greece.”
That’s the “Progressive” tv network.
Because it would have been a real “crisis” if the people who don’t think that the middle and lower classes should bail out the rich had gained power.
What a joke.
CNBC money monkeys must be doing the copywriting.
For the 1st time the Nazis will be in Greek parliament. Another big worry-facsism.
You can bet that a large portion of the one percent in Europe is rooting for Fascism. Then they can stop pretending that there is any division between corporations and the state and be completely open about it.
Ok, I understand the impulse for the reflexive ideological cheerleading, now move on to commenting on other than the easy stuff. Describe the idyllic scenario you see prevailing if you achieve your desired rejection of austerity and exit from the ECM.
Let’s make it easier…here’s mine…..just refute it……….
The EU/IMF stop the support for Greece and the ECB no longer accepts Greek bonds as collateral. Greece effectively has to undergo the fiscal adjustment overnight. There is a severe run on the Greek banks &defaults on its remaining public debt. The introduction of a new currency would take some time. This scenario would result in initial market chaos. Also, Spain and Italy are likely to come under pressure.”
Well, two things would be assured: the
richelite would lose their shirts AND pants; Romney would get a boost.…and stop pretending you don’t have an ideology.
The Greek economy shrunk seven percent last year, and will shrink five percent this. Youth unemployment is around 50 percent. This is what the last two years of “fiscal conservatism” have brought to Greece.
There is no place in Europe Greeks can go in those kinds of numbers to find jobs. Unemployment is high just about everywhere. What do you expect will happen when unemployment runs out for those folks, and there is no place for them to work? Do you expect them to all just die quietly?
What is your idyllic scenario where that doesn’t happen?
Iceland seems to be doing OK. Greece would have also. But the rich, rather then losing their shirts and pants would have finally been required to contribute, at long last to the general welfare rather them milking the cow. What a horror.
the rich would lose their shirts
I’m not sure which rich people you are referring to. To the extent the local rich would still have significant sums on deposit in Greek banks, then yes…..but, I suspect they probably have already moved most of their money out of Greece.
You might be referring to bond and debt holders in which case you hold a misconception. By far, the biggest holders of Greek debt are as follows: ECB, EU, Greek pension system, IMF, Natl Bank of Greece……….basically public sector institutions. There is a group of Asian banks below that that would get a pretty good sting out of a default, but the idea that your typical US and European Wall Street elite will get burned badly is incorrect.
Conversly, the reason why Iceland is not comparable to Greece….and why they recovered from their problems….is that their overleverage was indeed primarily private sector debt (i.e., their banks), not their government. In that case, a loan from the IMF replaced the liquidity lost from the troubled private banks and they were able to resume their normal economy. In the case of Iceland, the government was not the culprit.
Yes, I have an ideology, but it is shared by so few people that I have learned long ago not to allow any personal emotion attach to it. However, I have found that by encouraging you guys to fight the conservatives and by encouraging the conservative to fight you, I actually achieve a reasonable approximation of what I want.
The difference between Iceland and Greece is that Iceland wasn’t in economic trouble before the crash. Greece had been going badly for a while, for a number of reasons.
There’s no fundamental difference between government debts and private. Debt is debt. You owe it. If you can repay it, it’s good. If you can’t, it’s bad. In the Eurozone, governments can’t pay debts for the same reason anybody else can’t – they’re not making enough money. There’s a cure for that, but “fiscal conservatives” don’t like that, either.
As for not being emotional, proposing solutions that make the problem worse isn’t being emotionless, it’s being foolish.
I didn’t propose any solution above………I just gave my thinking on what I expect the result of an anti-austerity/Grexit/default scenario to be in contrast to following the Eurozone prescription.
Of course, “austerity” will be a bitch. Just like a stringent diet is a bitch for the obese.
But if you believe printing drachma and giving it away in assistance payments is the path to the good life, then by all means, go for it. You will either elevate Krugman to superhero status and banish him to Elba….whatever the outcome, I simply welcome the elimination of years and years of theorizing without running a conclusive experiment. I am happy to volunteer Greece to the laboratory.
The Greek economy has been shrinking ever since they were hit with the “bailout” plans. Calling further austerity a “diet” is absurd. They are shedding jobs and money. Going off the euro, if that’s what it takes to get the effect of fiat sovereignty back, will be tough, too, at first. The only difference is that in the long run, it will not be a permanent “diet”.
Oh, and we have tried this experiment before. Lots of times. Guess what? Liberal economics outperforms “free market” economics.
casualobserver 18 June 2012 at 1:06 pm
Ah, I should have written ELITE, not rich, and I’m not speaking about debt & bond holders and definitely not Wall Street. In that category the financial wizards definitely sit, which you mentioned, especially the ECB.
you guys to fight the conservatives and by encouraging the conservative to fight you
The only “personal emotion” I “attach” to this situation is finding something that WORKS.
I’m not so much “fighting conservatives,” as I am railing against stupidity, which conservatives from Dem & R parties represent in great numbers on economic matters.
As a liberal, I think all the Bush tax cuts should expire & none should replace them, so that pretty much leaves me outside BOTH parties, though I remain a registered Democrat.
It remains to be seen if either New Democracy or Syriza can form a coalition. It looks like ND can, I doubt Syriza could without that 50-seat bonus for coming in first. Still, there’s a lot of negotiating between now and then, and these are the same actors who couldn’t for a coalition last time.
Scroll to the bottom of this article for one of those wonderful BBC graphics that explain it all.
Sigh. “form a coalition”.