Archive - Jun 17, 2012 - Story

What's more tiresome than a hastily rehearsed soap opera that replays the same boring plots again and again? Re-Runs of that soap opera. The Eurozone "drama" is now in re-runs and I for one am switching channels. Nothing will change until some critical part of the worm-eaten, corrupt construct of artifice and denial collapses in a heap. Until then, all we have is replays of the same boring plot lines:

Put-upon Greece: We were just minding our business here in the sunny south, living happily on borrowed billions in a thoroughly corrupt Status Quo, and suddenly we're debt-serfs squeezed by rapacious Eurozone enforcers of the banking cartel. What did we do to deserve this? It's not fair.

Put-upon Germany: We were just minding the store here, racking up 40% of our GDP in exports and raking in bank profits loaning money to our Eurozone compatriots, when suddenly everyone who's lived beyond their means demands that we refinance their debts because we're rich. Excuse us, but did anyone look at how we got rich? Hard work, cuts in spending, high taxes and a tight lid on wages. What did we do to deserve this? It's not fair.

Married couple in counseling: France and Germany: It's all his/her fault. They never bothered to understand me, etc.

"MARKET ISSUES: Greek euro exit fears are likely to ease for now, but even in this best case outcome, Greece will continue to struggle to meet programme targets and renegotiation with a possible third programme for Greece will soon have to be addressed. Moreover, this does not solve the fundamental issues weighing on Spain and Italy."

It is "no government" in Greece for the moment, playing chicken over the bailout terms, playing chicken over new money for Greece as their economy continues to deteriorate and as they amount they owe now, much less any new money, cannot be paid back under any scenario that anyone can concoct. The headlines may well drive the markets' reaction briefly but "watch out below" will be what takes hold as it must because that assumption is based upon facts and not hype.

In a perilous replay of the Spanish bank "bailout", the proxy for bailout sentiment, the EURUSD pair, was up 61 pips to just under 1.2700... and that's it. Naturally, if the world suddenly thought Europe was "fixed", Spain notwithstanding, one would imagine the reaction by the FX market would be just a little more invigorated than merely confirming that what is playing out (namely the lack of a definitive Greek government) has already been priced in. And yet here we are...

As reported in the previous post, the Greek PASOK party of former PM G-Pap may have thrown a grenade into coalition discussion, following an announcement by Katerina Diamantopoulou that Pasok will not join into a coalition government with ND unless Syriza also joins said coalition. Which Syriza stated moments ago it would not do. The question then comes whether ND can form a government (150+ seats) with any of the other remaining parties (up to and including neo-nazi New Dawn or the communists... why is there no Pirate party in Greece?). The answer is most likely not, but not before some serious horse trading shows that the second Greek elections has achieved nothing, and the world now has to look forward to a 3rd Greek election round, some time in August, and then another, and then another, until no more assets are left to be plundered from the state which will have no head for a long time. Incidentally, just as we predicted on May 3 in "Previewing The First Of Many Greek Elections"

While everyone is focusing on Greece, we have news from France:

• FRENCH SOCIALISTS WIN ABSOLUTE MAJORITY IN PARLIAMENT, CSA SAYS
• FRENCH SOCIALISTS WON 320 SEATS, CSA SAYS; MAJORITY IS 289
• FRENCH SOCIALISTS WON'T NEED TO RELY ON LEFT FRONT, GREENS: CSA

So... does that mean that the recently reduced minimum retirement age wil be cut again, thank you Germany?

Ignore the media spin of sampling error as definitive confirmation of this or that (because a 1% difference in exit poll terms is well within a 3% error sampling distribution, where a plurality lead incidentally gives the winner an automatic 50 seats), and follow the results for yourself as they come streaming in. Full visual real-time update below.

While the burning of a ballot box in Exharia, Athens remains the most unrest among the civilians we have seen so far (in which 2 policemen were injured), the second exit poll results are in and New Domcracy has a modest lead:

•     *GREECE'S NEW DEMOCRACY GETS 28.6% - 30%   IN EXIT POLL: NET
•     *GREECE'S SYRIZA GETS 27.5% - 28.4% IN EXIT POLL, NET SAYS
•     *GREECE'S PASOK PARTY HAS 11% - 12.4% IN EXIT POLL, NET SAYS
•     *INDEPENDENT GREEKS GETS 6.8% TO 7.8% IN EXIT POLL, NET SAYS
•     *GREECE'S GOLDEN DAWN GETS 6.5% TO 7.1% IN EXIT POLL, NET SAYS
•     *GREEK COMMUNIST PARTY GETS 4.8% - 5.6% IN EXIT POLL, NET SAYS

As a reminder (here and here), "The outcome will be too close to call if the difference between the first two parties is less than 2%-3% with strong precedent of exit polls failing to predict the outcome when the race is tight."

In the meantime, a friendly reminder from the Germans:

•     *GERMANY'S WESTERWELLE SAYS GREEK PACKAGE CAN'T BE NEGOTIATED

The long-anticipated first Greek exit poll is out. The results, per Greek Mega TV, are as follows:

• New Democracy 27.5-30.5,
• SYRIZA 27-30,
• PASOK 10-12,
• Ind Gr 6-7.5,
• Golden Dawn 6-7.5,
• Dem Left 5.5-6.5,
• KKE 5-6

In a word: very much indefinite, as the leader will get the bonus of 50 parliamentary seats, which makes any conclusive calculus impossible for now.

The battle fronts have been drawn out: it is literally the world against Germany.

With mere hours left until the first Greek exit polls are released, one group of the Greek population, perhaps the most important one if the country of 23% unemployment is to have any hope of not sinking into the Mediterranean, its business executives, has yet to express its opinion on the aftermath of today's election. And while we know that many local businesses have already transferred their money (whether or not taxed is a different question) abroad, it is after all they that will serve as the backbone of any possible future Greek renaissance, whether EUR or XGD denominated. So do they think? Recently Citigroup's European team met with executives from big Greek / Cyprus banks and several officials - independent parties. The key message is that the situation is critical but there is some optimism on the Day after the elections.

For Greece, this is an important election. Inside the euro, their heavily state-dependent economy will continue to suffer scathing austerity. Outside the euro, they can freely debase, and — as Nigel Farage has noted — enjoy the benefits of a cheaper currency like renewed tourism and more competitive industry. If Greeks want growth sooner rather than much later, they should choose life outside the euro (and by voting for Tsipras and trying tough negotiating tactics, they will be asking to be thrown out). But for the rest of the world, and the rest of Europe, this is all meaningless. As Ron Paul has noted, when the banking institutions need the money, central banks — whether it’s the ECB, or the Fed, or the BoE, or a new global central superbank — will print and print and print. Whether Greece is in or out, when the time comes to save the financial system the central bankers will print. That is the nature of fiat money, as much as the chickenhawks at the ECB might pretend to have hard-money credentials. Tsipras, though — as a young hard-leftist — would be a good scapegoat for throwing Greece out of the Eurozone (something that — in truth — the core seems to want).