Greece

Papandreou's latest attempt to buy his failed regime some time, after last week reneging on his promise to step down (which certainly did not buy him any friends), was a speech to Parliament in which he told Greece the obvious "We had three choices.First, bankruptcy, second, leaving the euro, the third, helping the support mechanism that we created... The consequences of a violent bankruptcy or exit
from the euro would be immediately catastrophic for households, the
banks, and the country's credibility." Nothing new there: the same Mutually Assured Destruction rant that Americans have grown to love so much over the past 3 years. More importantly the Papster called for a referendum on constitutional reform in the fall, naturally without any actual details or specifics. The speech launched the 3 day parliamentary debate on the vote of confidence in the government which is due on Tuesday at around 5pm EDT. In addition, G-Pap also called for a consensus at national level, something which will be very difficult to achieve with ongoing MP defections from the ruling PASOK. The PM noted that the Greek problems can not be solved by banishing the International Monetary Fund and the Troika. Paradoxically the truth is precisely the opposite: the Greek problem stem from the Troika's involvement, and as long as they are there, Greece will merely get more and more encumbered with emergency loans until very soon 100% of government revenue goes to pay off western banks. But when it the last time a member of a ruling party actually told his electorate the truth?

Spokes, meet stick. According to Reuters, Greece will seek approval from euro zone finance ministers on Sunday to agree to some changes in a mid-term austerity plan that parliament is expected to pass, the country's new finance minister said on Friday. And so the scramble for concessions begins. First Greece will demand a scrapping of all retirement age hike requirements, then public sector cuts, then everything else in the mid-term plan, until the second bailout is effectively without conditions. And now that Merkel has effectively thrown in the towel to her, and the CDU's, political reign by agreeing with the ECB's and France's demands, a move which will be brutalized by Der Spiegel in T minus 5 minutes, the fact that Europe blinked to Greece's bluff, just may mean that every demand out of Greece will be met. Or not. If the Troica tells Greece to go to hell, this could be the end of the bailout package.

Keeping a track of all the fluid, hourly changing developments in Greece can be unbearably complex, and as a result one may be left with the impression that things are better than they really are. They aren't. As the SocGen report below summarizes, Greece may have about 72 hours before it gives itself a Pass/Fail grade on Sunday, which in turn will have massive repercussions on the Troica bailout, on the eurozone, on the EUR, and on all those "Lehman-like" consequences you have been reading about. Once again, just like 2000 years ago, the fate of the western world (we would say democracy but that has not been the case for centuries), is about to be decided by a few popularly elected parliamentarians in Athens.

Will you own your own body? Or will that be privatized, too?

• IMF SAYS `WE STAND READY TO CONTINUE OUR SUPPORT FOR GREECE'
• IMF SEES `POSITIVE OUTCOME' ON GREECE AT NEXT EUROGROUP MEETING
• IMF SAYS SUPPORT SUBJECT TO ADOPTION OF AGREED GREEK MEASURES
  

And the EUR surges

With everyone focused exclusively on the Greek balance sheet, where apparently the market has now realized that you don't cure unmanageable debt with yet more debt (something the Troica will figure out just as soon as the eurozone breaks apart), a far more important statement is the country's P&L, or income statement. After all, if a country can not grow into its balance sheet with excess cash at the end of the day, all bailouts are completely irrelevant. Alas, as this historical and projected income from Egan-Jones shows, there is simply no hope for Greece as a "going concern", and if anything should the ECB and IMF continue pursuing bailout after bailout, the end result will be Greek bonds that will be a bigger paradox than Schrodinger's Cat: not bankrupt, yet trading at a price that when lim'ed to ∞ approaches zero. Sadly, there just is no way out, even if China pulls a White Knight for the 3rd time and triple down on good money after bad and worse.

The euro has fallen on international markets as the European sovereign debt crisis is deepening and appears to be reaching a dangerous denouement. European stock markets are also weaker due to serious divisions in Greece and in the EU as to how to resolve the Eurozone debt crisis and prevent contagion. Moody's has placed three large French banks on negative review based on their exposure to Greece. The problem looks increasingly intractable meaning that contagion appears more likely every day. Gold is higher against the euro, pound and Swiss franc and lower against the U.S. dollar, the yen, Kiwi and Aussie dollar. Demand continues to be very strong especially from China and India where the World Gold Council said that there is a “tidal wave” of “gold demand coming”. The dollar is firmer despite yesterday’s stern warning from Bernanke that America’s credit rating is at risk. Bernanke urged policy makers to again increase the debt ceiling – this time to over $14.3 trillion – in the hope that this will prevent a U.S. downgrade.

Meanwhile, in Athens…

A day ahead of the general Greek strike coupled with major Parliament blockade protest, it is useful to remember just why it is that Greeks are so pissed. Well, besides the obvious increase in the retirement age from 61 of course. So below it is in chart format. While we previously presented the UK "misery index" which back in March hit a 20 year high for the first time, here is the same appropriately titled index for Greece. And if the UK is at a 2 decade "misery" high, then Greece is roughly at a 10 billion year high. It really may all be uphill from here... Unless of course the Greek population decides it is happy with the status quo.

A week ago we suggested that the second Greek "bailout" was Dead on Arrival. Gradually, the market is starting to realize just that, as schisms are appearing not just between the core and the periphery, but between the two main players: Germany and the ECB, both of which have realized Plan B is doomed to failure. Late in the day, we got another confirmation from the Luxembourg finance minister who just did what the CFTC is now doing with Frank-Dodd implementation - announce indefinitely delays until some miraculous machine from god appears. Well, no machine is coming now or any time in the future. So ahead of tomorrow's day which is shaping up to be critical for Greece, the Eurozone and potentially the entire developed world, here is SocGen's summary take down of all of today's events in preparation for tomorrow.

Have €121,000 lying around? Enjoy hiking in smallish central European countries with picturesque villages? Then this deal is for you. While its new European banker overlords are pushing Greece to sell off, pardon, "privatize" the bulk of its most monetizable assets, Austria has already seen the writing on the wall, and in a very proactive step, iss offering to see two mountain peaks in the Austrian Alps. From AP: "Two 2,000-metre (6,500-feet) mountain peaks in eastern Tyrol -- the "Grosse Kinigat" and the "Rosskopf" -- are up for sale for just 121,000 euros ($175,800) for the pair. On its website, Austria's federal real estate company, the Bundesimmobiliengesellschaft or BIG, proudly boasts that the two peaks offer the "most stunning views of the Carnic Alps and are popular destinations for mountain climbers and hikers"." As to why Austria is suddenly scrambling to sell mountains, nobody really knows: ""It's a mystery to me why they're wanting to sell the peaks right now," the mayor of the tiny village of Kartitsch, Josef Ausserlechner, told the Austrian news agency APA. "In Greece, they're selling off islands. In Austria, it's the mountains," he fumed." Lastly, the reason doesn't matter. What is certain is that some Goldman dodecatuple secret shell holding SPV will end up being the buyer. And where Greece and Austria have already ventured, so shall the rest of Europe boldly go very soon as the banking syndicate soon ends up owning literally everything.

And there goes the EUR again. Furthermore, "Outlook Negative" on CCC means CC is next, then C, and lastly, D. "The downgrade reflects our view that there is a significantly higher likelihood of one or more defaults, as defined by our criteria relating to full and timely payment, linked to efforts by official creditors to close an emerging financing gap in Greece. This financing gap has emerged in part because Greece's access to market financing in 2012 and possibly beyond, as envisaged in the current official EU/IMF program, is unlikely to materialize. This lack of access, in our view, creates a gap between committed official financing and Greece's projected financing requirements. Greece has heavy near-term financing requirements, with approximately €95 billion of Greek government debt maturing between now and the end of 2013 along with an additional €58 billion maturing in 2014... and this "based on recent statements made by the German government ahead of the June 20, 2011 Eurogroup meeting, we believe some official creditors will see restructuring of commercial debt as a necessary condition to such additional funding. We believe that private sector burden sharing could take the form of a debt exchange offer or an extension of debt maturities. In our view, any such transactions would likely be on terms less favorable than the debt being refinanced, which we, in turn, would view as a de facto default according to Standard & Poor's published criteria. In that event, under our criteria, this would result in the rating on the affected instruments being lowered to 'D,' while Greece's credit rating would be lowered to 'SD'(selective default)."

Moreover, the downgrade reflects our view that implementation risks associated with the EU/IMF program are rising, given the increasingly complicated political environment in Greece coupled with its current difficult economic climate.

Last night's major anti-IMF rally at Athens Syntagma square was one of the largest peaceful protests in Greece to date. There was one notable highlight: the dubious distinction of Greece's George Papaconstantinou as Goldman's employee of the decade (speaking of Goldman, whatever happened to that Fed investigation into Goldman's use of "derivative arrangements" with Greece. Reminder: "We are looking into a number of questions related to Goldman Sachs and other companies and their derivatives arrangements with Greece" Bernanke said in testimony before the Senate Banking Committee). Below is a photographic gallery of last night's events courtesy of Preza.tv

From Greek website Capital: "George Papandreou said that reforms on the political system or the public administration need the voting of Greek people through referendums. Furthermore, he stated that “the road will be difficult but we must endure the pain”, adding that he is determined to proceed with all the necessary changes to make the country’s debt sustainable."

Reuters has obtained an advance peek at the crucial Troica report whose findings will determine Greece's fate, and according to Andreas Rinke the conclusion is not very palatable: "The EU, ECB and IMF mission to Greece said in a report obtained by Reuters on Wednesday that the next disbursement of Greek aid could not take place until it corrected the under-financing in its adjustment program." More from Reuters: "The long-awaited report by the so-called "troika" said Greece risked missing its deficit targets without further consolidation measures and that its recession appeared to be longer and deeper than initially expected. "The financing strategy needs to be revised. Given the remoteness of Greece returning to funding markets in 2012, the adjustment program is now under financed," it said. "The next disbursement cannot take place before this under financing is resolved." The troika said a privatization agency with an independent board, to which the European Commission and euro zone member countries could nominate members, would be set up shortly." We fail to see how the Troica can be satisfied by Greek economic data in the next month or so when Greece is expected to run out of money. Hopefully there is more to this because otherwise this ia very unpleasant conclusion for the insolvent country.