Greek Ruling Coalition Collapses Days Ahead Of Critical Vote
If one is curious why the EURUSD has been ramping as if no one will ever sell one more euro ever again, the reason is simple: the BIS is desperate to mask the fact that the fragile Greek coalition, whose creation sent Europe to the edge back in June during the Greek re-elections that just barely avoided a Grexit, has just crumbled. And with an illiquid market, the reflexive argument always is a simple one: if someone is buying, the news must be good, so dear momo-chasers - buy along. Only the news isn't good, and in a centrally-planned world, the only buyer left are central banks, who are now solely political, and not market, forces. What the news really is, is that with Greece poised to vote on critical labor reforms (read more layoffs) next week, which must be passed in Parliament with a majority vote in order to get the next Troika bailout tranche, the Samaras-led coalition just lost one of its three members, after the Democratic Left announced it would take its 16 votes and vote against any further austerity. In doing so it has effectively joined Syriza and any other anti-bailout powers, and has made certain that yet another Greek election is imminent, one which will finally see the rise of the "anti-memorandum" forces on top, and finally launch the 3 year overdue departure of the Greek ferryboat from the monetary landmass, with even more dire consequences for the USS EURtanic.
A Greek coalition partner confirmed on Tuesday it would vote against labour reforms proposed by foreign lenders, ignoring the prime minister's appeal for a united front to push through more unpopular austerity.
The Democratic Left party's refusal to back the reforms leaves the government facing an unpredictable vote when they are presented in parliament next week, making it the fragile coalition's biggest test since taking power in June.
"The Democratic Left has fought on the issue of labour relations, to protect workers' rights which have been already weakened," the party said in statement.
"It does not agree with the result of the negotiations. The Democratic Left sticks to its position."
A party official, Dimitris Hatzisokratis, told Reuters the party would not vote in favour of the labour reforms.a
Meanwhile, the current (if not for much longer) PM Samaras, resorted to the usual trite and overused threats of global destruction if anyone dares to vote against the will of Europe:
"What would happen if the deal isn't passed and the country is led to chaos?" Samaras said in a statement. "Such dangers must be avoided. That is the responsibility of each party and every lawmaker individually
Sadly for him, nobody buys the MAD argument any more, and especially not Greece, where one can't hit more rock bottom if one already is at rock bottom.
The only good news is that the Democratic Left can't alone scuttle the majority needed for the vote to pass. It can, however, show that the coalition government has now collapsed, and get more defectors to join them across the aisle, in hopes of being on the right side during the next parliamentary elections which now appear to be imminent.
The Democratic Left party has the support of 16 deputies in the 300-seat parliament. The government -- which has a 176-seat majority - could pass the reforms without its support.
But a vote against the package by the party would undermine the already fragile coalition and could encourage other lawmakers to defect and vote against unpopular measures, leaving the outcome uncertain till the end.
Already some lawmakers from the other junior partner in the coalition, the Socialist PASOK, have threatened to vote against the measures, though the party's leader has hinted the group will vote in their favour to ensure stability in Greece.
Expect all this and much more to be once again in the daily headline rotation, but not before the US presidential election: can't rock the boat before that. Cause Tim Geithner said so. After that, pardon the phrase, the deluge (only this time in Europe).