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Geopolitics Will Trump Economics In Greece
Submitted by John Browne via Euro Pacific Capital,
Based on the continued failure of the negotiating parties to make any substantive progress in the talks over Greek debt payments, the financial world is tied up in knots over a possible Greek exit from the European Union. The uncertainty has manifested in both high and low finance, with a sharp sell-off in bonds, particularly EU and Greek government debt, and heightened retail withdrawals from Greek banks as depositors become wary of capital controls that would be imposed in the case of an exit. All concerned parties should likely breathe easier. Despite Greece's almost complete lack of financial integrity, neither NATO nor the EU can afford the political cost of a Greek exit from the EU.
The unacceptable specter lurking behind the EU negotiators is that, if Greece is shown the door by the EU, Russia or even China might step in to provide financing to Greece in return for a strategic foothold in Western Europe and gateway to the Eastern Mediterranean. This is a possibility that Europe cannot abide. In short, international political ramifications will trump any economic or financial issues.
As reported several months ago in this column, modern Greece has been used continuously by Europe as a bulwark against unwanted incursions. In the 1820s, Greek independence from Ottoman Turkey was financed and supported by Western powers as a way to contain and rollback Turkish influence in the Mediterranean. In the 20th Century, Greece became a key battleground of the Cold War, with the West expending considerable blood and treasure to ultimately keep socialist Greece from falling into the Soviet orbit.
Although the Greeks received countless sums from abroad, Greek governments have been notoriously feckless, and have been instrumental in ensuring their nation's economic demise. By opting for generous socialist entitlements and blatantly anti-capitalist regulations, Greek governments decided to borrow irresponsibly to meet its obligations.
With the formation of the European Union (EU), strenuous efforts were made to include Greece to prevent the rise of Communism. This encouraged the surreptitious acceptance of untruthful economic statistics to facilitate Greek membership, both of the EU and the Eurozone.
Eurozone membership gave Greece access to vast amounts of cheap debt, offered largely under the false assumption that an early conclusion of a single political union would offer an implied EU guarantee for Greek debt. It was similar to investors assuming, erroneously, that the debt of Freddie Mac and Fannie Mae carried the 'implied' guarantee of the U.S. Government.
But, as was the case with Fannie and Freddie (whose collapse many believed would have plunged the U.S. into deep Depression), the political cost of failure was too great to accept. Therefore, the financial costs of technical failure had to be borne by citizens. In addition, over the past few years, much of the Greek debt has been transferred from EU banks to EU governments that have the much abused ability to pass the bad debt onto future generations of their citizens.
Likely aware of this, the Greek government has faced off repeatedly against some of the world's most powerful politicians and central bankers, winning time and yielding little.
Even more importantly, when Greece's socialist Prime Minister Alexis Tsipras faces Germany's Chancellor Angela Merkel, he knows that she is acutely aware that any soft deals offered to Greece may be seen as a precedent encouraging Portugal, Ireland, Italy and Spain to push (even acting as a united block) for similarly favored treatment. Furthermore, any perceived increase in the prospect of a potential break-up of the EU might encourage voters in Great Britain, in the 2017 referendum, to vote to leave a sinking ship. A British exit could put an end to the European dream and place at risk trillions of dollars' worth of European debt and even the Euro-currency itself.
In addition to these serious concerns, Merkel has one overriding fear. Should talks break down, Greece will likely go searching for other sources of funding. It may find many willing givers, all with strings attached. Russia may offer funding to Greece in return for a naval base. If not Russia, even China might attempt to offer a vast, soft funding rescue package in order to buy entry to the European and NATO landmass. It is no secret that China has a strong interest in taking over operations of the Port of Piraeus, one of the largest ports in the Mediterranean.
While Merkel and her supporting fellow EU leaders may talk tough to Greece's leaders, they know it is politically unacceptable to allow a financial default to open the way to EU dissolution or the slightest possibility of a Russian or Chinese strategic incursion.
As a result, whatever the eventual financial costs to EU taxpayers of a Greek default, the political costs of a Greek exit are likely to be seen as unacceptable. Therefore, after much posturing, delays and threats, I believe that the chances of an actual Greek exit are far lower than are commonly believed. Most likely the EU will allow a covert Greek default, disguised for the time being by extended repayment schedules, bogus refinancing formulae and possible delayed haircuts as bonds mature. They may insist that such moves are not a technical default. Despite that absurdity, our obedient press corps may even concur with such a characterization, and investors may be so thrilled that a relief rally occurs in stocks and bonds. Extend and pretend will once again be the only acceptable manner to confront our intractable problems.
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Desperately pimping his underwater book of Greek bonds.
Reminds me of poor Leo.
The Grexit - part 1: The never ending story
The Grexit part 2: It's Happening This Weekend.... For Reals This Time
The Grexit - part 3: The epic saga continues
The Grexit part 4: Germany Strikes Back
The Grexit - part 5: Greece pivots
The Grexit - part 6: Enter the IMF Dragon
The Gexit - part 7: Loan sharknado
The Grexit - part 8: the bankers dozen
The Grexit - part 9: the bailout begins
The Grexit - part 10: atms the new frontier
The Grexit - part 11: Drachma fever
The Grexit - part 12: fiat wallpaper blues
The Grexit - part 13: drackma park
The Grexit - part 14: terminator euro II
The Grexit Returns: Raiders of the lost bailout
The Grexit - part 15: pretty in pink slips
The Grexit - part 16: grumpy old bankers
Gexit Part Two: Electric Boogaloo
Yawn. At the last minute moar credit will be extended to Greece. The can will be kicked a little further down the road. Same as it ever was.
A lotta heads gonna explode around here tomorrow when either the Greeks get a new loan or most likely the talks will be postponed until next week when the truly really double secret probation almost final final talks will commence to then be postponed...
I think that they'll do as he suggests.
Negotiate extended maturities, delayed (long coupons) payments etc, etc, etc, with arms twisted by the debt holders to agree to the new terms and thus avoid a "formal" event of default being declared even though it actually takes place. Meaning none of the debt holders have to write the shit off. Also, reclassify it as "tier 3" or whatever the "Mark to Unicorn Basket" is called today and declare it "remaining with undiscovered substantive value" or some such crap and everybody pretends all's well.
Look a can! Quick, kick it when it's not looking!
"Hello, CAN... it's your old friend, FOOT. Sorry, but I've gotta kick you in the ass yet again!"
Oh thanks, foot! That's what I'm here for!
Hi! My name is can and I've been kicked for eternity, now!
Buy Greek bonds yielding 18%...it's the trade of the decade.
When Greece is miraculously rescued and kept in the EU at the 11 1/2 hour, those bond yields will fall to 8%, and you can sell the bonds you previously purchased for a 200% to 400% gain, depending on maturation date.
Smoke and mirrors baby, smoke and mirrors...
And media controlled by a clique with ties to the banking clique all under the umbrella of an even larger World Congress Clique, will make sure you get all the smoke and mirrors that are needed.
What if Rescheduling of debt isn't good enough? Default may still be preferrable if there's no chance of Greek GDP to get any better. Greece is better off without the EU. Let the EU stew in their own hardass authoritarian bullshit. Russia is actually trying to INVEST in Greece, not bleed it dry.
Exactly. This author doesnt get it.
This is the point where extend and pretend is no longer mathematically POSSIBLE
soon coming to a debt theatre near you.
Is Greece Still A Country If Someone Else Owns Its Assets?
http://www.zerohedge.com/news/2015-05-23/greece-still-country-if-someone...
Yes graneros, a lot of people will be disappointed when their put options and doomsday scenarios will not pan out as hoped for.
"This is a possibility that Europe cannot abide. In short, international political ramifications will trump any economic or financial issues."
Sums it up perfectly, and something quite a few people have been saying here for quite some time now: it's all political!
Unfortunately even more people here on ZH don't want to hear it, and they keep on daydreaming about all sorts of Grexit, "capital controls" and "Lehman Weekend" scenarios, wishful thinking that their gold and put options will make them rich overnight.
When you think about it, it's really pretty sad if people are hoping for a total collapse of the financial system for them to finally overcome their inferiority complex.
Keep on hoping bitches! And don't forget to BTFD when gold and silver sink to a new low once Greece has been 'rescued' once again, and the can has been kicked a few more weeks/months down the potholed road...
How about part 17 - Yellen bails out Greece
Hopefully the idiots in West have pushed Greece into the arms of the Russians.
Geopolitics Will Trump Economics In Greece
isn't that what is already happening?
Reap what you sowed. Sell at market price. Shit happens.
Of course - the sheeple always prefer illusion over reality.
"They have to keep the system up"
Nope, they're bringing it down to raise up a new one.
would not be surprised to see the can kicked one more time......
but, just as a reminder, the greek government is not asking for an nth bailout but a "long term settlement". Therein the sticking point...
(the "creditors" would happily kick the can ad infinitum through "bailouts", i.e eternalisation of debt)
"Eternalisation Of Debt", nice turn of phrase. It neatly encapsulates the mechanism of control in the new era of neofeudalism.
This article assumes that European leaders are logical, reasonable, and have a vision which goes beyond the next election cycle...
A writer for Peter Schiff not being totally bearish?
Shit's going down Monday sons.
http://www.andion.co/wp-content/uploads/2013/06/star-trek-make-it-so.jpg
Do I note a booger on the end of his finger? A harbinger of things to come? A portend of future enthrallment?
Care to place a wager?
Monday will be another boring day in the EU.
Someone needs to get their hands dirty and blow up the EU. Come on Greece, you can do it!!
(I don't think so, the article is right, but one day the EU shitbag will be punctured)
Extend and pretend will once again be the only acceptable manner to confront our intractable problems.
Exactly. There is too much at stake to take the risk of Greece leaving the EU. First, there is a risk of a global bond bubble bursting. Then there is the chance of a derivative bust including Deutsche Bank's $54 trillion in derivatives. Then there is the risk that Greece will align with Russia and China.
All those risks for a measly $1 billion a year? There is not a chance of Grexit despite all the posturing.
Yes, it is worth Observing that the USA has been involved with Greece at least since 1947 when a US Congressional Bill was passed to fight Communism in Turkey & Greece.
History seems to show US Involvement in the Greek Military Coup in the 1960 as part of the Strategy of Tension or creating a Coup in Greece as they implement the strategy of tension from 1960s - 1990s. I should probably find primary sources rather than blanket statements from scholars for all of Europe.
My Bet?
USA has people on the Ground in Greece especially after the Presidential Election win of the Left Wing Recently. USA will want to win this. NATO will want to win this.
I Picture 500 Neocon and other EU, English & US Foundations & Agencies all working for securing Greece as a Non-Communist Country.
Indeed! After World War II, Stalin sold out Greek Communists, and in return for Eastern European concessions, Stalin let England arm fund and train the anti communist Greek right wing, who in a swift civil war crushed communism. Greek resistance to Nazis has a very strong communist component, after the War, they were eliminated.
You must remember Jack - Obama/US play checkers whereas Putin/Russia/Stalin play chess. Stalin's sell out of Greece was part of a long-term plan on the part of Russia to take over Europe.
Don't forget this.
Well wonder about Greek Deposit Insurance, or is it EU Deposit Insurance?
I guess there would be no insurance claim if the Government or Troika needed a Bailout or Bail-in for the IMF Corporation or other Corporations.
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- 2013 Total FDIC Trust Fund in Treasuries = $36.9 Billion + $18 billion in the DIF (Risky)
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Hm... USA is Greece. USA doesn't really have Insurance on US Banks, TBTF Banks, or... for the simple solvency of US Households and Nonprofits.
What can it mean??
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- Hark, US TBTF Banks are Extracting the Wealth of Global Citizens -
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US Banks are Deliberately Left Uninsured, Left Under Funded, Left unprotected, Left Unregulated, Left Ungoverned, and Left without MSM & PRess Scrutiny!!
One cannot extend, and pretend, that bankruptcy all around is not the reality de jour. Greece is bankrupt, and so is the United Kingdom, United States of America, and the whole of the European Union. The REPO man is working overtime, and so are the banks, Trustees in Bankruptcy, and BIG law. The dark pool derivatives universe cannot realistically be re-inflated back to previous asset bubble inflation amounts witnessed previous to 08. Ergo, it is easier to declare bankruptcy outright rather than pretending that one is not bankrupt. When bankruptcy hits everyone knows it when they cannot pay the minimum on the debt obligations. The Banksters want people to pretend when the Banksters stand to lose on their incompetence. A sound business plan would be to go bankrupt. An unsound business plan would be to pretend that one could meet one's debt obligations when they cannot be met. Let us not forget the definition of insanity.
It's not the form or government nor the economic system that is unsustainable, it's the corruption beneath that is unsustainable.
spain and italy are watching, that is the biggest concern.
We should be in for some very inventive uses of the English, Greek and German languages in the next few weeks as our overlords try to convince us that the smoking train wreck we are witnessing is just a scheduling conflict. Coupons will be "adjusted," maturities will be "extended," covenants will be "reviewed," but the "D" word will never, never be used (except to deny that it happened). Remember, it's not a default unless the ISDA says it's a default, and DeutcheBank's derivative book will NOT be allowed blow up, unless the whole world blows up with it.
"Russia may offer funding to Greece in return for a naval base."
Greece has been a NATO member for a long time and there should be little doubt that its armed forces are strongly linked with NATO's. Tsipras would not take Greece out of NATO because such a move would likely result in a coup. Moreover, Putin understands this and would not require any such thing from Greece for humanitarian aid - which would promptly be matched by the US and others. That, of course, might encourage the other PIIGS but the EU and NATO will cross that bridge when they come to it.
All this talk in the article about talking. The Empire will not just let Greece go, otherwise they would have left the euro and EU a long time ago. Greece is not sovereign.
Circus Theme music
http://www.youtube.com/watch?v=1D5Sa2Yq-2g (2:46)
Despite Greece's almost complete lack of financial integrity, neither NATO nor the EU can afford the political cost of a Greek exit from the EU.
Outstanding point! This is what Greeks are counting on at the end of the day. There is leverage for the poor Greeks, and just as the article says, it lies in Greek NATO membership in a critical area for the war on Russia. Greece has to know that the EU and America can not afford to lose Greece and it's NATO membership. The EU and NATO are hell bent on expansion to the east, a loss of a nation behind the battle front is a disaster. So look for something to save the day.
What is the cost to the Fed acting in Washington's interest? Zero. All that is needed is a shawl covering the transaction.
"Although the Greeks received countless sums from abroad, Greek governments have been notoriously feckless, and have been instrumental in ensuring their nation's economic demise. By opting for generous socialist entitlements and blatantly anti-capitalist regulations, Greek governments decided to borrow irresponsibly to meet its obligations."
Hey John, ever heard of crony "capitalism"? Yeah that's right, it consists of "corrupt" politicians sharing a nations wealth with their buddies the "capitalist elites", and screwing over a whole nation. That doesn't sound much like socialism or capitalism, don't you think? I expected an "analyst" of such depth to already know this stuff..
You really expect him to know, while his salary depends on not knowing this? Come on, you should know better ...
Greece will be the mitgating factor that causes geo~political turmoil.
Cyprus, Spain, Portugal, Italy, eventually France> will be swept into the same delusional demands of the EU akaTroika.
No!... Austerity isn't going to save the underlying debt issues of Europe.
The Elite Bankers and Corrupt Politicians will never let Greece go to a Russian pivot.
A deal will be done between the EU and Greece.
Too simplistic an argument. There are numerous possible post-exit scenarios, not just one or two negative hypotheticals, and some day (one would hope) the long-term future of the Greek people must eventually be considered. This won't happen as long as foreign creditor banks and governments retain significant control of the economy or the currency.
He who pays the piper calls the tune.
And the only ones with the spare change for the Greek panhandler are the Eurasian folks.
Sooner or later if not already.... Greece is leaving the Potemkin Village slum of the €uromercan Saudi dollah.
My money is "IN" on the extend/pretend. Worry about the rest of the PIIGS later, let's first arrest the contagion.