Greece: Next Steps

Tyler Durden's picture

The Greek elections culminated with the worst possible outcome: 2 votes short of a majority for the pro-bailout New Democracy and Pasok parties. So what happens next? Well - two things: expect to see random stop hunting ramps in the EURUSD and ES on false rumors that despite the math, a pro-bailout coalition government is being formed. It isn't, but it will take out all FX and ES stops to the upside first as skittish shorts get burned as usual on planted fake headlines. More importantly, and as predicted last week, we will likely see yet another Greek election as the political vacuum in Athens is likely too big to be circumvented in a few days. Below we present a summary of immediate next steps as summarized by the WSJ. Yet one thing we want to bring attention to is that as we pointed out first on Saturday, a key even over the next two weeks, during a time when Greece will most likely not have an active government in place is the May 15th maturity of €430 million in international-law bonds whose holders have not agreed to the terms of the PSI and thus demand full payment... of money that Greece does not have. Finally we already know that Norway is the biggest non-PSI compliant entity out there. So will we finally see the first Greek PSI-related lawsuit on May 16 if and when Greece fails to make a payment? We will know in 9 days whether the European soap opera gets even more exciting than usual as various European countries start suing each other in international court, especially when one of the countries will have no government for the foreseeable future.

From the WSJ:

TIMELINE: This is what the next few days will look like.

  • May 7-May 9: New Democracy’s Antonis Samaras seeks coalition government
  • May 10-May 12: Syriza’s Alexis Tsipras tries his hand at building coalition if Samaras fails
  • May 13- May 15: If both have failed, Pasok’s Evangelos Venizelos gets the mandate to start coalition talks
  • May 16: President of the Republic invites leaders of the seven parties that have made it into parliament in final effort to cobble together coaltiion.
  • May 16 or soon after: If that final effort fails, a caretaker government is appointed t o lead the country to elections.
  • June 10: Is the earliest date that fresh elections can be held if all previous steps have failed.
  • June 30: Deadline by which Greek parliament must approve €11.5 billion in further cutbacks to deal with expected budget gaps in 2013 and 2014 under its bailout plan agreed with the Troika of its international lenders.

Until a new government is formed and a new prime minister sworn in, Lucas Papademos, Greece’s technocrat caretaker prime minister will remain in his position. However, Papademos’ government cannot legislate as parliament was dissolved ahead of the elections.

And in detail:

THE MANDATE: Antonis Samaras today will receive a so-called exploratory mandate from President of the Republic Karolos Papoulias, whose role is largely ceremonial. This means he has three days to form a government. Mr. Samaras yesterday invited “all pro-European parties” to unite forces under his leadership to “keep the country in the euro” and “modify” the economic policies attached to Greece’s bailout program. That implies he’s likely to hold talks with most parties that have made it into parliament, apart from the neo-nazi Golden Dawn and the Communists who are both categorically anti-Europe.


If Mr.  Samaras fails, the president will call on Alexis Tsipras, leader of Syriza, to try and form a government. Mr. Tsipras had called upon all left-wing parties to join forces before the election and will do so again now. In his address on Sunday evening following the results, he said he would do the same when the exploratory mandate reached his hands. He too will have three days to build a government.


If Mr. Tsipras fails, the exercise will be repeated by Evangelos Venizelos, the leader of socialist Pasok, which was the winner of the 2009 election and the party that oversaw the country’s bailout program and its debt restructuring. Mr. Venizelos Sunday said he too wanted a pro-Europe coalition.


If none of the three is able to form a coalition government, the president will call the leaders of all the parties in parliament together for one last stab at a cross-party coalition. But if that fails, too, the president and the party leaders are tasked with cobbling together a caretaker government that will lead the country to fresh elections.


If the party leaders can’t even agree on a caretaker prime minister (this has happened once before, in 1989) the president appoints the chief justice of either Greece’s Supreme Administrative Court, the Supreme Court, or the Court of Audits, to take the reins and lead the country to elections.

However in all of this, pay particular attention to May 15. This is what we said previously:

Unlike Belgium, it is unlikely that Greece can persist under anarchy, especially with another critical event coming due: a €430 million payment on an international law bond that matures on May 15, and whose owners have held out from the PSI process (remember that? apparently not all has been swept under the rug). In fact we now know that the Norwegian sovereign wealth fund could very well be the entity that will demand payment and when it doesn't get it will promptly proceed to sue Greece.

And a good just issued summary from Peter Tchir on precisely this issue:

In a world full of unintended consequences (where unintended invariably means bad) the profile of the Greece’s debt is interesting.


Greece currently has €220 billion of debt outstanding.  That will grow as part of the “bail-out” but since the bank recapitalization isn’t done, and other money has been held back, the amount is smaller than the final projected amounts.


Troika loans are about €77 billion of this amount.  These loans have stricter language and will be hard for Greece to do much about. 


Of the €142 billion in bonds, at least €50 billion are the ECB’s holdings (remember, they have been getting paid off on bonds as they mature).  This amount should draw the attention of the newly elected Greek government.  While the Troika loans may be tough to walk away from, these bonds, held as part of an ill-advised secondary market purchase program would be a nice target for more debt reduction.  In fact, it looks like over €3 billion is due to go to the ECB this month.  Think about that.  This newly elected government has to borrow €3 billion from the ECB to pay back the ECB? 


It has to be tempting to renegotiate with the ECB and make them take some share of the losses (especially since they have been earning interest, getting paid par on bonds already matured, and didn’t pay par for these bonds in the first place). This disagreement between Greece and the ECB is why the ECB has not been involved lately in the secondary markets recently, and why that role is being pushed onto the EFSF and ESM (if and when that is implemented).  Watch this.


Of the €90 billion or so of private sector held bonds, the €450 million due on May 15th are particularly interesting to watch.  An actual default on these could lead us right back to the “disorderly” default scenario that so many people were afraid of.  Although I don’t think a default would be a disaster, much of the market thinks it would, so I suspect Greece will pay off these holders.  The next maturity isn’t until June 2013, so I’m guessing all parties will suck it up and pay these holders out so they can put off more decisions for a bit. What that does to the game theory analysis when other countries start their own PSI, I have no idea, but suspect it doesn’t make it easier for countries to achieve their goals.

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JPM Hater001's picture

There's that 13000 again.  Shot time bitchez.

Ben Burnyankme's picture

Greece is a side-show.  The headliner is Spain.

Jason T's picture

interesting..  "Exulting in the apparent breakthrough, Michaloliakos quoted Julius Caesar: “Veni, Vidi, Vici” — I came, I saw, I conquered.

Michaloliakos said his party would fight against “world usurers” and the “slavery” of an EU-IMF loan agreement which he likened to a “dictatorship”.

“Greece is only the beginning,” he shouted at reporters as he walked to the news conference, accusing foreign media of spreading lies about his movement."

GetZeeGold's picture


Michaloliakos said his party would fight against “world usurers” and the “slavery” of an EU-IMF loan agreement which he likened to a “dictatorship”.


I'll take "How do you rise from the ashes of Weimar Germany" for a thousand Alex.


Loukanika the riot dog's picture

He refered to the foreign press as the porn press . In which case shouldn't it has been "Veni, Vidi, Vicky??"

battle axe's picture

Greece Default. Just look at how the Icelanders are doing. Party!!!

smiler03's picture

Iceland - DID NOT default on Sovereign Bonds, it DID NOT bail out it's banks - there is a big difference.

ZippyBananaPants's picture

Feta cheese and olive oil baby!

Cognitive Dissonance's picture

Looks like this movie is getting good. Better go get some popcorn now 'cus I don't want to miss any of the action at the end.

HarryM's picture

Expect some unexpected twists - the Nas just went green

TruthHunter's picture

"Better go get some popcorn now..."


Its coming in 3D to a street near you!


You won't need glasses either.

Seize Mars's picture

Wow. It's getting nutty out there.

StychoKiller's picture


German Chancellor Angela Merkel on Monday said it was "of utmost importance" that Greece stick to the reform course agreed in exchange for an EU bailout, despite the voter backlash.

"It is of course of utmost importance that the programmes in Greece continue," she said in Berlin. [/quote]

What is NOT said, is just WHO deems it of the "utmost importance!"

Zgangsta's picture

Obviously all of this bad news was going to get us green in no time!

Zero Govt's picture

steaming broke Govt, wrecked economy, social chaos

Greece, birthplace of democracy, see what it can do for your nation

PontifexMaximus's picture

greece will only become a headline when you have 200 to 300 dead demonstrators on a daily basis and 24/7 army presence and all this 24 hours on CNN or MSN. Otherwise, move on.

insanelysane's picture

Missed an entry in the list:

July ?: Start minting drachmas.

Jonas Parker's picture

"Missed an entry in the list:

July ?: Start minting drachmas."

July?: Start printing drachmas.

There, I fixed it for you!

falak pema's picture

what happened to our greek posters on ZH...? 

Joe The Plumber's picture

I sure like getting first hand accounts

drider's picture

We are still counting votes... Afterwards we will try to figure out what this voting means. And then we will be lectured from the greek mass media that we should be more responsible in the future (most probably we will have elections again in June).

IslandMan's picture

So, now the deadline is May 15th.  A few months ago it was 8 March, and before that it was 30 December, and before that....How many "deadlines" will go by in the rearview mirror before you realise that they won, they are winning, and they will win?

mayhem_korner's picture



Who is "they" and what did they "win"?  You think "they" can play this game forever?  Greece is insolvent and nothing is going to change that.  Either that gets transferred to others (via austerity and communal bag-holding via Troika, etc.) or the country simply hits reset and defaults, outside of the eurozone.

"They" will not win because they cannot win.  As in Titanic: "I assure you she can sink...and she will.  It's a mathematical certainty."

Cognitive Dissonance's picture

It all depends upon the meaning of "win". In this case "win" means the ability to kick the can down the road so the rape and pillage may continue.

Of course it will eventually fail. But not before nearly everyone is savaged.......except of course the financial elite and their directly controlled or enabling minions.


Nobody For President's picture

I enjoy deadlines. I like the whooshing sound they make as they go by.

-Wally of Dilbert cartoon fame.

carbonmutant's picture

"SYRIZA considers to question with legal means whether ND is elligible to be granted the 50-seats bonus as its rates have been extremely low. Without the 50-seats bonus, ND’s seats would sharply drop down to 58 seats."

smiler03's picture

I seem to have misread what the law is in this allocating of 50 extra seats. Perhaps my mistake was misinterpreting the Wikipedia entry or maybe Wikipeadia is wrong. Here's my confusion, highlighted in bold:

"However, the law helps the party that wins a plurality to achieve an absolute majority (151 out of 300 parliamentary seats), provided it tallies at least 39% of the total vote: this is supposed to enhance governmental stability. Specifically, the current electoral law, which was used for the first time in the election of 6th May 21012, reserves 50 parliamentary seats for the party or coalition of parties that is supported by a plurality of votes cast, and apportions the remaining 250 seats proportionally according to each party's total valid vote percentage."

Muppet Pimp's picture

Brian Sack was at Kelly Services Manhattan first thing this am picking up a load of temps to help press the buy button all day

boiltherich's picture

May 16 or soon after a military junta rolls into Athens and forms a new government, and the first order of business is to reinstate the drachma as the Greek legal tender.  I give that scenario at least a 50-50 at this point.

Joe The Plumber's picture

Not for 6 to 12 months says my magic 8 ball

apn3a's picture

well, im a Greek poster. But i dont give a flying f*ck about Greece nemore. This is exactly what happens when your nation is constituted from uneducated, illiterate and self-centered fucks. No bonding, no vision whatsoever. Greeks feel the world owns them the world just because they invented Democracy. Im Greek, i studied in the States as a foreign student and now i am back to this shitty place. We deserve every single thing that happened/happens/will happen to us. Period.

Joe The Plumber's picture

So when does greece Nationalize the banks and forcibly convert remaining euro accounts to drachmas? Do u have any money in greek banks?

apn3a's picture

dude i am not planning to stay here. this country does not express my ideals any more. You can find sunshine elsewhere too. and to answer your question, yes i do have money in greek banks but not for long.

GetZeeGold's picture



Come back and help us in the States.....we've still got a slim shot.


Bag Of Meat's picture

Well everything has a reason , and everything can be traced back to its source. I dont think that Germans/Americans or anyone else on this planet was born less uneducated,illiterate and self-centered than the part of greeks you are referring to. When the leaders are corrupt, when the game is rigged, then most people adapt and do not fight back, either for survival or plain ignorance. And dont give me the "leaders are put in power by people" , because this is not true. The leaders are the puppets,or sometimes the masters, of a small coalition of powerful people,working for their further empowerment (More about this in the excellent book "The dictators Handbook"). In order to do this, they have to control the masses,by turning them to illiterate self-centered fucks...
Races are not corrupt. Maybe humanity is. Or maybe we just havent found a way to live in peace..

nicxios's picture

This is exactly what happens when your nation is constituted from uneducated, illiterate and self-centered fucks. No bonding, no vision whatsoever. Greeks feel the world owns them the world just because they invented Democracy.

Unlike you, being that you wuz edumecated in the States.

BlackVoid's picture

"The Greek elections culminated with the worst possible outcome: 2 votes short of a majority for the pro-bailout New Democracy and Pasok parties."


??? WORST ???? Maybe for the banksters.

I think it is pretty good.

Bag Of Meat's picture

And i though i was the only one who noticed..

smiler03's picture

Tyler is pro bailout but can't seem to admit it in plain English.

Jonas Parker's picture

The vampire squid is gobbling up a lot of Tums today!

cherry picker's picture

MSM full of good news this morning, about the Fortune 500 doing great, three of the top four are oil companies.

Moody's says economy a lot better.

Maybe no one is going to demand the money the Fed printed so generously back? 

That is the only thing that makes sense to my brain.....

walküre's picture

Wow. The turnaround overnight is incredible.ES futures down to 1342 and opening positive this morning. 24 point roundtrip.

Bernanke & Co. saved the world, AGAIN! Ta Ta!

If they had allowed to open 20 or more points down this morning, DAX off 3% and so on.. the world would have ended this week. We're this close to the end.

They can't keep this up much longer. I know they're trying to avoid full on chaos and financial apocalypse but the European voters (yes, they really still exist!) are basically asking to take the bitter medicine now.

Once more, overnight the USD was King. But it didn't last.

chelonia1663's picture

There is no mystery to projecting the pattern of failure engendered by any purported economy subject to interest.
As interest multiplies debt in proportion to a circulation, ever more of every existing dollar is dedicated to servicing multiplying debt, and ever less of every existing dollar can be dedicated to sustaining the commerce which is obligated to service the multiplying debt. Everything around you can be understood from the obvious consequences.

We advocate real solution:

Mathematically Perfected Economy (MPE)

Zgangsta's picture

These Greek elections are confusing!  So, if ND is unable to form a coalition, but Syriza is, does that mean that Syriza would get the "bonus" 50 seats in parliment?

drider's picture

No, the first party gets the bonus seats

smiler03's picture

I disagree:

reserves 50 parliamentary seats for the party or coalition of parties that is supported by a plurality of votes cast, and apportions the remaining 250 seats proportionally according to each party's total valid vote percentage. 

ND & PASOK is not the only coalition possible, though it seems others are considerably less likely.

Bag Of Meat's picture

Well I don't exactly disagree with you, but I will show you why your point, and the electoral law are mathematically impossible.
Translated from the greek wiki page:

The addition of fifty (50) seats can also be given to a coalition of partner parties, if the average strength of these parties,is greater than the power of the independent party, which garnered the highest number of valid ballots. The average is obtained by dividing the percentage obtained by the above coalition, by the number of its constituent parties.

This means that if the first party gathers 18% , then the percentage of the coalition must be >18% . But how can this ever happen for the parties that are below first? Lets say that we have the coalition with 4 parties ,each of them with the max percentage of 17,999% (in order for them to not be first) . Then [17,9 + 17,9 +17,9 +17,9]/4=17,9%<18% !!!!!!!

This is only one of the ways that the coalitions that were on a payroll tried to ensure their remaining on power.