Guest Post: How Will A Spanish Bailout Deal Effect The Greek Elections ?

Tyler Durden's picture

Submitted by The Needle Blog

How will a Spanish Bailout Deal Effect the Greek Elections ?

Alexis Tsipras, the big winner of the Spainish Bailout Negotiations ?

Spain is holding out for a better bailout deal.

Spanish banks need an estimated  €40 billion but will likely need much more than that.  (see definition of ‘recipriversexcluson’) The ECB wants to lend the money to Spain so that it can then bailout it’s own banks but Spain wants the ECB to lend the money directly to the Spanish banks, in this way the ‘loan’ is not a Spanish sovereign liability but a liability of the banks themselves. The ECB, correctly, perceive that those Spanish banks don’t have an assured future even with a bailout, whereas, the country of Spain is unlikely to disappear from the map of Europe anytime soon, and they have a better chance of getting their money bank from Spain than if they bailed out the banks directly.

This issue is at the heart of the negotiations which have taken place over the last week and look set to be concuded by teleconference this afternoon. I’ve written above that it’s the ECB negotiating with Spain but in reality it’s Germany and some other Northern Eurozone countries who are driving the ECB position.

The final result will be a fudge, which is  unbelievable considering that the two positions seem irreconcilable, but as both sides seems to be pursuing a negotiating position based on M.A.D (Mutually Assured Depression) and neither side can afford to back down, so a fudge it must be.

All this wrangling appears rather interesting if you happen to be a Greek trying to decide who to vote for in the upcoming Greek election.

If the Spanish cave in to the ECB position then this would strengthen the hand of the mainstream pro-bailout Greek parties, Pasok and New Democracy, whereas, any compromise or ‘better deal’ for Spain than Greece got, will strengthen the hand of anti-bailout party Syriza.

The Spanish government are, in effect, taking a similar negotiating postion to the one Syriza are proposing to take if they get a majority in the Greek election next week and if the ECB compromise the message to the Greek electorate will be loud and clear, ‘there is room for negotiation on the established Greek Bailout package’ , something which Syriza have always claimed but which Pasok and New Democracy have always dismissed.

Under those circumstances, who would you vote for ?

This next week will be another interesting one. Fast forward and imagine that a Spanish/ECB compromise has already been announced. If the Troika maintain their current position on Greece then Syriza look bound to win in a week’s time. As the Troika don’t want this they will need to offer some kind of bailout negotiation to Greece with some prospect of compromise, they may even hint that Pasok and New Democracy are in a better position to secure any compromise.

Will this work ?

I doubt it, but it is the only chance the Troika have of avoiding a Syriza rout.

I suspect history will record that the moment that the Spanish bank bailout compromise was announced, was the moment that a Syriza win in the second Greek election became certain, and they will have a mandate to negotiate in the same manner as the Spanish government have.

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veyron's picture

Neo nazis are done according to MSM. Title is "Slap heard 'round the world"

Gully Foyle's picture
“NOBODY expects the Spanish Inquisition! Our chief weapon is surprise...surprise and fear...fear and surprise.... Our two weapons are fear and surprise...and ruthless efficiency.... Our *three* weapons are fear, surprise, and ruthless efficiency...and an almost fanatical devotion to the Pope.... Our *four* *Amongst* our weapons.... Amongst our weaponry...are such elements as fear, surprise.... I'll come in again.”
OttoMBMP's picture

Hey, Needle Blog guy, do you really know wahat you are writing about?

You are always writing about the "ECB". You don't possibly mean EFSF or Euro-group countries or something like that?

By the way, Germany and the northern countries have a ridiculous minority position in the ECB.

Nobody For President's picture

It is pretty obvious you don't know what you are talking about, to the point of embarrassing yourself. When it comes to European Finance these days, Germany is a majority all by itself. Have you been in a cave the last 5 years or so?

gojam's picture

Thank you NFP

Otto, I prefer gojam to 'needleblog guy'

The ECB, European Central Bank are supposedly leading on this bailout ( a proxy?) but as 'Nobody For President' correctly points out the bulk of the AAA Eurozone countries are in Northern Europe, and as the ability to actually contribute money does play a part in how big a say any Eurozone member country has, the reality is somewhat different.

I've used ECB as shorthand ('cause I'm lazy)

Waffen's picture

Dont kid yourselves, Neo nazis slapping stupid vile spewing ad hominem slinging commies will only help golden dawn.

Look, it's time that people that only throw out logical fallacies are told to shut up. The public is too ignorant to even wade through the fallacies(do to the deliberate dumbing down of the public). Slapping a commie/progressive etc and sitting them down in the corner should be what we all aspire to do.

MeanReversion's picture

You must have missed the nationwide anti-Golden Dawn protests. People voted for them because a) most didn't really know much about them b) as a protest vote.

They will be inconsequential this time around in vote totals.

ElvisDog's picture

Right, but the communists will be inconsequential too. The Greek electorate, from what I read, is gravitating to the Big 3 - Pasok, ND, and Syriza.

Freddie's picture

Europe's problems are just like Wisconsin, Cal, NY, IL and Detroit.  Too many parasitic unionized govt workers.  The bankster scum are also the problem.  The corrupt politicians kept giving money to their union cronies and others while Goldman Sachs hid the spending. 

"We lost democracy tonight man!  There is nothing left!"

Whiny weepy union scum in Wisc.

jez's picture

How will a Spanish Bailout Deal Effect the Greek Elections ?


It won't effect them at all.

Might affect them, though.

gojam's picture

 You're possibly correct but 'Effect' is generally used as a result of consequence. While 'Affect' is influence. On balance I'd say you're correct. As a consequence of your objection, I 've edited the original article.

Mea Culpa.




GeneMarchbanks's picture

'The Spanish government are, in effect, taking a similar negotiating postion to the one Syriza are proposing to take if they get a majority in the Greek election next week'

Extortion? I guess that bumbling putz Hank really set the precedent in 2008.

Is anyone really surprised by any of this?

lolmao500's picture

A less stupid question would be to ask what it will do to the German elections.

algol_dog's picture

Just add a bunch of digital 0's before the decimal and bail out all these sovereign's and banks. What's the difference. When the inflation hits, they can raise the interest rates to high hell and we can start the game all over again. So easy ...

Ghordius's picture

The link in the article leads to a really hilarious article ( ;-)

Nobody For President's picture

Triple double up on this! Saturday morning pretty early, still in bathrobe, laughing my butt off - wife opens door to mancave/trading center/home office/home bar-entertainment center/fuck off place and sez 'What's so funny?", and I reply "This guy's explaining the Euro debt crisis", and wife gives me The Look and backs out closing door.

gojam's picture

Hey Ghordias,

I think that article is better than the one that is published here.

This article raises some interesting questions, but the one you've linked to is more entertaining.

neptunium's picture

I'm just hoping this boring pantomime train-wreck can unravel sooner rather than later, this is becoming tedious to say the least. Merkel doesn't look like one for making concessions at this stage, Rajoy is far more vulnerable than she is and everyone knows it, brinksmanship will only work to the extent that one can sustain a risk position of imminent bank runs, Spain will conceed, and we'll all likely be dissapointed by the Greek elections. 

Basically the whole fiasco boils down to the fact that there are still a surprising number of muppets in Euroland, I'd bail now if I was Germany, hit the hay and let the chips fall where they may.


ElvisDog's picture

I think you're being a little too hard on the Euros. Their fantasy life has a lot of appeal - early retirement, large government safety net, healthcare for all. I don't blame them for wanting to hold on to the fantasy as long as possible.

Freddie's picture

Well "Democracy" died the other night in Wisconsin.

Game over man!

Detroit is hanging onto it's fantasy a little bit longer until the money runs out.  Detroit is slowly turning into a corn field as more buidlings get bull dozed.  F the left.

What is hilarious about Wisconsin is as soon as the state stopped collecting union dues for the unions - people started quitting the unions in droves.


Pure Evil's picture

As far as the douch bag bemoaning the loss of democracy due to being outspent by the Reptillians is concerned; the Greys saw the writing on the wall and saved their money for another day.

StychoKiller's picture

Someone needs to inform the Decepticrats in WI that democracy != Redistributing Munny from productive citizens to Public employees!

Jake88's picture

So you're saying that you are also very stupid.  Wonderful. Thanks for sharing.

BlandJoe24's picture

Hmmm.... so therefore they will not reach any conclusions this weekend and will schedule a "to be continued"  conference for sometime after the Greek elections.

stocktivity's picture other words...It's all Bullshit!

BeanusCountus's picture

Actually, I think BlandJ has it right.  They will agree to something this weekend, but won't announce until after election.  The only alternative would be to announce that a deal was reached with no concession to Spain in order to get the desired result from the greeks.  But that would probably send Spanish Banks (and Spanish soverign debt) way down next week which they would prefer to avoid.

Of course, this creates its own set of problems.  The longer they wait to announce something, the more it is going to cost as capital continues to leave Spain.  This has to be a serious concern as the banksters are again meeting on a Saturday.  Unheard of, unless shit is really hitting the fan.  And the Spanish pols will be eager to announce ANYTHING to stem the tide.  Plus the germans will want to minimize the eventual cost as they are footing the bill.  And then there is the possibility of leaks.  In the words of that fine old fellow Sargeant Schulz, vewwwy eenteresting.

blindman's picture

for a very substantive discussion on the salient
issue see this...
Max Keiser and Hugo Salinas Price on Sunny TV – Athens, Greece
Posted on June 8, 2012 by stacyherbert| 90 Comments
Interview by George Noulas.

Manthong's picture

As long as the Greeks and Portuguese continue paying 2x, 3x or more the interest rates that the Spaniards do, everyone will be happy.

And it's all good as long as the German, US, Japanese and Chinese economies continue enjoying the current robust expansion.

Hacksaw's picture

You go Spain! Make the bankers take on the risk for the loans they need to keep from going belly up instead of laying that risk off on the tax payers.

MeanReversion's picture

Fascinating article on the left wing dynamics in Greece (bear in mind told from a socialist perspective but good nonetheless)

C-B77's picture

If the ECB didn't act like the dick it is in the first place we wouldn't be discussing about this now. 

Either bailout the banks or preferably let them fail like they deserve. By transfering 100% of the problem to the people all they managed to do is to create a bigger mess than it was before. 

They were able to keep bullshiting everyone so long as they could pretend the only problem was Greece. The moment of truth is here.

Nobody For President's picture

Rajoy may not have a strong hand, but it is way past time *somebody* played it. This shit has been going down at least since the Irish gubernmint voted to backstop their banks debt to get bailout funds for the banks, thus putting their grandchildren in debt for the banker's benefit.

Course, the US congress, after initially saying no, got Paulson'd into doing the same thing (more or less) with TARP.

I mean, think about it. Why the fuck should the government, any government, guarantee private banks bailout loans? Why should the taxpayers of any country be on the hook for a bunch of bad decisions of banks, even if they were aided and abetted by lax or absent government oversite, purchased by said banks through their purchase of the legislative process? Yes, the governments have to clean up their fiscal act, but the austerity demanded for Troika *cough* German loans is not condusive to getting their debt-overhang house in order.

So I say, you go, Rajoy - don't ask for a bailout. EU wants to bailout Spanish banks, let 'em bail out the banks without putting the next generation of Spainards on the hook for it.

Greece is doomed not matter who 'wins' the coming election - I'll bet it's 50-50 nobody gets a majority again and a military coup is as likely an outcome as any other. 

bloostar's picture

Guest Post: How Will A Spanish Bailout Deal Effect The Greek Elections ?

Affect.. Not effect! Makes me madder than a greek protester!

gojam's picture

Hi Blooster,

You're correct and I've ammended the title of the original .


flyweight's picture

Reading the news and talking with people here in Greece, I conclude that anything that might happen in Spain will not affect the decision of the electorate. People are way too ignorant, way too confused, and (as Greeks always are) way too self-centered to understand or bother to deal with what is happening in Spain.

AmCockerSpaniel's picture

It's all about timing. Greek vote, then the Spanish Bailout. See it's easy!