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Independent Strategy On "Greece The Ungovernable" - "Go short the euro and PIIGS debt — and hold on to your seats!"

Tyler Durden's picture


Must read update on Greece from Independent Strategy

Greece the ungovernable

  • The Greek PM's call for a referendum on the bailout package reveals that Greece is becoming increasingly ungovernable under the weight of fiscal austerity and recession.
  • Expect weeks of uncertainty in markets and rising contagion in other weaker EMU states. If the vote is lost, Greece will default. Stay short the euro and PIGS debt.

The decision by Greek PM Papandreou to call for a referendum on the latest Greek bailout deal shows that Greece is becoming ungovernable. The PASOK leader made this decision because riots in the streets, increasing refusal by civil servants to implement the austerity measures and the likely loss of his majority in parliament made the survival of the government unlikely within weeks or months.

So Papandreou has gone for broke. He hopes that by winning a vote on the bailout plan he can shut up the opposition both in parliament and on the streets. But this high-risk strategy threatens to bring the whole house of Euro cards down.

At best, we face two months of uncertainty before the vote. The Greek parliament must approve the call for a referendum and the President must agree. And then it depends on how the referendum question is worded. If it is ‘do you want to accept the latest bail out plan’ then the answer will be a resounding no. If they word it so it says ‘do you wish to remain in the Euro zone’ then the answer will be a resounding yes.

At worst, Greece may not even make it to mid- January before there is a disorderly default. Parliament could defeat a vote of confidence in the government on Friday and Greece would be plunged into elections, with the opposition likely to win on a programme of ‘renegotiating’ the bailout plan so tortuously agreed with the Euro leaders.

Also the latest tranche of official funding from the EU and the IMF under the old Greek bailout plan could be frozen if the government falls. Under IMF rules, it cannot disburse a tranche if there is no government. The EU would have to step up to the plate and provide all the funding until the election or referendum is over. Without this money, Greece would be bankrupt.

And just imagine if Greece heads into two months of a referendum campaign with riots and demonstrations in the streets. A run on Greek banks — Argentina-style — would become very likely. It’s true that the rich and many corporations have already moved their euros abroad, but the populace at large would soon be running to get their euros under mattresses fast if they thought that Greece was set to default and leave the euro.

The Greek public debt ratio may be heading towards 180% of GDP next year without the bailout plan, but if Greece leaves the Eurozone with a no-vote in the referendum, a New Drachma devalued by 50% or more would double that debt ratio.

The optimistic scenario is that the Greek parliament backs the government and a referendum campaign is conducted on ‘staying in the euro’,  which is won. The Eurozone and the IMF continue to finance the Greeks over the next two months before the new bailout package takes over. The 50% haircut for the banks on their holdings of Greek debt goes through with over 90% involvement; the banks receive funds to  recapitalise; and the EFSF is enhanced with new firepower to inoculate Portugal, Spain and Italy from the Greek nightmare. And the G20 meeting comes through with new measures of funding to help Europe.

The more you think about, the less likely that sounds. More likely, the uncertainty will undermine the efficacy of enhancing the EFSF through adequate funding from a Special Purpose Vehicle. It will increase contagion for Italy and Spain, increasing the cost of ring-fencing. And a  disorderly default would trigger losses for the ECB itself on its holdings of Greek debt.

Go short the euro and PIIGS debt — and hold on to your seats!


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Tue, 11/01/2011 - 10:00 | 1831978 Mongo
Mongo's picture

I vote for chaos

Tue, 11/01/2011 - 10:01 | 1831990 Clueless Economist
Clueless Economist's picture

I have a crush on G-Pap...he is HOT

Tue, 11/01/2011 - 10:16 | 1832053 wombats
wombats's picture

Sounds like you need psychiatric help, new glasses, or both.

Tue, 11/01/2011 - 10:27 | 1832109 The Big Ching-aso
The Big Ching-aso's picture

Merkel then must really send ya over the top.

Tue, 11/01/2011 - 11:00 | 1832289 philipat
philipat's picture

It ain't over till the fat lady sings?

Tue, 11/01/2011 - 10:58 | 1832277 philipat
philipat's picture

Another Pap-Smear?

Tue, 11/01/2011 - 10:02 | 1831995 fuu
fuu's picture

Hail Eris.

Tue, 11/01/2011 - 10:53 | 1832263 James-Morrison
James-Morrison's picture

We all different, but in the end, we all fruit -- I mean toast.

Tue, 11/01/2011 - 10:11 | 1832035 Peter Pan
Peter Pan's picture

Chaos is a Greek word and so are the words, austerity, panic, crisis, catastrophe, strategy, problem, method, scheme, kleptomaniacs, politicians, psychopaths, tyrants as well as economics and history.

In other words, this whole show has been going on with regular repeats for at least 2500 years. Back in Ancient Athens they were suffering a similar level of catastrophic debt burden amongst the people. Instead of hiring PhD economists to solve the problem, they appointed a philosopher for the task. He promptly wrote off whole swathes of debt and everyone got back to business.

Any philosophers out there?

Tue, 11/01/2011 - 10:25 | 1832099 eureka
eureka's picture

Sure - and what will bring down the whole US/FED/Wall Street/Pentagon/CIA/NWO  cardhouse? What US philosopher will write off US debt - when it all crashes next year?

Crash JPM and Wall Street TBTF banksters - buy silver.

Tue, 11/01/2011 - 11:55 | 1832612 UK debt marsh
UK debt marsh's picture

Beware of Greeks Airing Rifts

Tue, 11/01/2011 - 18:06 | 1834557 TheGardener
TheGardener's picture

Or so to say; they were suffering democracy. You got all the symptoms right, but not the disease.

And that guy offering jubilee on debts every 50 years or
so was Moses, but bashing the Old Testament is in vogue for
some centuries now ...

Tue, 11/01/2011 - 10:12 | 1832037 The Big Ching-aso
The Big Ching-aso's picture

Where's Apollo, Zeus, and Athena when ya need em'?

Tue, 11/01/2011 - 10:22 | 1832083 Ralph Spoilsport
Ralph Spoilsport's picture

Zoroaster ate them.

Tue, 11/01/2011 - 10:28 | 1832119 eureka
eureka's picture

And where are the "anglo-saxon" method saviors? Oh yeah, that's right, they operate their leverage, ponzi, fiat schemes out of London and NYC, flying high as a kite - or should we say as Icharos...?

Next to melt & nuter:  London & NYC.

Tue, 11/01/2011 - 10:14 | 1832047 rosex229
rosex229's picture

at this moment the markets simply want to hear that there won't be a referendum. either g-pap will step down, or there'll be a no confidence vote on friday leading to new elections. all these results are quite negative, but markets only care about the next 5 minutes, not the next 5 weeks, or even 5 hours for that matter. i' mexpecting a bullish bump in stocks over the next few hours when its realized that no referendum will ever be held. of course, the long-term picture is as horrendous as ever.

Tue, 11/01/2011 - 10:18 | 1832052 SWRichmond
SWRichmond's picture

I vote for chaos

Well, the haircut is looking like 100%, so you get your wish.

P.S. the Fed is meeting today, what a coincidence.

Tue, 11/01/2011 - 10:20 | 1832071 Nascent_Variable
Nascent_Variable's picture

Sarkozy:  This is blasphemous!

Merkel:  This is madness!


thunderous chest kick to the Eurozone

Tue, 11/01/2011 - 10:01 | 1831982 Ancona
Ancona's picture

They may preemptively vote themselves out of the union, return to the drachma and screw Europe by paying their bonds off US style, with inflated currency.

Maybe the Weimar Republic taught some valuable lessons after all!

Tue, 11/01/2011 - 10:01 | 1831985 Iriestx
Iriestx's picture

Coming soon:  ISDA rules that a full Greek default is not a CDS credit event.

Tue, 11/01/2011 - 10:06 | 1832016 fonzanoon
fonzanoon's picture

From Bloomberg

U.S. banks increased sales of insurance against credit losses to holders of Greek, Portuguese, Irish, Spanish and Italian debt in the first half of 2011, boosting the risk of payouts in the event of defaults.

Tue, 11/01/2011 - 10:12 | 1832041 semperfi
semperfi's picture

A 100oz silver bar in hand is worth 2 paper CDSs in the bank

Tue, 11/01/2011 - 10:18 | 1832065 The Big Ching-aso
The Big Ching-aso's picture

Or the equivalent of 4 dozen rolls of Charmin.

Tue, 11/01/2011 - 10:02 | 1831989 taraxias
taraxias's picture

The Papa government will collpase in the next 48 hours. End of discussion.

Tue, 11/01/2011 - 10:20 | 1832072 Sudden Debt
Sudden Debt's picture

In europe, 48 hours won't get you anywhere.
48 days is more like it, they need to discuss a bit more on the topic.

Tue, 11/01/2011 - 10:02 | 1831991 HedgeAccordingly
HedgeAccordingly's picture

This chart is real healthy.. loooks like the sell on the close of cash yesterday.. 'knew' somethign -

Tue, 11/01/2011 - 10:02 | 1831992 XXL66
XXL66's picture

Does G20 stand for G-forces on this ride ?

Tue, 11/01/2011 - 10:23 | 1832085 Sudden Debt
Sudden Debt's picture

Yep, it pulls out every gold filling you've got if you on this ride

Tue, 11/01/2011 - 10:35 | 1832167 Peter Pan
Peter Pan's picture

I am not sure. But I think Mr Pap in Greece has hit tEurope's G-SPOT anyway.

Tue, 11/01/2011 - 10:02 | 1831993 Note to self
Note to self's picture


Tue, 11/01/2011 - 10:09 | 1832029 scatterbrains
scatterbrains's picture

or is it 9.99 on the Bovine scale ?

Tue, 11/01/2011 - 10:14 | 1831996 Zero Govt
Zero Govt's picture

...and in the 'birthplace' of democratic government too

couldn't happen to a nicer institution for thieving scum

Tue, 11/01/2011 - 10:19 | 1832068 orkneylad
orkneylad's picture

"...and in the 'birthplace' of democratic government too"


and ass f***ing remember   ;-)

Tue, 11/01/2011 - 10:26 | 1832097 Zero Govt
Zero Govt's picture

and that too ...we're at orgy levels for anal in Greece, the Papa ruling family have been pimping Govt for decades

Tue, 11/01/2011 - 10:25 | 1832102 Ralph Spoilsport
Ralph Spoilsport's picture

"I'd rather be the only woman on a Greek freighter"

Tue, 11/01/2011 - 10:33 | 1832153 Peter Pan
Peter Pan's picture

I think the capital for thieving scum might actually belong to Wall Street crooks and money printing Washington.

Tue, 11/01/2011 - 10:03 | 1832000 semperfi
semperfi's picture

"..this high-risk strategy threatens to bring the whole house of Euro cards down"

Uh, got news for you bubba - come a little closer so I can whisper in your ear.........ITS ALREADY DOWN DOWN DOWN YOU MORON!!!!  BEEN DOWN FOR MONTHS!!  WHERE THE F HAVE YOU BEEN HIDING???

Tue, 11/01/2011 - 10:03 | 1832001 Jim in MN
Jim in MN's picture

Recently posted on BBC


1343: Jonathan Berland, Managing Director, Gresham Investment Management: If a Greek referendum goes forward the most dangerous part is the precedent, not the outcome. #Italy
Tue, 11/01/2011 - 10:05 | 1832009 Note to self
Note to self's picture

Folks's true colors start to show through under the stress.

Tue, 11/01/2011 - 10:08 | 1832026 The Big Ching-aso
The Big Ching-aso's picture

Ya, black and blue.

Tue, 11/01/2011 - 10:05 | 1832011 taraxias
taraxias's picture

thanks for posting that

Tue, 11/01/2011 - 10:12 | 1832038 reload
reload's picture

Another democracy fearing financier then.

Huge cudos to ZH - the referendum news was on here waaaay before anybody else had it. Who says there is no actionable information to be found here? there most certainly is.


Tue, 11/01/2011 - 10:04 | 1832002 TooBearish
TooBearish's picture

Good luk wif dat! fighting the NWO....

Tue, 11/01/2011 - 10:04 | 1832007 stant
stant's picture

collapse has a sound track now on cnbc. i am waiting for whom the bell tolls

Tue, 11/01/2011 - 10:07 | 1832020 homersimpson
homersimpson's picture

I think the song "Another One Bites the Dust" is more appropriate..

Tue, 11/01/2011 - 10:07 | 1832018 The Big Ching-aso
The Big Ching-aso's picture

"Mama Mia!!!!    Thisa Greeka Salad is afull of fetid cheese!!!!!"     Poppy Seinfeld


Tue, 11/01/2011 - 10:16 | 1832051 johnnymustardseed
johnnymustardseed's picture

Poppy is a little sloppy

Tue, 11/01/2011 - 10:22 | 1832084 The Big Ching-aso
The Big Ching-aso's picture

Ya, and so is Papa.

Tue, 11/01/2011 - 10:09 | 1832024 Rockfish
Rockfish's picture

Exploit the Now and prepare for the FUTURE

I will add to my Au stash.

Bloomberg just reported "market down only 200+ pts" I just shake my head.

Tue, 11/01/2011 - 10:20 | 1832074 Dr. Engali
Dr. Engali's picture

You should have heard CNBC trying to sell the market yesterday. " We are going into the last two months of the year."" History shows us that the last two months are the best months" blah blah blah.....

Good luck collecting your $845,000 from MF Global CNBC

Tue, 11/01/2011 - 10:10 | 1832033 Boston
Boston's picture

I wonder what Robo thinks?

Tue, 11/01/2011 - 10:35 | 1832147 oddjob
oddjob's picture

More importantly, MHFT tripled his volatility short last week.

Tue, 11/01/2011 - 10:10 | 1832034 murdomcsponge
murdomcsponge's picture

They won't have a referendum. Its not possible that anyone in the Urine Zone will be consulted. Democracy doesn't figure when the Urine is involved - or much else in Urineland for that matter.

Tue, 11/01/2011 - 11:36 | 1832036 assumptionblindness
assumptionblindness's picture

Don't use CDS as a tool for shorting, however.  No matter what happens, there will never be a 'credit event' to pay on.  Sorry, MF Global et al....

Tue, 11/01/2011 - 10:14 | 1832045 greensnacks
greensnacks's picture

A narrow vicotry or defeat of any vote will further fragment the country and its citizens for years.

Tue, 11/01/2011 - 10:20 | 1832057 Canucklehead
Canucklehead's picture

This is a very positve move, in the long run.  In the short run... not so much.

Backroom EU deals where the "players" ignore treaties or the rights of voters are on life support.  The only way this old style of politics can continue is if every issue is viewed as life or death.

Going forward this precedent supercedes any undemocratic super treaty the EU concocts on the fly.  The democracies have the final decision.

I agree with the Slog's view of events:

Stepping back from G-Pap's decision... who would be the winners of this zero sum game?  Certainly not those supporting business as usual.  Clearly France is found to be out on a limb and will likely proceed to undercut it's domestic support to build a firewall for it's banking elite.

France will simply focus attention on it's actions and be found to be a bedfellow of Italy.

As Martin Armstrong has always alluded to, we are seeing the death of socialism right before our eyes.

Tue, 11/01/2011 - 10:35 | 1832165 eureka
eureka's picture

And what becomes of the US national-socialsm/fascism?

Will we see it die too - and by who's hand - its own or the sheeple's?

Tue, 11/01/2011 - 11:34 | 1832485 Canucklehead
Canucklehead's picture

Watch the Tea Party movement.

There was a time when the phrase "Pioneering Spirit" meant rolling up your sleeves and getting to the task at hand.  Nowadays, it appears to mean grabbing a sign and becoming a community activist who leads a parade.

Most people will be left to their own devices and return to community values that served them in the past.  Socialism will evolve to the point where it is sustainable for the community.

The Nation's game calls for 3 strikes before you are out.  Today, many want one sure bet or they fall back on the resources of the government and lament their one swing of the bat.

Using phrases like sheeple and facism shows me that you are not serious about the task at hand.  I assume you are smart enough to profit from the direction that society is currently taking.  When navigating the world's oceans, remember there are many times when you need to tack...

Lead or follow.  It's your "choice".  Remember to watch the Tea Party movement...

Tue, 11/01/2011 - 10:18 | 1832059 The Deleuzian
The Deleuzian's picture

MF Global, Greece, Italy, eating up the foodchain...Dead bodies will be impossible to hide...Look for the 'big boys' to use the 'little boys' as bullet-proof vests...Because after all...They all have their big toe in it and the 'little boys' have little to no political cover....

Tue, 11/01/2011 - 10:18 | 1832064 cocoablini
cocoablini's picture

Heres my theory:
Somebody is playing this volatility, and collected senior currency and gold along the way. The push will be towards a new global currency, replacing the dollar and the euro along the way.
Everyone who owns dollars and euros will take a huge haircut- so the more you have the better your nest egg position is.
Everyone knows the Greeks and PiiGs are going to go tits up, but there is money to be made on the way down to shore up our position.
I'm talking a decade from now, but its not sci- fi. Its what "they" want. The Builderbergs, etc...

Tue, 11/01/2011 - 10:21 | 1832076 The Big Ching-aso
The Big Ching-aso's picture

"......a decade from now,......

Don't take my advice but that crystal ball you're using should maybe be used as a bowling ball.


Tue, 11/01/2011 - 10:35 | 1832160 youngman
youngman's picture

I am with you...this "market" wea re watching is a changing of the guard...TPTB are transfering what they had and where they had it to a new location and into PM´s....

Tue, 11/01/2011 - 10:19 | 1832067 BadKiTTy
BadKiTTy's picture

So...... The whole world is going to shit because...... the people get to vote on what happens to them in a democratic process rather than being shafted by the unelected! Hummmmmmm........

All that is happening here is that the props to delusion are falling away.

Hard default, credit event, and maybe Greece is the next Iceland (which I undersand is recovering).

Sounds like a plan to me.....


Tue, 11/01/2011 - 10:20 | 1832073 aerial view
aerial view's picture

The Greek working class understand that they have been scammed by their own government which answers to the financial elite and have the guts to say enough is enough. Their leaders should be held fully accountable just like in the U.S. and the rest of the world for selling us all down the river. The Greeks will try and restore some semblance of a democracy by referendum and then riots and revolution while busy Americans get ready for Thanksgiving and Christmas. 

Tue, 11/01/2011 - 10:25 | 1832095 The Big Ching-aso
The Big Ching-aso's picture

When ya have lemons ya make lemonade, and when you have Ouzo well WTF ya get drunk and riot.

Tue, 11/01/2011 - 10:44 | 1832216 srsly-wtf
srsly-wtf's picture

That reminds me, I need to go to the Dollar Store and see if they will buy all my dollars and give me gold.

Tue, 11/01/2011 - 10:21 | 1832078 GOSPLAN HERO
GOSPLAN HERO's picture

Go long on FEMA Camp contractors.

Tue, 11/01/2011 - 10:28 | 1832114 youngman
youngman's picture

Is Merkel and Sarkozy having another meeting...hurry...hurry...or we need a FT headline..or something....Vote or no Vote..does not matter...Greece will default...PERIOD....

Tue, 11/01/2011 - 10:41 | 1832194 doublesharp
doublesharp's picture

So this is what the hooker meant when she asked if I'd pay extra to go Greek.

Tue, 11/01/2011 - 11:15 | 1832378 dizzyfingers
dizzyfingers's picture

It would be a relief is the worst happened sooner than later. Enough of this dragging it out.

Tue, 11/01/2011 - 11:18 | 1832387 SwingForce
SwingForce's picture

I think its perfectly rational, why not consult the people who have to pay this money back at 100% + interest, while taking a 50% LOSS on the investments they hold? Its an opportunity to expose the deal for the sham that it is. P-BRILLIANT!

Tue, 11/01/2011 - 11:18 | 1832396 shazbotz
shazbotz's picture

Actually, what he is doing is smart. He knows he will loose an election. Therefore the winner of said election will take the blame for the coming collapse of Greece and the Euro.

Meanwhile he gets to sit on the sideline and say "I tried my best but at least the collapse didn't happen on my watch"...

Tue, 11/01/2011 - 11:19 | 1832401 dcb
dcb's picture

iceland screwed the bankers/ speculators. spent the money protecting the people, on way to recovery. the financial elites don't want this to happen, because it will show the only way to recovery is to screw the speculators.

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