SocGen's Take On The Greek Elections And What Happens Next

Tyler Durden's picture

SocGen summarizes today's Greek elections and their implication:

What next in Greece? As we head to press, the preliminary results (82.5% of national vote counted) of the Greek general election show 130 seats out of 300 seats to the pro-programme New Democracy Party and 33 seats to PASOK, combined the two pro-programme parties should thus have secured enough seats to form a unity government. The largest anti-programme party, Syriza, secured 71 seats, making it the second biggest party in parliament. Sunday evening, Presidents Van Rompuy and Barroso issued a statement welcoming the election outcome and noting that “The second Greek adjustment programme <..> is the basis upon which to build to foster growth, prosperity and jobs for the Greek people. We stand ready to continue assisting Greece in achieving these goals”. We expect to soon see a renegotiation of the target dates and a real effort to free up structural funds, etc. for Greece.


MARKET ISSUES: Greek euro exit fears are likely to ease for now, but even in this best case outcome, Greece will continue to struggle to meet programme targets and renegotiation with a possible third programme for Greece will soon have to be addressed. Moreover, this does not solve the fundamental issues weighing on Spain and Italy.

And as an added bonus: the French bank's take on the NEW QE:

Will the Fed adopt QE3? Yes! Will it help? Only at the margin. With economic data signalling stall speed growth for the US, we expect the Fed to lower its current 2012 growth outlook from 2.7%, narrowing the gap to our own forecast of 1.8%. This – and the risks from the euro area debt crisis – will allow the Fed to adopt QE3 at the June 20 FOMC. We estimate the Fed could extend twist by another $150bn, but our expectation is that the Fed will instead allow its balance sheet to expand a further $600bn, with purchases split 40/60% between MBS and Treasuries.


MARKET ISSUES: Opinions are increasingly divided as to whether additional QE will help – some even fear it could be counterproductive. QE works through three channels (1) the interest channel (borrowing conditions), (2) the US dollar (competitiveness) and (3) asset prices (wealth effect). We have long held the view that each new round of QE comes with diminishing returns. We nonetheless see the impact as positive – if nothing else giving the reassurance of a pilot in the plane.

All that said, in a global market in which only the next 60 seconds of trading matter, as beyond that anything is merely in the eye of the central planning beholder, and out of the purview of the newsletter one just spent $29.95 purchasing, it is all surely good enough.

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Another day, another babble about the Euro being saved, and another raid on PM's. 

AllWorkedUp's picture

 Yep. Wouldn't be the same without the pm's getting creamed on any good or bad news.

Killtruck's picture

Indeed. As many here have already stated, Greece is saved and the bullshitting continues.

economics9698's picture

The election was bull shit.  Fixed just like elections in America.  The masters want to give the peasants the illution of fair elections, nothing more.  

Pure Evil's picture

I guess with the latest news out of Greece, Angela Merkel, right about now, should be dancing a German jig.

German Jig

mcguire's picture

one of the key ramifications of a greek exit was going to be the risk of contagion... and now with spain and italians spreads blowing out, it seems like we got there, greek exit or not.  

dexter bland's picture

So expect to see Spain and Italian bond yields fall tonight.

Also more talk of relaxing Basel, less talk of QE3.

EURUSD hard to call, short PMs might be the play.

Trade them, don't worship them.

Why no QE3?

From the article above

QE works through three channels

(1) the interest channel (borrowing conditions),

Rates are already very low. Actually a good overseas crisis may make them lower.

(2) the US dollar (competitiveness) and

Who are we trying to compete with here, Europe? Finish them off completely? Lower USD does not effect competitition with China, the rates are pegged.

(3) asset prices (wealth effect).

The asset prices that matter most to consumers are housing, not equities (which aren't far from their highs in any case). House prices are just starting to recover. To date, the main issue hasn't been lower rates, but the inability of many to refinance more easily at these rates. Basel modifications may help with this, but will pose a serious inflation risk in combination with further easing. 

HomerToeclipper's picture

I have a feeling you're right. As a matter of fact, I susepct alot of election riggning and cross-contry coordination and execution will be taking place at the expense of any type of democratic process in elections. The things needed to be done are far too sensitive and important to be left up to chance with the blithering masses.



CommunityStandard's picture

Whoever is responsible for the rigging should be fired, because they're doing a terrible job.  Should have nailed it the first go around.

vast-dom's picture

Japan stocks rally 2% on early Greek election results. Everything is fixed!  



Divided States of America's picture

The fact that the black hole that is known as Greece is still in the Euro (or hope to remain in the Euro) is more the reason that Spain and Italy is fucked...this market can rally all they want, but I aint certain it will last long.

vast-dom's picture

Hong Kong shares jump after Greek vote. Everything is fixed!

RiverRoad's picture

AllWorkedUp:           Try to be patient.  Central bankers desperately need to be buying now.  It'll go back up when they're done buying.

Peter Pan's picture

Agreed. The comatose patient has twitched and the world rejoices. The French have handed over the reigns in full to the socialists who no doubt can now reduce the retirement age to some new low. Europe as well as the USA have unemployment problems, excess capacity, falling property prices, insolvent banks and a host of other issues.

The election result for Greece is about as meaningful for the economy as its win against Russia. Great feeling for a few days but then that blasted reality keeps spoiling things.

JeffB's picture

Well if they lower the retirement age to 45 or so, that could really help the unemployement problem. A lot of new retirees would open up a lot of jobs for the unemployed.

Then printing hundreds of billions to trillions of new euros should help bail out those poor banks and sovereigns, not to mention allowing them to pump up the real estate values again.

Start retiring and print money for expenses!

That ought to fix things. What could go wrong?

Peter Pan's picture

If it were that easy we should print even more money and have everyone retire. I understand your thinking but it doesn't work. The USA has been printing like hell and can't even manage a dollar for dollar increase in GDP.

JeffB's picture

Yeah, I was being facetious. Maybe I should have said lower the retirement age to 40, eh?

or 30.

The key to a better standard of living is productivity. Instead of political infighting over getting the biggest piece of pie, focusing on making a bigger pie and more of them. That typically requires more savings and investment, which of course requires living below ones means to acquire the necessary savings for investment.

These idiot economists are all pushing us in the exact opposite direction... pushing for more consumption... lowering interest rates, printing money and things that can't possibly increase the size of what's produced. They're rewarding and pushing consumption and penalizing saving.

Consuming your seed corn isn't a good long term strategy for prosperity.


AmCockerSpaniel's picture

Greece will stay and so the printing will continue. This will devalue the Euro/USD. This will push up the price of PM's (long term).

RiverRoad's picture

Yes. Yes. Yes. Yes.  And Greece will stay so long as their recalcitrance serves TPTB's printing agenda.  BTW central bankers are stocking up re Yes #4.

Tsukato's picture

Fucking Greeks! What a disappointment. Thought they were going to bring it all down :( Anyway, I had a thought last night: Why aren't the Greeks leaving the Euro, and just using the $US? Could fuck off all those debts, not have to worry about a drachma devaluation, could trade Euros for $s, no problem. In fact it would be a coup de grace to jump into dollars after fist fucking the euro. It would be a helluva return on their exchange from euros to dollars too, cuz they would be abandoning the boat that they helped sink. Oh well.

I may be a fool. but it seems to me that everything happening now is nothing short of economic warfare, with the last standing being the victor?  The Fed keep conjuring money but it hasn't such a detrimental affect on exchange rates right? Why not invite all the periphery euro countries to dump the euro for $, and no matter how much printing Ben Shalom does, it won't matter because everyone will be running for dollar safety. Could be that this will be the case against all currencies until someone backs their with gold. Am I mistaken? If so, please fill me in.


Peter Pan's picture

Hey buddy we are all looking for answers and any honest thought should be expressed, BUT BUT BUT I think you are mistaken.

The US dollar is not a solution because you might not have noticed that things are not too good in the USA despite Ben printing plenty of them as well as handing them out to banks at zero interest rate.

Currencies will have value when they are attached to reality and the biggest reality is precious metals.

If the Greeks could bring the system down when they only account for less than 1.5% of European GDP, that should be a clear sign to you about how fragile, messed up, corrupted and interlinked the system is. It's like saying that Greece could bring a whole building down by breaking a window.

Destruction of unbacked and unserviceable debt is the thing that comes close to solvng the problem.

By the way, i am not knocking you and I genuinely feel your frustrations.

Soul Train's picture

Following is a list of key events facing European leaders in the aftermath of the Greek election.

June 18 -Greek leaders start efforts to put together a coalition.

June 18-19 -G-20 summit in Mexico.

June 19 -Spain sells 12-month and 18-month bills. -Greece sells EU1 billion in 91-day bills.

June 20 -Germany sells additional EU5 billion in two-year notes.

June 21-22 -Euro region and European Union finance ministers meet.

June 21 -ECB Council meeting (officially a non-policy meeting). -Merkel and German opposition discuss European fiscal pact. -Spain sells bonds.

June 22 -Merkel, Hollande, Monti, Rajoy meet in Rome. -Germany plays Greece in the quarter finals of the soccer European Championships.

June 26 -Spain to sell 3-month and 6-month bills. -Italy to sell bonds.

June 28-29 -EU summit. Leaders will discuss a blueprint for deeper euro integration authored by Draghi, Barroso, Rompuy, Juncker.

June 28 -Italy to sell bonds.

June 29 -Germany’s lower house likely to ratify ESM and fiscal pact.

July 5 -ECB council meeting (policy meeting).

July 15 -Greece will run out of money by mid-July, Greece’s Syriza party said on June 13.

To contact the reporter responsible for this story: John Fraher at

To contact the editor responsible for this story: John Fraher at

Peter Pan's picture

Forget the timetables they have never produced anything but meetings and motherhood statements.

The election win by New Democracy will prove to be a poison chalice and then what happens?

I have friends who have been sending medication to relatives in Greece for some time. The unemployment situation is far worse than reported because thousands of people have not been paid for months but still cling to their jobs in the hope that things might reverse.

Young people leaving by the thousands and many more others are heading back to their villages in what is a subsistence but somewhat more sustainable move.

If Greece has not turned into a humanitarian disaster by Christmas I will be surprised. Unless of course Europe starts sending aid.

RiverRoad's picture

Surely at some point they will beg to be annexed to Germany.......?

thebark's picture

If that happened the fat lazy bastards would have to work...and they surely dont want that!

RiverRoad's picture

Hunger does funny things to people.

vast-dom's picture

thank you for this bit of insight PP. much scarier on the ground then the media dare report, all to keep markets  up and everything status quo. TPTB are out of control. 

Newsboy's picture

The #1 party ND will try to form a ruling coalition, No Go.

Then the #2 Syriza party will try. They will have the #3 Pasok with them, but will they still fall short?


Bay of Pigs's picture


Edit: <sarc on>

duckarooni's picture

How much do the private banks which own the Fed get paid for this work?

RobotTrader's picture

John Embry probably squealing loudly again about to have a heart attack after watching gold get smashed again.

disabledvet's picture

As funny as this is tis when gold crossed the 1500 mark that the euro zone's fate was sealed no? Sure "there will always be a euro"...just as there is still a ruble and there is still a real. But to what economy do we affix said currency to? The only answer I see is to the place that invented the euro as well as controls the majority of the other currencies namely New York. Should be a wild one Europe. As Shakespeare taught us however "told by an idiot signifying nothing." We all know better in these here parts which is why we should have already moved on. Unless of course you fancy yourself a "founder of the feast." in which case I bid you "good luck" and "adieu."

SilverTree's picture

What market actions give YOU heart attacks Robo?

JustObserving's picture

Gold drops from $1621.08 to $1604.91  in less than a minute today.  No one will want to sell his gold that cheaply and recklessly unless it is to scare of investors.  

It is clear that the Fed working with big banks has been manipulating gold and silver prices so that the dollar remains the undisputed reserve currency.

We have corrupt, crony, controlled markets in the USA.

Ted Butler accused the US government of allowing JP Morgan to manipulate silver just on Friday:

"I’m disclosing for the first time that the U.S. government has given JPMorgan the green light to manipulate the silver market. This fact explains the shenanigans in the silver market. It answers all the questions and exposes this tawdry affair for all to see.

The scandal recently became more outrageous. The June Bank Participation Report, as of Tuesday, June 5, along with the COT confirmed that JPMorgan’s silver short position has increased by at least 5,000 contracts in the past two reporting weeks. That is the equivalent of 25 million ounces of silver, truly an enormous amount in a two week period and about equal to all the silver produced and consumed in the world in the same period. I calculate JPMorgan’s net short position in COMEX silver futures to be between 16,000 and 17,000 contracts. JPMorgan has been the sole net commercial silver short seller over the past two weeks. That is the clearest proof yet of manipulation. A market dominated by one buyer or seller is the ultimate definition of manipulation."

Paul Craig Roberts also accuses the US government of manipulating the price of gold last week:

Dr. Roberts says, “The cliff dive we are experiencing in housing isn’t over,” and precious metals prices are “being suppressed.”  Roberts says, “Gold prices should be rising.  Why? Because the debt is rising.”   What is the reason why Dr. Roberts thinks the suppression game has gotten so intense?  Dr.  Roberts says, “The fact that they are driving the price down suggests to me the situation is getting more desperate.”

Bay of Pigs's picture


And we always can count on some worthless fucking troll to give a down error for someone telling the truth.

Dermasolarapaterraphatrima's picture

$1,627 right now....seems like they cannot stop reality. I'm waiting to see what oil does.

disabledvet's picture

this hasn't been a gold game for some time. this is a "euro game" now. and that would be "thousands of tons of gold" as an afterthought in that game. i mean we're talking capital raisings beyond belief, massive issuances of debt, the BRIC's sink like bricks, gasoline dirt cheap, oil falling, pension funds going under, scandals galore, attempts at a cover up of it all by going all in in the Middle East. I'm sure i've left a lot of things out as well. Enjoy!

OneTinSoldier66's picture

But Gold hasn't been 'smashed'. Apparently even TPTB can't put a lid on it. So I don't know what there'd be to have a heart attack about. It's down by like $6 right now. Big whoop. It's still up nicely from what it was at last month. That's not smashed. So, I suppose you'll probably be disappointed that John Embry isn't likely to have a heart attack.


And you might want stick with what you know by getting back to your robotic HFT's.

Hulk's picture

We flat now. Your buddy's take downs have a half life of about an hour these days...

FieldingMellish's picture

'twas simply the pause that refreshes....

MeBizarro's picture

This gov't will fall by the end of the summer.  Greece is already starting to run low on medicine and within another month or two is going to start running out of basic critical maintenance drugs for certain patients which are essential to maintain life.  They will be available on the black market of course (Greeks always have been experts at smuggling into and out of their country) but not without cash and a huge markup.  Ability to pay for energy supplies is also becoming a huge issue including refined oil products. 

Once medicine becomes tight enough especially for critical medicines necessary for maintaining life in certain patients, petrol supplies start to dry up, and the military largely stops getting paid or runs really far behind on payments, you will have a military coup in Greece and installed to maintain basic civil order.  Just a matter of how it transpires.  It just won't be an outright coup with old-school junta style. 

My bet is that this happens by the end of the year in Greece.

XitSam's picture

OK, say a military coup happens. How will the military government pay for medicine? For gasoline? Pay themselves? Will they stay in the EZ and force "austerity" at the point of a gun? Will they leave the EZ and try to pay for things with a greatly devalued drachma?

MeBizarro's picture

Can't have a coup and stay in the EU.  I imagine they leave, implement a new drachma, and go through but maintain order largely through the gun. 

Only question is whether US intelligence services and foreign policy will allow for this and the subsequent issues it economically and militarily. 

lewy14's picture

I'm betting they could have a coup and stay in Nato.

What is the alternative? Let them fall completely into Russia's orbit?

And as a member of Nato, they may be entitled to certain "military aid"...

Element's picture

I doubt they would fall into Russia's sphere easily, despite buying advanced Russian SAMs.  What can Russia really offer them long-term?  The Greek military, especially air force is dependent on western parts and can not afford to replace the air force with new-build Russian jets and weapons.  And Russia can't afford to give them away (except maybe refurbished hand-me-downs).  It could come to that for a decade or two though.  But what does Greece offer Russia?  I can't even answer that.  The main lesson is if you sponsor Greece they bleed you dry.  But it's somewhat unavoidable, and here's why;
There are two key features of the 'developed', 'advanced', 'rich' world that really stand out;

(1)  They all used credit to pretend they were much richer than they really are.

(2)  Most have used copious credit lines to pretend they were militarily much more formidable than they were ever capable of sustaining long-term.
This strategic facade has been taken as far as it can go.  Now this is unwinding and mean-reversion is on, with an overshoot of capabilities below long-term means.  And for Greece that would be very low (advanced) capabilities indeed. 

This then creates a series of power vacuums, as falls in readiness and loss of capabilities occur, so dramatically escalating strategic uncertainty and real vulnerabilities.  History shows opportunists are more likely to opportune, in these circumstances.  It happened soon after the Soviet Union collapsed too.

But NATO will most likely persist in a weakened form even WHEN the Eurozone fails.

Core countries understand the need for a viable periphery defense, so even WHEN the PIIGS do leave the Eurozone, with a devastating wave of private and sovereign defaults, NATO and its political process still will have to be pragmatic about it and of necessity ensure these states can remain stable. So they still need to foster, facilitate and provide minimal acceptable levels of security and defense capabilities, and maintain interoperability training, and maintain defence alliance linkages with the core. 

I suspect past blatantly unaffordable credit and defense deals have been oriented towards propping these states for that strategic purpose. 

In the end the European core will still need to come back to Greece again and offer credit and weapon sales.  Greece knows this.  One way or another all will be forgiven and this necessary process will begin once more. 

This I think is why Greek debt-default keeps happening, and why states never seem to learn their lesson, as they have no choice in the end but to lend the money.

The otherside of this mean-reversion process is that those states that are genuinely wealthy and have managed their finances and budgets and defense spending properly, will remain more-or-less militarily strong, fairly secure and politically stable.  The tide is now going out in defense, and we are going to find out who was swimming naked, and which ones really are the stronger.  The strong ones will then necessarily increase defense spending, extend capabilities further, and ramp readiness and reaction capabilities, to cover the new strategic liabilities created by their suddenly much weaker neighbours.

It remains to be seen who can do this.  Obviously this is going to create big issues and alliance re-definitions.

MeBizarro's picture

I would highly doubt they leave NATO even with a coup because the US simply wouldn't allow it nor have the Greeks raised any objections about NATO because they largely haven't had to do much in Afghanistan anyways.  

My bet is that the next coalition gov't breaks down completely at some point this summer, civil order starts to fail apart because people haven't been paid for months, and that the Greek military (with backing from NATO and US) steps in to suspend civil gov't and install a temporarily regime that will restore law & order and be in place until civilian elections can be held either later in 2012 or more likely at some point in spring 2013.  Call it what you like but it is still a military coup.  I am sure the CIA has already looked and vetted senior Greek military officials that they know they can work with & will be pro-Western. 

What gets tricky is how they work out the numbers - including existing bonds and ECB loans that Germany and a few other Euro nations are largely on the hook for, preventing all of the nasty swaps from kicking in and nuking the Western banks, setting up a new currency (drachma which I think is the only answer after they look at it & all of the crappy options on the table), keeping the lights on in the interim, and given the Greeks all kinds of quiet guarantees and economic assurrances so they won't be left pissing in the wind once they set up the new currency & elect a new governing coalition in '13. 


Element's picture

The US has to stay clear of it, it can't get directly involved for the simple reason that the Greek people themselves despise or mistrust PAX-AMERICANA, and are anti the US military (probably moreso even than Iranians and Pakis).  The US must work with proxies and Europeans to have influence in Greece.  Greeks don't really want to be aligned with anyone, ever, and they hold US culture and power in especially low-regard.

MeBizarro's picture

Of course the US will stay 'officially out of it' just as they have since since WW2 and the OSS was heavily involved in Greece even before the war was over.  CIA has good practice too with pulling off the juntas in Greece in '67 that ruled Greece from 1967-74.  I would be very curious to see profiles of key Greek military officials and they were trained & what postings they have in NATO offices.  Those will be the people that the CIA will look to.  Need to be at Col. rank and higher (General is better), in command of either important Greek military assets, or stationed at key points in Greek especially in Athens.    

The key is to not make this look like an outright military coup with a ruling junta.  That won't fly.  What it has to be is the military stepping in 'preserve civil society' and to restore law and order to protect civilians or some line of similiar bull@hit the press and citizens in US and EU will buy it enough to not raise holy hell about it.