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What Is Next For Greece?

Tyler Durden's picture




 

One European think tank which has been spot on in its skepticism over the past two years, is OpenEurope. Below they share their views on the next steps for Greece.

From OpenEurope:

What happens now?

As the largest party, New Democracy (ND) will lead talks on forming a coalition government. The starting point will likely be negotiations over a ‘national unity government’ which tries to incorporate as many parties as possible. If ND fails, the mandate would normally pass onto the second and third largest parties, SYRIZA and PASOK respectively. However, SYRIZA has said it will reject the mandate, while PASOK called for it to be passed straight to Greek President Karolos Papoulias. ND still looks likely to lead the first talks, but if these fail Papoulias will take over. Given the risk of a eurozone collapse, most political leaders in Greece accept that not forming a government is not an option. Once a government is in place, negotiations with European partners will begin.

Is a national unity government likely or possible?

We don’t think so. SYRIZA has already ruled out governing in tandem with ND, and has consistently rejected the austerity measures attached to the Greek bailout programme. Throughout the election campaign, SYRIZA leader Alexis Tsipras has been incredibly critical of ND and the ‘old guard’ of Greek politics – which he blames for the corruption and economic problems Greece is now facing.

But wait, hasn’t PASOK ruled out joining a coalition without SYRIZA?

It is true that yesterday PASOK leader Evangelos Venizelos called for a minimum four-party coalition and suggested he would not join a coalition which did not involve SYRIZA. However, we believe this to be largely political posturing. PASOK has seen its vote share eroded by SYRIZA and is therefore keen to exploit its position of power as kingmaker to ensure it does not lose further support. The party is also wary of being stuck in a coalition with only ND where it would be overwhelmed. We believe PASOK would join a coalition as long as it involved other parties beyond just itself and ND. As an alternative, PASOK could pledge its votes in parliament to allow the new government to pass EU-mandated austerity measures. Ultimately, PASOK has supported Greek membership of the euro and the current bailout programme, while Venizelos is aware of how costly new elections could be meaning it is likely to compromise. Somewhat ironically, he has already argued that there is no time for “political games” when it comes to forming the new government.

What could a new government look like and how strong would it be?

We believe a likely coalition would be ND-PASOK-Democratic Left. This would have a fairly strong majority with 179 seats in parliament. However, it would face a strong, motivated and more unified opposition in SYRIZA. This coalition government, although broadly pro-euro and accepting of the bailout programme, would still be marred by disagreements over the level of ‘austerity’ and the correct way to promote economic growth (ultimately it is an ideologically mixed right-left coalition).

Is a third election possible?

Yes, although it seems the least likely option at the moment. Interestingly, there is a precedent in recent Greek history – the Greeks have previously had to vote three times in less than a year (June 1989, November 1989, and April 1990) before a stable government could be formed. All the political parties know that a third election would now be the worst possible outcome – not least because Greece would run out of cash before the new vote takes place, probably towards the end of the year, while eurozone leaders look unlikely to lend into a black hole (in governance terms). Therefore, a compromise is likely. However, if SYRIZA stays out, the new coalition would inevitably be a weak one (as noted above), meaning that new snap elections may well be called in six months’ time.  

What prospect is there of a renegotiation in the bailout agreement?

Eurozone leaders hinted strongly ahead of the election that if a broadly ‘pro-bailout’ coalition was formed some easing of terms would be forthcoming. This looks to have been confirmed by German Deputy Finance Minister Steffen Kampeter who said Germany expected the new Greek government to honour its existing commitments but added that Athens should not be pushed too hard, saying, “It is clear to us that Greece should not be over-strained.” German Foreign Minister Guido Westerwelle said there could not be “substantial changes” to the agreement but that he could “well imagine talking again about timelines.”
One big question is whether eurozone leaders will push for SYRIZA to provide a supporting signature – we think this is unlikely given the party’s opposition – but ultimately the support of a broad coalition with 179 seats may be enough for eurozone leaders.
Any adjustments are likely to be small focusing on lower interest rates, extended repayment periods and EIB funds for Greece. Some adjustment in the deficit cutting programme may be possible, although only to account for the delays to the plan due to the two Greek elections.

Will this solve the eurozone’s and Greece’s problems?

No. Even with adjustments to the bailout programme, it still looks virtually impossible for the country to meet the various austerity targets. Missed targets will continue to be a source of disagreements and controversy, particularly inside Germany, while the continued EU/ECB/IMF Troika presence on the ground in Greece means that any delays will come to light quickly. Therefore, Greece’s future in the eurozone remains uncertain. For the single currency as a whole, should a compromise be possible in Greece, the focus of attention will shift back to Spain – whose banks remain a major liability for the euro.

So what chance is there for a third Greek bailout?

Politically, providing a third bailout for Greece would be incredibly difficult for the likes of Germany, Finland and the Netherlands, which would all struggle to get parliamentary approval. From the Greek side, it is hard to imagine even a pro-euro coalition signing up to a new strict ‘Memorandum of Understanding’ detailing further ‘austerity’ for Greece. At best, extra cash might be put on the table if a move towards a fiscal or banking union is close, but this will not happen anytime soon. We expect that a more fundamental decision over Greece’s eurozone membership will need to be made before this money runs out, within the next six to nine months.

Why doesn’t Greece just leave the euro now and move forward?

  • There are clear economic benefits to Greece leaving the euro, but the risks involved in an imminent exit could well outweigh these benefits in the short term. We estimate that if Greece left the euro now, it could still need between €67bn and €259bn in external short-term support, potentially split between the IMF, the Eurozone and non-euro countries including the UK. These figures do not include longer-term support or contagion costs to the rest of the Eurozone.
  • A Greek exit and the withdrawal of ECB support would almost certainly lead to the undercapitalised Greek banking sector collapsing. To avoid a massive bank run and huge losses to pensions, we estimate that banks and pensions funds between them would instantly need a €55bn injection of fresh capital, which would be difficult for Greece to afford without external support.
  • The new Greek Central Bank would also need to create at least €128bn worth of the new currency (63% of Greek GDP) in liquidity to help keep Greek banks afloat. This could trigger high levels of inflation, though these might only be temporary.
  • Despite a compromise being likely in the short term, as Greece approaches a balanced budget and a more stable banking sector, though still messy, an exit will look increasingly attractive – particularly if the only alternative for Athens is to permanently give up economic and political sovereignty.

How exposed are EU countries to Greece now?

Open Europe estimates that the EU countries have a total exposure of €552bn to the Greek economy. This comes through various sources including: the two direct bailouts, central bank lending (ECB monetary policy, ECB Securities Markets Programme, Target 2 and Emergency Liquidity Assistance) and exposure of these countries banking sectors to Greece. This has increased by a massive 67% since June 2011, despite little progress being made on reforming the Greek economy or solving the wider problems in the eurozone.

€ Billion Total Exposure to Greece
Eurozone: Austria 15.5
Belgium 17.7
Cyprus 1.1
Estonia 0.7
Finland 8.5
France 138.9
Germany 139.4
Greece 7.7
Ireland 7.8
Italy 84.9
Luxembourg 1.3
Malta 0.6
Netherlands 30.7
Portugal 19.8
Slovakia 2.7
Slovenia 2.3
Spain 55.7
Non-Eurozone: Bulgaria 0.2
Czech Republic 0.3
Denmark 0.5
Latvia 0.0
Lithuania 0.1
Hungary 0.3
Poland 0.4
Romania 0.3
Sweden 0.9
United Kingdom 13.5
Total 551.8
 

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Mon, 06/18/2012 - 09:24 | 2536030 mrktwtch2
mrktwtch2's picture

i think this circus will continue until spain is on the brink..and if the euro quake starts to rock itlay..then the bears will finally get there 25 to 30% sell off in the indices worlwide..but this probably wont happen till late septemeber..

Mon, 06/18/2012 - 09:35 | 2536050 Chief KnocAHoma
Chief KnocAHoma's picture

WTF? Is the Euro really that important to try and salvage? It seems to me these countries co-existed for centuries with different currency. Sure Germany acted up every few years, but this idea of the EU is just whacked.

It ain't working...punt and everyone go back to your own money. Is my solution too simple? Am I missing something?

Mon, 06/18/2012 - 09:51 | 2536077 Seize Mars
Seize Mars's picture

Chief, yes you are missing something. The general rule is if something looks like a failure but persists nonetheless, it's not a failure. It's a success when measured from a different metric.

The EURO has been a great success at creating and maintaining a huge number of centrally managed interest-paying wage-slaves. If you are the central boss, then a breakup of that system would be a disaster, and you would go to great lengths to keep it going for as long as possible. Why relinquish control back to local lords, when you can remain king?

Mon, 06/18/2012 - 10:15 | 2536132 vast-dom
vast-dom's picture

well put SM

Mon, 06/18/2012 - 10:05 | 2536108 Roger O. Thornhill
Roger O. Thornhill's picture

You're missing the overal game which is globalization. 'The Powers That Be' are of the opinion global governance is the foregone conclusion, that we will get there, kicking a screaming... eventually.

When you look through the prism of inevitable globalisation you will see the game through TPTB's eyes. They do not care for liberty or democracy or individual rights. They believe they can rule and make their "perfect world" as did their predecessors Hitler, Lenin, Stalin, Mao, etc. It is an idea as old as the world - nobles and serfs (and guess who you are).

Once you see the threads of global governance in this, all their confusing activities fall into place.

Mon, 06/18/2012 - 10:26 | 2536140 Jake88
Jake88's picture

All true. But the TPTB aren't the only players here. The sheeple can't be herded if they refuse to be herded.

Mon, 06/18/2012 - 11:08 | 2536240 Lebensphilosoph
Lebensphilosoph's picture

The noblesse d'épée of Europe arose out of the natural leadership of the Germanic tribes that had little in the way of desires to fashion the world according to an ideology, but was by its very nature intimately tied to the land and its people, and, moreover, a bulwark against any pretense of central government. No, that desire is to be found in the bourgeouis and noblesse de robe intellectuals of the 18th century who fomented the Glorious Revolution in the name of liberty, equality, and fraternity in place of God, hierarchy and loyalty, and whose actual and spiritual successors rule us to this day.

Mon, 06/18/2012 - 10:19 | 2536135 eclectic syncretist
eclectic syncretist's picture

Yes, as Sieze Mars said, the local banks create the debt out of thin air (via fractional reserve lending they lend 10 euro for every one deposited) in collusion with the central banks, which create money out of thin air for the banks. Since the money that is lended to the countries is created out of thin air all the banks have to do is sit back and collect the interest payments.

And the banks can never lose because 1) their client accounts are insured at taxpayer expense in the form of something like the FDIC, so they have no liability issues there and can gamble freely, and 2) loans to governments are guaranteed by the governments, meaning the taxpayers will ultimately have to pay in one way or another, and 3) if they do go insolvent the central banks can just create more money out of thin air to keep them afloat.

Note that whenever the central banks create money the taxpayers associated with that particular central bank ultimately pay for the created money via inflation.

when you understand these things you will understand why the banks will never stop lending ever increasing amounts of money.  They don't have any skin in the game, and almost unlimited profits to gain.  The banks will destroy the economy and all forms of commerce until they ultimately become so vilified that we close them down.  At least that's how it's always played out in history.  Today's version is just on a much larger scale.

Mon, 06/18/2012 - 10:26 | 2536149 Chief KnocAHoma
Chief KnocAHoma's picture

I think you are ALL making my point. PUNT this EU trap! PUNT while can and send those fucking CB leaches a message.

We don't need no stinking CB central planning! We want freedom from this enslavement!

This entire money franchise isn't going to work and I'm tired of the scare tactics. I mean really... how much worse can it get?

Mon, 06/18/2012 - 10:47 | 2536197 Mitzibitzi
Mitzibitzi's picture

A LOT!

Mon, 06/18/2012 - 15:19 | 2537086 WakeUpPeeeeeople
WakeUpPeeeeeople's picture

And it will....

Mon, 06/18/2012 - 11:15 | 2536263 bankruptcylawyer
bankruptcylawyer's picture

yes, precisely my thoughts, but it's SUCH a larger scale to the point where the largest 5 banks have Online systems where they can just deposit money (debt) into bankholders accounts with almost no effort. 

the debit card system and online payments system make possible a future where all the small banks get liquidated and the literally the only banks left are the biggest. ONLY BANKS LEFT ARE THE BIGGEST. 

 

think about closing that system down. it's a lot easier for a disorganized mass of people to reorganize a failling system of different banks where decentralized banking makes systemic failure correctable. 

i don't know if a single giant bank failing can ever easily be corrected without transitioning to the polar end of authoritarianism. 

the 'revolution' will simply want to reboot the bank as it is , and utilize it for its own ends. at that point, there will already be so much inflation and deflation that the giant bank conglomerate willl be able to politically manage its way through any supposed change in power and just mask over the status quo as 'change'. the other alternative is burn it to the ground and embrace a period of loan sharking as the re-capitalization of a new distributed small banking system. something like that would be hard to imagine. and it would be far more brutal for the public at large. it could not happen without a full breakdown and disruptions to gas and food supplies and is thus politically untenable. 

put simply, too big too fail is going to get a WHOLE lot bigger before any of this 'changes'. 

 

 

Mon, 06/18/2012 - 11:50 | 2536383 Ghordius
Ghordius's picture

chief, it pains me that a question like yours is discussed only on the "financials" side, with it's many shades of propaganda

1. "these countries co-existed for centuries with different currencies": if you are talking about centuries, then the answer is with one currency: gold. Until WWI/II and then 1971.

2. the idea of the EU (a supra-national entity that costs less than 1.5% of the GDP of the 27 nations involved) has very little to do with the Euro. Ask the Brits, if you don't believe me.

3. The Euro? besides the obvious answer of the propagandists that want to sell you "the imbecility of the continental europeans"?

It's pricelists, pricelists and pricelists. That simple. We have an industry where for example German, French, Spanish and Italian carmakers assemble components from Slovenia, Portugal, etc. in countless permutations and directions.

Multistage component industries across several countries need price stability, something that can only be insured by either gold, currency grids or a common currency.

Even the Swiss need price stability for their turbine blades and electric components, hence the EURCHF floor.

Of course this is not the answer you would get from a supersmart 30y banker in the square mile, he would say this is all a missed opportunity to make lots of money with ITL/FFR/DEM/GBP/USD longs/shorts and a couple of new derivatives on top of it.

Mon, 06/18/2012 - 09:44 | 2536067 CatoRenasci
CatoRenasci's picture

Can't interrupt the traditional Summer holidays, now can we?  You're right the can will be kicked through 'til the Autumn one way or the other....

Mon, 06/18/2012 - 09:58 | 2536093 gaoptimize
gaoptimize's picture

Global markets better hope it is either well before or well after the negative impact of the lame duck debt cieling / "fiscal cliff" discussions that will put negative pressure on the bond and stock markets later this year.  If this all hits at once, it may trigger economic SHTF, whether Romney or Obama is elected.

Mon, 06/18/2012 - 09:26 | 2536031 Divided States ...
Divided States of America's picture

Wait for the Greece Germany Euro 2012 match and think everything is A-OK.

Riots in Greece will be dependent on whether they beat Germany in the soccer match.

Mon, 06/18/2012 - 09:30 | 2536045 Ivanovich
Ivanovich's picture

Don't you mean "PAS-OK?"

Mon, 06/18/2012 - 09:25 | 2536033 ATM
ATM's picture

in the end they will all print

Mon, 06/18/2012 - 09:52 | 2536075 kridkrid
kridkrid's picture

 

Choose your own adventure time:

(Page 1) Credit markets are beginning to collapse and falling asset prices will destroy your ponzi banking system... do you A) Print or B) let it all collapse... 

(A)- Turn to page 57....

(Page 57).  If this is your first time on page 57, 3 months have passed...(turn to page 1).  If this is your second time on page 57, 2 more months have passed (turn to page 1).  If this is your third time on page 57, 1 more month has passed (turn to page 1).  If this is your forth time on page 57, go here... http://www.goldonomic.com/When%20Money%20Dies.pdf Inflationary Depression.... and all bets are off...

(B) Deflationary Depression... and all bets are off...

 

Mon, 06/18/2012 - 11:47 | 2536364 ElvisDog
ElvisDog's picture

God damnit, they are not and will not "print" if by printing you mean give the money away for free. The Central Banks are making loans. Every single bailout to Greece, Ireland, Spain, etc. has been a loan that the bankers fully expect to be paid back. In some cases they are simply making a bigger loan to pay back a previous loan. You (ATM) and all others who think simplistically about "printing" need to get that through your thick heads.

Printing would devalue all existing loans in that currency. Central Banks will not willingly devalue their assets. What they will do and have done is to try to seize physical assets as repayments for previous loans.

Mon, 06/18/2012 - 11:56 | 2536408 kridkrid
kridkrid's picture

I've seen a couple of people get touchy about this... I think it's slightly overblown.  As long as one recognizes that debt = money and money = debt... the process of "loaning money" out of thin air and "creating money" out of thin air, i.e. printing, is not too different.  That first part is the key... and you are right in pointing out that many don't get this. Virtually all money is LOANED into existence... that's how it comes to be.  

Mon, 06/18/2012 - 13:11 | 2536674 Zymurguy
Zymurguy's picture

Good points - we must always take these defininitions futher up stream to the source to fully understand the cluster fuck we are all in.

Keep in mind also... real money must have some value either a temporary or long term store of it, acceptable by others for trade and be of some divisible unit of measure.  Gold for instance is a good example of money or it might even be wheat or bullets.

Currency is the represenation of that store of value.

In our case the banks are dealing with neither money or currency.  They are playing with fiat currency which represents absolutely nothing.  The only reason it resembles currency is that others will currently accept it for the exchange of goods/services/property/etc.

Small business accounts for a tremendous amount of exchange and employment here in the U.S.  One way we can begin to fight goliath is if small business owners would begin to encourage their employees to accept gold/silver for their earnings and to encourage the use of gold/silver as payment for their goods/services.  Only a clandestine effort of this nature can ever shake the giant to it's knees.  Our elected representatives will never enact any legistlation to set the country right - we must do it ourselves.

Mon, 06/18/2012 - 12:08 | 2536438 Bananamerican
Bananamerican's picture

"A hungry mon is an angry mon"-Bob Marley

They will print

Mon, 06/18/2012 - 09:28 | 2536038 Rainman
Rainman's picture

No matter who or what runs Greece, they are still flat ass broke.

Mon, 06/18/2012 - 09:29 | 2536040 yogibear
yogibear's picture

LOL, people are maxing out their credit cards and defaulting! Stick it to the banksters!!!

Mon, 06/18/2012 - 10:08 | 2536120 j0nx
j0nx's picture

Yup and you won't hear that in the MSM just like you won't hear mention of bank runs all over Europe. How are we different than the USSR of 1977 again? Oh, that's right, we're not. Propaganda rules the day and what that doesn't get misinformation will. Oh well, the people continue to allow it...

Mon, 06/18/2012 - 09:30 | 2536044 mpyre
mpyre's picture

4-1 germany...

Mon, 06/18/2012 - 09:31 | 2536046 TTaco
TTaco's picture

Where is Switzerland? Ha , yes I forgot : THEY KNEW BETTER:
http://stephanemontabert.blog.24heures.ch/media/01/01/500205485.jpg

Mon, 06/18/2012 - 09:31 | 2536047 Rubicon
Rubicon's picture

Im off to Greece in a couple of weeks for a holiday. Can I pass any messages on to Antonio?

Mon, 06/18/2012 - 09:36 | 2536053 GMadScientist
GMadScientist's picture

170B zooro just to the other PIGS teetering on the brink.

"Don't worry. Everything will be fine. Just climb up using my grenade firing pin as a foothold."

Man that German lifeboat is looking small.

Mon, 06/18/2012 - 09:35 | 2536054 lizzy36
lizzy36's picture

Remember PPIP.

Think Geithner should try and PPIP Greece.

Mon, 06/18/2012 - 09:36 | 2536057 GMadScientist
GMadScientist's picture

I believe it's spelled PIMP. ;)

Mon, 06/18/2012 - 09:40 | 2536062 Undecided
Undecided's picture

Yay for frigan apple moving the whole market again! 

Mon, 06/18/2012 - 09:41 | 2536063 Rip van Wrinkle
Rip van Wrinkle's picture

"...the EU countries have a total exposure of €552bn to the Greek economy....This has increased by a massive 67% since June 2011,.."

 

Isn't the rest of the paper just waffle?

Mon, 06/18/2012 - 09:42 | 2536065 mantrid
mantrid's picture

finally someone noted that quick, disorderly exit thanks to Syriza obstructionists is not neccessarily the best way to fix Greece.

Mon, 06/18/2012 - 10:30 | 2536157 ThirdWorldDude
ThirdWorldDude's picture

The best way to "fix" Greece?  LMAO! 

The irony of it is that you're right, Greece has been turned into a debt junkie. Your doublespeak reminded me of one of the best scenes in "51st State!"   http://youtu.be/57h1AXpgf80

Mon, 06/18/2012 - 09:46 | 2536069 RobotTrader
RobotTrader's picture

National Bank of Greece still green today after two massive volume up days last week.

Mon, 06/18/2012 - 13:11 | 2536608 akak
akak's picture

I'm not sure how a national central bank can be "green", but I junked your comment because of its predictable and meaningless ultra-short-term perspective, and also simply because, well, it is from you --- the asswipe cowardly troll extraordinaire.

Mon, 06/18/2012 - 09:47 | 2536070 CatoRenasci
CatoRenasci's picture

The Germans should scupper this now - bring back D-Mark and let the profligate Southerners deal with their own messes.

Mon, 06/18/2012 - 10:06 | 2536115 LeisureSmith
LeisureSmith's picture

Maybe someone should be on the lookout for unusual activity around this place..http://www.landqart.com/unternehmen/?L=1

Or if there are German cargoplanes being loaded with big pallets surounded by armed guards at the local airport. http://www.zerohedge.com/news/material-banknote-order-reinstated

Mon, 06/18/2012 - 09:51 | 2536076 SmoothCoolSmoke
SmoothCoolSmoke's picture

Greeks should have gone the Icelandic route already.  They'd be on the road to recovery by now.   Love those damn Icelanders.

Mon, 06/18/2012 - 09:53 | 2536081 asteroids
asteroids's picture

Tick Tick Tick. It'll take weeks, if not months to form a government. In the mean time bills must be paid. That will only happen if Gemany approves. Remember, Greece hasn't lived up to it's austerity promise. Someone will have to look the other way. When that happens, the game really is over for Germany.

Mon, 06/18/2012 - 10:02 | 2536104 harry555
harry555's picture

Golden Dawn Bitchez!

Mon, 06/18/2012 - 10:26 | 2536147 slewie the pi-rat
slewie the pi-rat's picture

nothing new here...

not surprisingly

Mon, 06/18/2012 - 12:10 | 2536159 ThisIsBob
ThisIsBob's picture

I'm soooo tired of Greece and Greeks.

They borrowed money from the players and they can't pay it back.  All this scrambling is so the players can try to lay off or minimize their most certain losses.  A pox on 'em all.

I came, I saw, I bet, I lost.  No, wait...  that's Italy.

Mon, 06/18/2012 - 10:50 | 2536203 Bill Shockley
Bill Shockley's picture

Fascism vs. Socialism...

same as it ever was.

It's coming to the USA.

 

Better decide now and double down while you can.

 

Or as Kyle said, guns and gold.

 

Read a Tale of Two Cities and 1984.

  bill

Mon, 06/18/2012 - 11:40 | 2536345 Lebensphilosoph
Lebensphilosoph's picture

Given their track records, Mussolini vs Lenin, Stalin, Hitler, Mao and Pol Pot, I'll go with the former.

Mon, 06/18/2012 - 16:37 | 2537340 peaceful
peaceful's picture

Samaras holds the fort till he prepares the army to take over and nip

any impending revolution in the bud. In other words, COUP OF THE COLONELS PART DIO

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