Wolf Richter www.testosteronepit.com [10]
The new Greek finance minister, Yannis Stournaras, until recently a professor of economics at the University of Athens, hasn’t learned yet the art of extortion that is required to accomplish anything at all during negotiations with the Eurozone. And so, when he went to the meeting of Eurozone finance ministers earlier this week at the Eurogroup—which serves as political control over the common currency—he accomplished absolutely nothing. He wasn’t even able, unlike his predecessors, to get himself into the media with some wild threat about a “disorderly default” or destroying the entire Eurozone if he didn’t get what he wanted.
He had two big jobs to do: one, promote Greece’s efforts to renegotiate (“water down” is the technical term) the structural reforms that the prior government had agreed to in writing by signing the bailout memorandum; and two, push for a two-year delay of these watered-down conditions. At the same time, he’d have to make sure Greece would continue to receive the flow of bailout billions from taxpayers elsewhere.
But roundly ignored at the Eurogroup meeting, he returned empty handed to Greece. A fiasco for him. In a meeting with leaders of the three-party coalition government—the conservative New Democracy, the socialist PASOK, and the small Democratic Left— Evangelos Venizelos, PASOK leader, former finance minister, and extortionist par excellence, was apparently [11] furious with him and hollowed out his power. The infighting begins.
Time is running out for Greece. Completely dependent on bailout payments to keep its finances from collapsing, Greece is losing ever more support where it counts the most: in Germany. According to the latest poll [12], 61% of Germans reject giving Greece and other bailed out countries more time to solve their problems. They’ve had enough of the broken promises. They’ve become so bitter about the whole process that, according to another poll [13], 58% of Germans want their Deutsche Mark back, up from 39% in 2010.
And what had to happen, finally happened: for the first time, an important component of German industry, the German Engineering Federation (VDMA) demanded [14] that Greece leave the Eurozone “if it cannot, or does not want to, stick to its agreements.” German industry, which has benefitted from the euro and what amounted to a bailout of its customers in other countries, had been a staunch supporter of the euro, the bailouts, and keeping the Eurozone intact. But bailout funds, such as the European Stability Mechanism (ESM), should not be used to fund structural deficits, the organization said. And so it stepped up its support for Chancellor Angela Merkel and encouraged her to hold the line on Greece.
Merkel came out swinging. She would not tolerate that the bailout memorandum that contained the agreed-upon structural reforms would be watered down though she might be willing to delay implementation by “a few weeks”—not the two years the Greek government is seeking. Her spokesman Steffen Seibert was even firmer: “Neither the content nor the time frame of the memorandum is up for debate,” he said. Greece must “make great exertions.”
But that’s precisely what has not been happening. Inspectors of the “Troika”—the EU Commission, the European Central Bank, and the International Monetary Fund, the entities that have agreed to bail out Greece under certain “conditions”—were back in Athens earlier in July to review Greece’s books, check on progress of the agreed-upon structural reforms, and meet with government officials, all in order to determine if these certain “conditions” have been met. The inspectors already expected the worst, after a three-month hiatus while Greece was embroiled in political turmoil and two elections, an interregnum during which nothing was implemented.
Apparently, it was even worse. Elements of their preliminary and still unpublished report due by the end of July seeped out [15]: it painted an “awful picture”; of the 300 specific measures to be implemented by now, 210 were completely ignored and left by the wayside. This is the report that the Troika will use in deciding whether or not to send the next bailout tranche to Greece. And without this money, Greece will have to default and most likely exit the Eurozone.
Germany itself is embroiled in disagreement over the endless bailouts, and their two crucial future mechanisms: the ESM bailout fund and the fiscal union pact. Cobbled together after hectic summits with dog and pony shows designed to soothe edgy markets, they’re now in the hands of the German Constitutional Court—and these are the options. Read.... Will the Euro Survive This Year? [16]
Double-checking as euro miasma leaks into the rest of the world.... What Is Copper Telling Us about the Global Economy? [17]