In “Germany Gives Greece Grexit Referendum Greenlight [18],” we pointed to comments by German FinMin Wolfgang Schaeuble which seemed to indicate that the EU paymaster would like to see PM Tsipras put euro membership to a popular vote. Such a move could accelerate negotiations with creditors by effectively allowing Syriza to claim it hasn’t betrayed its support base, but a vote also risks plunging the country into turmoil should the gambit backfire (i.e. if Greeks unexpectedly vote to leave the currency bloc). Either way is probably fine with German officials who, at this juncture, have run almost completely out of patience with members of Angela Merkel’s Christian Democratic bloc pressing [19] the Chancellor to cut the Greeks loose. Now that Athens has resorted to tapping its IMF SDR account to pay the bills, German calls for a euro referendum are getting louder. Here’ Bloomberg with more:
The German Finance Ministry is supporting the idea of a vote by Greek citizens to either accept the economic reforms being sought by creditors to receive a payout from the country’s bailout program or ultimately opt to leave the euro.
A referendum could bring the conflict to a head after months of inconclusive talks between Greece and its creditors that have exasperated Germany and other euro-area countries. Public support for economic reforms might lead Greece toward a deal, while rejection could set the country on a path to leaving the euro.
“If the Greek government thinks it should hold a referendum, it should hold a referendum,” Schaeuble told reporters in Brussels on Monday.
“Maybe it would even be the right measure to let the Greek people decide whether they’re ready to accept what needs to be done”...
Schaeuble’s stance on a Greek plebiscite is a departure from Germany’s position in 2011. Back then, Prime Minister George Papandreou dropped his plan for a referendum after Chancellor Angela Merkel and French President Nicolas Sarkozy urged him not to hold the vote. A financial backstop for the euro region and policy changes in former crisis countries since then have made contagion risks “marginal,” Schaeuble has said.
"The Greek government is increasingly facing the dilemma that it can’t deliver on its own election promises and this is something the German government of course is also aware of,” Tanja Boerzel, a political scientist at Berlin’s Free University, said by phone. “Then it’s easier to let the Greek people decide in the hope that they vote to stay in the euro.”
A pro-reform vote would take away Tsipras’s “argument that they’ve promised something else” and that he has an anti-austerity mandate from his voters, Boerzel said by phone.
Meanwhile, a familiar face is once again proving to be quite adept at using the stalemate between Athens and Brussels as an opportunity to play geopolitical chess, even as the latest example of Russian meddling comes across as rather absurd on its face.
Again, via Bloomberg [20]:
Having scratched together the 750 million euros ($845 million) it owes the International Monetary Fund and with a few weeks of cash left in its accounts, Greece is now being invited to join a club with a membership fee running into the billions.
The disclosure this week from Athens that Russia wants to make Greece the sixth member of the BRICS bank sounded like nothing more than a late April Fool’s joke to Jim O’Neill. He’s the former Goldman Sachs Group Inc. economist who in 2001 coined the term BRIC -- Brazil, Russia, India and China. South Africa was subsequently invited to join by the others.
Last year they set up a development bank to rival the IMF. It will have authorized capital of $100 billion with each founding member contributing $10 billion.
So what gives? Certainly Greece, whose economy has shrunk by about a quarter as it became of ward of the euro zone, doesn’t exactly meet the vision laid out by O’Neill to highlight the growing economic weight of developing nations…
The invitation is therefore almost certainly geopolitical. Firming up eastern ties is one of Greek Premier Alexis Tsipras’s few points of leverage with his creditors. Panagiotis Roumeliotis, Greece’s former representative to IMF, has been appointed to explore the possibility of joining the BRICS bank.
Through it all, you can rest assured that Athens isn’t about to sit idly by and default on its obligations — at least not according to government spokesman Gabriel Sakellaridis:
- GREECE DOES WHAT IT HAS TO, EACH TIME A PAYMENT IS DUE: GOVT
It sure does, and that includes borrowing from the IMF to pay the IMF, raiding pension funds to pay pensioners, pillaging schools and hospitals, and shaking down local governments for cash.
Of course no update on Hellenic hell would be complete without a bit of fire and brimstone from an increasingly unhinged Yanis Varoufakis who still believes the best solution when it comes to Greek debt is to package it all up and overnight it into the “distant future.”
Via Reuters [21]:
Varoufakis first raised the idea of swapping Greek debt for growth-linked or perpetual bonds when his leftist government came to power earlier this year, But Athens has since dropped the proposal after it got a cool reception from euro zone partners.
The outspoken minister, who has been sidelined in talks with European Union and International Monetary Fund lenders, brought it up again on Thursday, saying 27 billion euros of bonds owed to the ECB after 6.7 billion euros worth are repaid in July and August should be pushed back.
"What must be done (is that) these 27 billion of bonds that are still held by the ECB should be taken from there and sent overnight to the distant future," he told parliament.
"How could this be done? Through a swap.”
There you go — simple. The only thing standing in the way (besides creditors not wanting to hold bonds where the long end of the curve is labeled “distant future”) is Jens Wiedmann, because were Mario Draghi to agree to a debt swap, he would risk infuriating the Bundesbank chief who already harbors ill-will towards the ECB for launching QE. Or at least that’s how Varoufakis imagines it.
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And because when it comes to insane rhetoric, nobody does it like Yanis, we’ll leave you with the following excerpt from the FinMin’s latest speech to parliament:
"The idea of a swap between the Greek government and the ECB fills Mr. Draghi's soul with fear."
