Greece Was 20 Votes Away From Defaulting This Weekend

Up until this moment, Greece may not have had the financial wherewithal to pay its creditors, forced instead to use circular math gimmicks in which the IMF paid the IMF for the country's most recent €750 million due on May 12 when it effectively pre-defaulted and used SDR reserves as "payment", but at least it had a united facade when facing Europe and political cohesion when dealing with the Troika.

That too may have just evaporated over the weekend, when in a surprisingly close vote showing just how deeply the ruling Greek Syriza party has splintered, the hard line "Left Platform" a faction within Syriza, proposed that Greece stop paying its creditors if they continue with "blackmailing tactics" and instead seek "an alternative plan" for the debt-racked country. Its motion called for the government to default on the IMF loans rather than compromise to creditor demands, among which a change to value-added tax rates, further liberalization of the labor market and changes to the pension system, including further cuts to pensions and wages.

According to the NYT, which first reported the vote outcome, the proposal was narrowly rejected with 95 people voting against and 75 in favor.

The WSJ adds:

The Left Platform’s leader, Energy Minister Panagiotis Lafazanis, told the meeting default was preferable to surrender, even if it meant Greece tumbling out of the euro.

 

Who says that an exit from the euro and a return to the national currency is a catastrophe?” Mr. Lafazanis said at the meeting.

Who? Well, all those - mostly bankers - who for the past 5 years bailed out European banks at the expense of preserving Greek participation in a doomed monetary union and avoiding the collapse of the Eurozone, an outcome which would lead to massive losses for the oligarchic status quo.

But back to Greece where with a vote as close as that, the genie of the full-blown dissent within Syriza, which has a tiny majority of just 12 seats in Greece's 300 seat partliament, is out of the bottle which could mean that the Troika's long sought after goal of pushing Greece into a political crisis, may be just around the corner.

As the WSJ reports, "Tsipras’s difficulty in selling a painful compromise to Syriza’s hard left, as well as to other parts of his ideologically diverse party, has become the largest obstacle to a deal. European officials and analysts—and privately even Greek government officials—say they don’t know whether the roughly 30 lawmakers who make up Left Platform will vote as defiantly as they talk if creditors’ terms are put before the Athens Parliament."

That may be a moot point, since Greece needs a deal yesterday: as a reminder, Greece has about 10 days of cash left, and this time there is no kicking the can - if there is no deal by June 5, Greece will be in default first to the IMF, and soon to everyone else.

 

Worse, while Greece may not have decided to formally prioritize pensions and wages over IMF repayments, at least not yet, it has absolutely no working proposal to present to the Eurogroup ahead of this week's latest meeting.

The Central Committee agreed on a text saying any deal with creditors must involve no pension cuts, a small budget surplus before interest, increased public investment and a restructuring of Greece’s debt—terms that lenders are unlikely to accept. The text isn’t binding on Mr. Tsipras’s government but indicates how hard it will be to sell a deal to Syriza.

But while some may have harbored hope that the Troika may agree to at least the smallest of concessions, after Sunday's municipal vote in Spain which showed a dramatic plunge in popularity of the ruling PP, a harbinger of even even more "anti-austerity" platforms coming to power, Merkel will do everything in her power to make an example of Greece that nobody can dictate terms to the Troika and in the end it is a very simple choice: the German way or the autbahn.

And just like that Greece is suddenly caught between the devil and the deep red lines: an intransigent Troika and potential rebels within the party itself.

“The biggest threat may not end up being Mr. Lafazanis, but other parliamentary members who lack party discipline, who are newly elected and are completely unpredictable,” said Dimitris Keridis, an associate professor of international politics at Panteion University in Athens.

 

Parliamentarian Ioanna Gaitani, a self-described Trotskyite in the Left Platform, said Greece can survive a debt default and lenders aren’t respecting Syriza’s mandate.

 

“When faced with the pseudo-dilemma of ‘euro or national currency,’ the answer is a unilateral write-off of most of the debt, the taxation of large wealth, and the implementation of Syriza’s program,” she said. “For the Left, the needs of the people are above profits and debts.”

The best news perhaps for Greece and everyone else who has been following this ultra slow motion trainwreck for the past 5 years, is that it is nearly over (one can hope), and that when it comes to defaulting, Greece has a truly exceptional range of choices how to make sure its last Euro-denominated check bounces in the most dramatic fashion possible.