There are two key events in the coming week: first, on September 12, is the decision of the German Constitutional Court, aka the Krimson Kardinals of Karlsruhe, whether the ESM, or the ECB's primary market bond monetization program, is legal. A no vote would severely cripple the European "make it up as you go along" bailout and leave Europe's peripheral nations with little recourse, and Spain with even less cash as it faces a wall of bond maturities in both October and 2013. Then, on Thursday, the Federal Reserve will most likely underwhelm the market which is expecting a new substantial round of outright Asset Purchases, aka NEW QE, which however as we explained will almost certainly not occur due to various reason first described here last Friday. A third, and perhaps far more important event, will be the Dutch parliamentary election also on September 12, but more on that in a further post. For now, looking at Germany, and the piecemeal attempt to put back together the European house of monetary cards, we find that in Germany - the country tasked with funding the European implosion - the population has decided, by a 2 to 1 margin - that the constitutional court should just say "nein" to the ESM, and let Europe go on its merry way without German backing (because as a reminder, the primary source of ESM funding is Germany). From Spiegel: "A survey shows that the majority of Germans hope that the judges in Karlsruhe reject the permanent rescue fund ESM. 54% want a reversal of the Bundestag decisions on the ESM and Fiscal Pact, which should be legally halted. Only 25% believe that the court should dismiss the urgent appeals of the Euro-skeptics."
As if we didn't already know, the majority of Germans are less than enthused about funding their insolvent neighbors:
According to the German population, there is a skeptical mood against the EU. According to the survey 53 percent are against the EU to transfer more powers. Only 27 percent are in favor. 42 percent would be an exclusion of Greece from the euro zone welcome. 30 percent would find it not good. 56 percent are worried before a breakup of the euro zone as a whole.
None of this is new and since in Europe the popular vote no longer matters on important matters such as whether or not to perpetuate failed monetary regimes, the only opinion is that of several red robe-clad men and women.
Elsewhere, and in what will likely bring Greece back to the forefront of newsflow, Bloomberg reports that "Greek Prime Minister Antonis Samaras failed to secure agreement from his coalition partners on 11.5 billion euros ($14.7 billion) of spending cuts required by the country’s lenders to release funds needed to keep the country in the euro."
Democratic Left leader Fotis Kouvelis, whose party is one of the three in Samaras’s coalition government, said no decision had been taken on the package and that poorer Greeks must be protected from more austerity. The three leaders agreed to meet again on Sept. 12, two days before euro area finance ministers meet to be briefed on Greek progress.
“The recession is deep and if these measures aren’t accompanied by growth measures, they will be ineffective,” Kouvelis said after the meeting with Samaras and Pasok leader Evangelos Venizelos in Athens yesterday. “Our European partners need to know that Greeks can’t take anymore. Nothing can be taken for granted.”
Samaras has said his two-year package of spending cuts contains unfair and painful decisions that are necessary to restore credibility and keep the country in the euro area. With his New Democracy party holding just 129 seats in the 300-seat chamber, he relies on Pasok’s 33 seats and Democratic Left’s 17 to secure parliamentary approval.
Agreement on the cuts, which must be approved by the so- called troika of inspectors from the euro area, European Central Bank and International Monetary Fund, may allow the release of a 31 billion-euro payment that will mainly go to recapitalize the nation’s banks and boost liquidity in a cash-starved economy undergoing a fifth year of recession.
In other words, if there is no agreement on the side of Greece as the Troika goes to Athens to determine if the Greek deficit cutting plan is viable, there will be no new aid tranches, and the Greek government will likely fall a few short months after a revote barely managed to cobble a tenuous coalition. And should a new vote take place now, it will hardly please the europhiles because as the WSJ reports the anti-memorandum Syriza would surely win the elections.
According to a survey prepared by VPRC polling agency and published in Ellada Avrio newspaper, the opposition Syriza party would garner 30% of the vote, while conservatives New Democracy--who lead the coalition government--got 28% of the support.
New Democracy is the major partner in Greece's coalition government together with two center-left junior partners, the Socialist Pasok and smaller Democratic Left parties. The conservative party won Greece's mid-June elections after getting 29.6% of the ballots leading the radical-left Syriza party by three percentage points.
And while it is unknown if a pro-Europe coalition can be cobbled should there be a new round of elections, what is certain is that in Greece the economic reality is going from bad to worse, with unemployment soaring by 1% in the month of June alone, and where now that the summer holidays are over, the labor strikes have once again returned, pitching Riot police against regular police, and judges, doctors and teachers against everyone:
Judges, doctors, pharmacists and teachers are this week all expected to launch industrial action to protest government cutbacks, sparking a new round of strikes and protests that will coincide with meetings between government officials and foreign envoys.
Unionists representing judges met Friday with Prime Minister Antonis Samaras and Democratic Left leader Fotis Kouvelis separately to air their grievances after Finance Minister Yannis Stournaras refused to revoke plans to cut their salaries by up to 25 percent.
Teachers are to walk off the job on Thursday, protesting salary cuts, and hospital doctors are expected to launch go-slow or strike action next week in protest at cutbacks in their sector.
To summarize: much more deja vu, all over again.