After five months of melodramatic debt negotiations, it turns the Troika fiat money lenders are better poker players than the current Syriza government in Greece. It decided to bite the bullet, i.e. a six month supply of paper money in exchange of a sizable pension funds and an increase in VAT collections.
The six-month debt extension will provide funds for Greece until the Jesuit “debt jubilee” project, which is also an opportune time for a Project Blue Beam “Second Coming” scenario, which in turn provides the best and graceful exit strategy for the fiat system.
But are they really going to abandon the fiat currency?
For Greece, borrowing more from vulture funds in order to survive the next six months will just make matters worst and is just prolonging the agony of the Greek people. In the end, the Greeks will have to fight their own revolution to free themselves from the debt trap. PM Tsipras just doesn’t have enough balls to lead them there., or he could be an embedded banksters’ puppet.
The Iceland Template is, indeed, one hard act to follow.
Greece Capitulates: Tsipras Crosses “Red Line”, Will Accept Bailout Extension
Submitted by Tyler Durden on 06/22/2015 17:26 -0400
We’ve long said that negotiations between Greece and its creditors are more a matter of politics than they are a matter of economics or finance.
From the troika’s perspective, breaking Greece and forcing PM Alexis Tsipras to concede to pension cuts and a VAT hike is paramount, and not necessarily because anyone believes these measures will put the perpetually indebted periphery country on a sustainable fiscal path, but because of the message such concessions would send to Syriza sympathizers in Spain and Portugal. In short, the troika cannot set a precedent of allowing debtor nations to obtain austerity concessions by threatening to expose the euro as dissoluble.
On the Greek side of the table, Tsipras must convince Syriza party hardliners that concessions are preferable to Grexit and the economic malaise that would come with redenomination. For some on the Left Platform, compromising the party’s electoral mandate is simply not an option and it’s these lawmakers (who just two weeks ago voted to leave the euro and default) that Tsipras will need to sway or else attempt to push an unpopular agreement through parliament a gambit which implicitly assumes that the ensuing political upheaval and voter backlash is preferable to economic collapse. The problem with the latter approach is that it effectively means the troika will have succeeded in using financial leverage to subvert the democratic process, an eventuality that die hard Syriza hardliners are in no mood to suffer.
After one final attempt to table a proposal that retains some semblance of Tsipras’ defiant posturing, it appears he may have finally broken after a meeting with ECB chief Mario Draghi where it sounds as though the central bank warned the PM that without concessions, ELA to Greek banks would be cut off and that, of course, would mean game over as Greeks would take to the streets en masse. From Bloomberg:
European Central Bank President Mario Draghi told Greek Prime Minister Alexis Tsipras in meeting on Monday in Brussels that the ECB will help secure the country’s banking system as long Greece is in an aid program, Greek government official tells reporters on the condition of anonymity.
And shortly thereafter (via AFP):
Greece has accepted the principle of extending its current bailout programme which expires at the end of the month so as to keep it afloat while a long-term debt solution is worked out, Greek government sources said Monday.
“For the first time, we accept the extension of the programme as the only way forward,” one source said as eurozone leaders discussed Greece’s future in the single currency ahead of the June 30 end of its current aid programme.
And so, we turn to politics or, more appropriately, Greek politics because the fate of Greece now looks to rest in the hands of Syriza’s far left factions. Dow Jones has more:
To avert a default and possible exit from the eurozone, Greek Prime Minister Alexis Tsipras must sell Germany’s chancellor, Angela Merkel, on his plan to fix Greece’s finances.
Then he needs to persuade Vassilis Chatzilamprou.
But out at the Resistance Festival, an annual gathering of Greece’s far left, the lawmaker from Mr. Tsipras’s left- wing Syriza party said he was in no mood for submission.
“We cannot accept strict, recessionary measures,” Mr. Chatzilamprou warned. It was after midnight Sunday, and the weekend festival was winding down. “People have now reached their limits.”
Syriza isn’t a traditional party but a coalition of left-wing groups with an intricate family tree formed out of doctrinal splinters and squabbles. It is those many, disparate factions that Mr. Tsipras must also satisfy with any potential bailout agreement with Greece’s creditors.
Mr. Chatzilamprou, for instance, is a member of the Communist Organization of Greece, which is an outgrowth of the Organization of Marxist-Leninists of Greece. It is distinct from the Communist Tendency, which has a Trotskyite bent. (Neither should be confused with the Communist Party of Greece, which is outside Syrzia.)
That unusual composition has made it especially hard for Mr. Tspiras to strike a deal with eurozone and International Monetary Fund officials. “The people who are responsible for the negotiation move within a frame that is determined by the central committee of the party,” says Alekos Kalyvis, a longtime union official who is on the committee and responsible for its economic-policy portfolio.
The negotiators have some latitude to make decisions, he said, “but this shouldn’t be interpreted as if they have a blank check from the party–neither them nor Tspiras.”
Many of Syriza’s factions regard the party’s rise as a epochal moment for the left–and any compromise on a bailout as a deep betrayal of its principles.
Stathis Leoutsakos, another Syriza member of Parliament, said Germany and the other creditor countries are determined to defeat Syriza. “In my opinion, their aim is to humiliate the Greek government,” he says. “They want the message that no other politics are accepted in the eurozone.”
It is also uncertain exactly what kind of deal would be acceptable to the left wing of Syriza. The party’s argument that fiscal austerity–steep budget cuts and tax increases–has deepened Greece’s economic slump has been central to its popular success.
Most on the party’s left wing reject any additional pension and wage cuts outright, saying Greek workers have suffered enough in years of depression since Greece’s first bailout.
Mr. Leoutsakos, like others on the far left, also insist that at least some of Greece’s debt must be forgiven. “In order to service it, we’d need to execute the Greek people,” he said. “And nobody in Syriza is willing to do it.”
There is also the question of Mr. Tsipras’s future as prime minister if he does compromise. No one here is unaware of the fates of former Greek premiers George Papandreou and Antonis Samaras. Both signed bailout agreements with Europe.
Both lost their jobs, and Mr. Papandreou’s party has been all but destroyed.
Going back on his leftist principals “would be political suicide for Tsipras,” Mr. Chatzilamprou said. “It would mean he is also recyclable: They could replace him with someone else.”
And DB has more color on the political fight Tsipras faces in the coming weeks:
Subject to further progress this week, focus is likely to shift very quickly to the Greek domestic political front. Disbursements for Greece ahead of the IMF tranche due at the end of the month will require domestic parliamentary approval. It is likely that the Greek PM would first attempt to obtain approval from the SYRIZA party’s 200-strong Central Committee before bringing an agreement to parliament. In the event of failure at the party level, a referendum would likely be called. In the event of party approval, a vote would be likely taken to the parliamentary floor. Depending on the process adopted, such a vote may take between 2 days to a week.
It will remain a major challenge for the Greek PM to successfully pass a potential agreement through parliament. Local press reports that 10-40 SYRIZA MPs are likely to dissent (the government has an 11 MP majority), while overnight the Independent Greeks junior coalition partner (12 MPs) has also raised the possibility of withdrawing from government. How the political process plays out largely depends on the number of MPs the current government loses. A loss of less than thirty parliamentarians may force a change in coalition to include the two small moderate parties in parliament (PASOK and the River) jointly controlling 30 MPs. More substantial losses requiring the support of major opposition party New Democracy would open up the possibility of broader changes to the government or a referendum.
We’ll close with what we said last week about the tough choice the PM faces: “Tsipras must decide how he wants history to remember his tenure as Prime Minister. Either he will be the leader who allowed Greece to crash out of the euro on its way to a redomination-driven economic collapse, or he will go down as the fiery advocate for change who caved under pressure and allowed the troika to stamp out democracy in the place where it was born.”
* * *
And because this is Europe after all, someone had to deny the “rumors”:
- MERKEL SAYS THERE WAS NO DISCUSSION OF EXTENSION SCENARIOS ON GREEK BAILOUT
How Greece Folded To Germany: The Complete Breakdown
Submitted by Tyler Durden on 02/20/2015 18:47 -0400
Having, as we previously explained, been given ‘just enough rope’ by the Germans, we thought it worth looking at just what Greece capitulated on (or perhaps a shorter version – what they did not capitulate on) and how Tsipras and Varoufakis will sell this to their fellow politicians… and most of all people.
As OpenEurope explains,
What points has Greece capitulated on?
1. Completion of the current review – Greece has basically agreed to conclude the current bailout. Any funding is conditional on such a process:
Only approval of the conclusion of the review of the extended arrangement by the institutions in turn will allow for any disbursement of the outstanding tranche of the current EFSF programme and the transfer of the 2014 SMP profits. Both are again subject to approval by the Eurogroup.
This is a clear capitulation for Greek Prime Minister Alexis Tsipras, who said the previous bailout was “dead” and the EU/IMF/ECB Troika is “over”.
2. Remaining bank recapitalisation funds – Greece wanted this money to be held by the Hellenic Financial Stabilisation Fund (HFSF) over the extension period, and possibly be open for use outside the banking sector. However, this has been denied and the bonds will return to the EFSF, although they will remain available for any bank recapitalisation needs.
3. Role of the IMF – The Eurogroup statement says, “We also agreed that the IMF would continue to play its role”. Again, Greece has given in on this point and the Troika continues to exist and be strongly involved in all but name.
4. No unilateral action – According to the statement,
The Greek authorities commit to refrain from any rollback of measures and unilateral changes to the policies and structural reforms that would negatively impact fiscal targets, economic recovery or financial stability, as assessed by the institutions.
In light of this, a large number of promises that SYRIZA made in its election campaign will now be hard to fulfill. In the press conference given by Eurogroup Chairman Jeroen Dijsselbloem and EU Economics Commissioner Pierre Moscovici, it was suggested that this pledge also applied to the measures which were announced by Tsipras in his speech to the Greek parliament earlier this week – when he announced plans to roll back some labour market reforms passed by the previous Greek government.
5. Four months rather than six months – Greece requested a six-month extension, but the Eurogroup only agreed to four months. This is a crucial point: it means the extension expires at the end of June. As the graph below shows, Greece faces two crucial bond repayments to the ECB in July and August which total €6.7bn. This is a very tough hard deadline. There is limited time for the longer term negotiations which will take place – provided that a final agreement on the extension is reached. It is very likely we will be back in a similar situation at the end of June.
* * *
Has Greece secured any wins?
Greece has received a couple of small fillips in the wording:
The institutions will, for the 2015 primary surplus target, take the economic circumstances in 2015 into account.
This suggests that Greece may, during this year and the extension in particular, get more fiscal leeway. As we predicted many times, this would manifest itself as a lower primary surplus target. A small victory which may provide a bit of temporary breathing space for the government. In practice, though, it was already looking difficult for Greece to meet its target this year given significant shortfalls in tax revenue.
Greece also managed to get the word “bridge” into the statement, and a specific promise to discuss a fresh programme and approach:
This extension would also bridge the time for discussions on a possible follow-up arrangement between the Eurogroup, the institutions and Greece.
* * *
What happens now?
As was stressed in the press conference, Greece will on Monday “present a first list of reform measures, based on the current arrangement”. Moving forward from this agreement, which is still largely in principle, will be conditional on these measures being judged as sufficient by the EU/IMF/ECB as a step towards completing the current bailout.
Once that is confirmed work will begin on getting the “national procedures” in place, so that all the necessary parliaments (such as Germany and Finland) have approved the extension by the end of next week.
In the not too distant future, discussions will begin on the “possible follow-up arrangement”. As we outlined in extensive detail here, there are a huge amount of differences which need to be resolved. The crucial ones being labour market and pension reforms, as well as debt relief. Chances of an agreement remain unclear, but we would expect Greece to struggle once again to get what it wants.
Finally, the Greek government has to return to Greece and sell what is almost an entire capitulation to its own MPs (some of whom would have rather left the Eurozone than abandon their aims), its coalition partner, and the public (which has strongly supported the hard-line stance). We got a taste of this in the presser, when Finance Minister Yanis Varoufakis said:
From the very first day, we refused to see these negotiations as a zero sum game.
We’re beginning to be co-authors of our destiny.
The Eurogroup statement is a good example of ‘constructive ambiguity’ on primary surplus targets.
I’m pleased to report that our commitments are commitments we wanted to make anyway.
Focusing on the longer term and selling the openness of the negotiation as an escape from the current programme. This may or may not be true, it is in the end a negotiation.
* * *
Greece has folded this hand but the game of poker continues. Greece is now short stack and living hand to hand (day to day). It continues to be in a very tough position and how the evaporation of the vision which SYRIZA sold at the election is a crucial and potentially explosive unknown.
SYRIZA’s proposed measures are a tax minefield!
8 bln euros to line state coffers is to be paid out of taxpayers’ wallets
After agreeing to yield measures worth 8 bln euros, the government has set up a minefield of VAT increases. VAT increases to food items are particularly tricky with hidden details aimed at yielding 2 bln euros in 15 months!
Here are the government’s hidden tax shocks:
– 45% hike to VAT at Aegean islands
100 mln euros more for this year and another 300 mln euros for next year can be found by increasing VAT from 16.5% to 23% in the Aegean. The measure will be applied to upmarket Mykonos and Santorini with VAT staying the same at isolated islands. The right-wing, anti-austerity ANEL party refuses to sign this measure, however members of the Radical Left Coalition (SYRIZA) government are also reluctant to differentiate cosmopolitan from other islands.
– Doubling of VAT at hotels from 6.5% to 13%
A vacation package worth 500 euros will now cost an additional 30 euros.
– 23% VAT to food: Increases to thousands of products and services
Non-basic food items will be affected by this measure. An increase to the prices of processed food such as spaghetti, rice and packaged items will cause grocery bills to escalate. Biscuit, chocolates, chips, soft drinks will definitely be among the food items to note price hikes.
– VAT increases will also affect the prices at restaurants, public transport, taxis and air fairs, maintenance services and entertainment
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