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Syriza Defies Technocrats, US Pressures EU, Greeks Buy Gold

Stock-Markets / Eurozone Debt Crisis Feb 10, 2015 - 04:00 PM GMT

By: GoldCore

Stock-Markets

- Tsipras to push ahead with counter-reforms “in their entirety”

- Dijsselbloem tells Syriza it must comply with Troika this week or have funding cut from February 28th

- Varoufakis calls the Eurogroups bluff – does not believe EU would risk expelling Greece from Euro

- US apply pressure on EU to keep Greece in the fold, fears “Grexit” would push Greece into Russia’s arms

- Greeks buying gold as insurance against uncertainty


Despite attempts last week by EU technocrats to browbeat the new and inexperienced Greek government into submission, Syriza appear to have grown even more resolute to fulfil their mandate.

David Cameron gathered his advisory team last night at No 10, made up of whitehall mandarins and Bank of England representatives, to plan for a possible Greek exit. Spurred by an increase in alarming rhetoric from the Greeks Prime Minister that a “humanitarian crisis” beckons should Greece continue on a path of austerity, the likelihood of an exit stepped closer to a reality. The European political landscape has shifted from centrist parties to those espousing nationalist agendas. In recent years the UK has itself shifted to the right as both centrist Conservative and Labour parties seek to reconnect with disillusioned “zero hour” workforces and wider debt ridden consumers.

Should the Greeks win concessions from Europe of any merit the political landscape in Europe will radically change and as such so will the prospects for British exports and important indigenous industries such as financial services.

In a speech to the Greek parliament on Sunday night, Prime Minister Tsipras made what London’s Telegraph described as a “declaration of war” on the Eurogroup of finance ministers and the EU hierarchy.

Mr. Tsipras stated that Syriza would proceed to raise the minimum wage, raise pension payments for the poorest and reverse the privatisation of state assets among other things.

He also said he would pursue Germany for €11 billion in reparation payments for the plundering of Greece during the Nazi occupation from 1941 to 1944.

Tsipras’s first official act in office – visiting the Kaisariani rife range where the Nazi’s executed 200 Greeks – reflects how any left-leaning greeks view the European project in it’s present guise.

While finance minister Varoufakis has tried to downplay the significance of the visit, saying it was a message to new Golden Dawn and other fascist groups in Greece, the fact remains that many Greeks view the EU as a tool of a new wave of German imperialism.

During the Nazi occupation somewhere between 250,000 and 300,000 Greeks starved to death as the country was plundered to feed the war machine. The cost of living rose, on average, 722% each month following the invasion. For over three years Greeks suffered immense deprivation.

As such, the bitterness and resentment that had lain dormant resurfaced when austerity was foisted upon ordinary greeks, apparently at the behest of German banks. The emotional charge behind the Syriza movement should not be underestimated.

For Syriza, succumbing to the troika is not an option. National pride in the face of the old enemy is at stake.

Meanwhile, the Eurogroup chair Jeroan Dijsselbloem has warned Greek finance minister Varoufakis that Greece must reengage with the troika at tomorrow’s meeting of EU finance ministers or Greece will be shut off from funding from February 28th.

This would effectively force Greece out of the Euro and back onto the Drachma. Varoufakis response was “we will not roll over”.

London’s Telegraph reports,

“Exit from the euro does not even enter into our plans, quite simply because the euro is fragile. It is like a house of cards. If you pull away the Greek card, they all come down,” he said.

“Do we really want Europe to break apart? Anybody who is tempted to think it possible to amputate Greece strategically from Europe should be careful. It is very dangerous. Who would be hit after us? Portugal? What would happen to Italy when it discovers that it is impossible to stay within the austerity straight-jacket?”

The Greek government seem intent on calling the EU’s bluff. They have received some encouragement from the Obama administration who are applying political pressure on the EU to find an acceptable resolution lest Greece, locked out of the Euro, are forced to seek assistance elsewhere.

Again from the Telegraph,

In Washington, President Barack Obama has already warned EMU elites to be careful. “You cannot keep on squeezing countries that are in the midst of depression. At some point there has to be a growth strategy in order for them to pay off their debts to eliminate some of their deficits,” he said.

Russia have already indicated that they would assist Greece if asked. The BRICS have formed their own IMF/World Bank style development bank with $100 billion in reserves.

Were Greece forced to access such funds it would greatly enhance Russia’s influence in Europe. Peripheral might reject the Troika in favour of better terms from the BRICS bank.

It will be very interesting to watch how this all plays out. Can the EU afford to expel Greece? Can they afford to keep Greece and renegotiate knowing that Spain and Italy will be watching very carefully and expecting similar concessions.

Such concessions could bring down the banking system and the Euro. Failure to grant concessions could lead to the dismantling of the EU as aggrieved nations look East.

In the longer term it is difficult to see how the Euro can survive. Without fiscal and political integration the currency will lurch from crisis to crisis. The possibility of further integration grows more remote as discontent festers.

Whatever the outcome of the current phase of the accelerating global economic crisis it is clear that great uncertainty lies ahead. Greeks have been preparing for the worst in recent months.

British Gold Sovereigns were a common store of wealth during the war and are familiar to Greek people. In recent months the Royal Mint has seen an upsurge in demand for sovereigns from Greece.

“There has been a noticeable increase in demand in this last quarter,” Lisa Elward, head of bullion sales at the Royal Mint, said in an e-mail to Bloomberg News. “We tend to see an upsurge in sales at times of political and financial uncertainty.”

At the same time, the Bank of Greece saw a dramatic increase in demand for sovereigns.

Bloomberg reports,

The Bank of Greece sold 5,849 Sovereign coins in January, according to an e-mail from the central bank, which said the numbers do not show any “abnormal activity.” While it didn’t provide monthly figures for comparison, government data show sales of 7,857 coins in the last quarter of 2014.

A serious crisis in the Euro currency is looming. Bank-runs, currency collapse and break up of the currency union are possibilities. The response from the EU include bail-ins of bank deposits. We, as always, advise clients to prepare for the worst by holding an allocation of physical gold outside of the banking system while hoping for the best.

MARKET UPDATE

Today’s AM fix was USD 1,237.50, EUR 1,096.78 and GBP 812.97 per ounce.
Yesterday’s AM fix was USD 1,242.25, EUR 1,096.18  and GBP 816.20 per ounce.

Gold rose 0.41 percent or $5.00 and closed at $1,240.70  yesterday, while silver climbed 1.67 percent or $0.28 closing at $17.03.

The likelihood of Grexit from the eurozone has increased since Prime Minister Alexis Tsipras has taken a tough stance over government debt. Tsipras has insisted that Greece would not extend its reform-linked bailout.

European Commission President Jean-Claude Juncker warned Greece not to expect the Eurozone to bow to Tsipras’ demands in a growing battle that spooked financial markets and prompted pleas for compromise from the U.S. and Canada.

This uncertainty is still leading to safe haven demand for gold bullion. Gold was last trading at 1,097 in euros up  0.35%. Gold in dollars is off marginally near $1,237.70. Silver and platinum are also trading down from the open at $16.86 and $1,215.52.

The Chinese Lunar New Year (Year of the Goat) begins on February 19th. Traditionally there is an increased demand over this time. Shanghai Gold Exchange withdrawals surged to 255 tonnes in January ahead of the holiday period.

SGE total withdrawals for the week ending January 30th reached 53.67 tonnes, following two consecutive weeks of 70 tonnes or more being delivered from the vaults, records show.

Crude oil or ‘black gold’ had its biggest two-week rally in 17 years on speculation that a drop in rig count will curb U.S. production growth. Price volatility rose to the highest in nearly six years. Brent crude jumped 18 percent in the last 10 trading days, the most since March 1998.

This update can be found on the GoldCore blog here.

Mark O'Byrne

Director

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