Most Popular
1. Banking Crisis is Stocks Bull Market Buying Opportunity - Nadeem_Walayat
2.The Crypto Signal for the Precious Metals Market - P_Radomski_CFA
3. One Possible Outcome to a New World Order - Raymond_Matison
4.Nvidia Blow Off Top - Flying High like the Phoenix too Close to the Sun - Nadeem_Walayat
5. Apple AAPL Stock Trend and Earnings Analysis - Nadeem_Walayat
6.AI, Stocks, and Gold Stocks – Connected After All - P_Radomski_CFA
7.Stock Market CHEAT SHEET - - Nadeem_Walayat
8.US Debt Ceiling Crisis Smoke and Mirrors Circus - Nadeem_Walayat
9.Silver Price May Explode - Avi_Gilburt
10.More US Banks Could Collapse -- A Lot More- EWI
Last 7 days
Stock Market Volatility (VIX) - 25th Mar 24
Stock Market Investor Sentiment - 25th Mar 24
The Federal Reserve Didn't Do Anything But It Had Plenty to Say - 25th Mar 24
Stock Market Breadth - 24th Mar 24
Stock Market Margin Debt Indicator - 24th Mar 24
It’s Easy to Scream Stocks Bubble! - 24th Mar 24
Stocks: What to Make of All This Insider Selling- 24th Mar 24
Money Supply Continues To Fall, Economy Worsens – Investors Don’t Care - 24th Mar 24
Get an Edge in the Crypto Market with Order Flow - 24th Mar 24
US Presidential Election Cycle and Recessions - 18th Mar 24
US Recession Already Happened in 2022! - 18th Mar 24
AI can now remember everything you say - 18th Mar 24
Bitcoin Crypto Mania 2024 - MicroStrategy MSTR Blow off Top! - 14th Mar 24
Bitcoin Gravy Train Trend Forecast 2024 - 11th Mar 24
Gold and the Long-Term Inflation Cycle - 11th Mar 24
Fed’s Next Intertest Rate Move might not align with popular consensus - 11th Mar 24
Two Reasons The Fed Manipulates Interest Rates - 11th Mar 24
US Dollar Trend 2024 - 9th Mar 2024
The Bond Trade and Interest Rates - 9th Mar 2024
Investors Don’t Believe the Gold Rally, Still Prefer General Stocks - 9th Mar 2024
Paper Gold Vs. Real Gold: It's Important to Know the Difference - 9th Mar 2024
Stocks: What This "Record Extreme" Indicator May Be Signaling - 9th Mar 2024
My 3 Favorite Trade Setups - Elliott Wave Course - 9th Mar 2024
Bitcoin Crypto Bubble Mania! - 4th Mar 2024
US Interest Rates - When WIll the Fed Pivot - 1st Mar 2024
S&P Stock Market Real Earnings Yield - 29th Feb 2024
US Unemployment is a Fake Statistic - 29th Feb 2024
U.S. financial market’s “Weimar phase” impact to your fiat and digital assets - 29th Feb 2024
What a Breakdown in Silver Mining Stocks! What an Opportunity! - 29th Feb 2024
Why AI will Soon become SA - Synthetic Intelligence - The Machine Learning Megatrend - 29th Feb 2024
Keep Calm and Carry on Buying Quantum AI Tech Stocks - 19th Feb 24

Market Oracle FREE Newsletter

How to Protect your Wealth by Investing in AI Tech Stocks

50 Shades of Greece

Politics / Eurozone Debt Crisis Feb 22, 2015 - 06:19 PM GMT

By: Raul_I_Meijer

Politics

When it comes to the ongoing Greek question, I see a lot of people eagerly jump to conclusions, after the ‘debt deal’, that I don’t think are justified; certainly not yet. The overall conviction in the press seems to be that Syriza has given in on just about all fronts, and Germany and Dijsselbloem are the big winners.

But since that may well be the exact position Syriza wants ‘the other side’ to be in, where they think they have prevailed, one will have to try and think a few steps ahead before judging the situation. There’s far more grey area here than many pundits seem to assume, easily 50 shades of it.


If Greece wouldn’t have given Germany the idea that it was winning, Athens would have already come very close to an exit from the eurozone. The problem with that is that it is not part of the mandate Syriza has been given by Greek voters. Who have spoken out for an end to austerity, but within the existing euro framework.

Varoufakis et al. may long have concluded that such a set-up is simply not realistic, but they would still have to work up to a situation where, at some point, they can present this to the people. And that can only be done after they can convincingly show that Germany and Holland refuse to honor the democratically decided mandate Syriza brings to the table.

They would have to make absolutely sure that the other side gets the blame for the failed negotiations. They have to do that anyway, even if a Grexit is not their preferred outcome. They need to be able to prove that they bent over backwards and Germany still wouldn’t play ball.

The 4-month extension debt deal agreed on this week is still contingent on a set of measures Varoufakis is due to hand to his various European ‘partners’ on Monday. If the ‘partners’ throw out the package, or too much of it, then Tsipras can go to the Greek people and say:

“Look, they’re not acting in good faith, they refuse to honor your democratic vote, and the mandate you handed us with that vote. So what are we going to do now? Do you want to stay in the eurozone and the austerity programs it forces upon you, or are we going to try to find out what would happen if we leave the euro?”

Even if Tsipras et al had been relatively sure, before the recent elections that brought them to power, what the negotiations with the ‘partners’ would lead to, it couldn’t have those negotiations and show the results to the voters. Perhaps as early as this Monday, it may be able to. It was simply always going to be a necessary step in the process.

Over the past week, Syriza has shown its ample willingness to negotiate, to do concessions, so much so that it’s being accused of betraying its voters. Also a necessary step. But if Schäuble and Dijsselbloem overplay their hand the coming week in reacting to Varoufakis’ proposals for getting the 4-month extension, the trapdoor may fall shut, and Greece may start preparing to leave the euro. Either after getting the people’s mandate first, or after being thrown out by Brussels and Frankfurt.

Would that be such a bad thing for Greece? Nobody really knows, even if everyone is more than ready to opinionate about it. One must not forget that things are already very bad in Greece, so threats of armageddon could easily ring hollow.

An interesting perspective comes from a Bloomberg interview with Gordon Kerr, co-founder of Cobden Partners, a firm I know Varoufakis was urged to consider as financial advisors, before Syriza chose to go with Lazard (I can’t seem to embed the video, so please click the link and watch it on Bloomberg, it’s only 5 minutes and worth every second):

Euro Is One of the Worst Designed Currencies

Q: Why should they bail? Why should Greece go: you know what: we’re going it alone?

A: Because that’s probably the best alternative for them in the medium term, if not the very short term. I suspect the reason why Greece is clearly trying to do something with the European Central Bank in the next couple days is maybe they have no contingency plan ready to go.

Q: Is Europe ready for Greece to leave? Are the contingency plans in place?

A: I don’t think Europe has any contingency plans.

And a few more points from the conversation:

• Even Citibank are saying that if the ELA’s (=ECB emergency loans) are not extended, Greece would be perfectly within its rights to repudiate up to €300 billion of debt.

• So the day after this happens, Greece will be €300 billion better off than it is right now.

• Bulgaria’s currency collapsed in 1996; within a weekend it was restructured..

• They [Greece] don’t have systemically important financial institutions dragging down their economy ..

I find it hard to believe Syriza wouldn’t know at least a good chunk of what Kerr says. And that would give them a lot more room to move than is generally assumed. Thing is, they need to get that mandate from their voters.

The long and short of it is there are a lot of possibilities, lots of shades of grey area, both when it comes to what people involved are thinking and in what they are doing. It doesn’t seem very wise to draw conclusions before having thought through the possibilities, like a strategist, like an army general or a chess player would.

Perhaps Syriza is just playing for time, perhaps that is their no. 1 priority, just so they create the space to come up with a contingency plan in case they leave the euro. But also perhaps they already have such a plan, and what is happening now is simply part of that plan.

And then there’s the option they’ve already been defeated and they’ll have to get ready for more humiliation next week. It’s just that that would make them look very short sighted, and awfully bad strategists.

By Raul Ilargi Meijer
Website: http://theautomaticearth.com (provides unique analysis of economics, finance, politics and social dynamics in the context of Complexity Theory)© 2015 Copyright Raul I Meijer - All Rights Reserved Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors.

Raul Ilargi Meijer Archive

© 2005-2022 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in