Monday, June 13, 2011

June 15th and Greek Pitchforks

There has been a lot of movement in the last week in regards to the situation in Greece-- and much of that movement appears to be backwards. Without listing too many details, it appears that the Germans' attitude towards another bailout is hardening.. it's becoming clear to many in Germany that extending yet more loans to an insolvent nation isn't the answer. Preparations for a Greek default are taking on a new seriousness in EU banking circles. The ECB is refusing to participate in another bailout-- likely because it simply is unable to thanks to the support they've already given to Greek, Portuguese, Irish and Spanish banks and government bonds. June 15th is the critical day: on that day, the Greek Parliament will vote on a series of new budget slashing moves. Among them are the slashing of over 100,000 civil servant jobs, tax hikes, more stringent tax enforcement measures, and reductions in both pay and pensions of state workers. The Germans are demanding that Greece also begin the sale of "state enterprises"-- companies and assets owned by the Greek Government. June 15th also happens to be a day when a general strike is planned. 

But today something a little more ominous is taking shape: a group calling itself the Syntagma Assembly, which has proven itself extremely successful in getting tens of thousands of Greek protestors into Greece's main Syntagma Square, is calling for a massive blockade of the Greek Parliament building on that very same day-- and this is in addition to the union organized general strike. Here's their call: "Last night (June 11th) the popular assembly of Syntagma square announced a call to blockade the Greek parliament ahead of the voting of the so-called Mid-term agreement between the Greek government and the troika (IMF/ECB/EU). The call-out for the blockade below is one of the most important acts we have seen by the Syntagma assembly so far. June 15th is gearing up to become a historical day in Greece, a crucial chance to block off the charge-ahead of neoliberalism here. Don’t be a spectator to this – translate and disseminate the text below; organise a gathering where you are, or come join us at Syntagma. This is the struggle for freedom and for our lives."

It's here that we need to take a hard look at what might happen should the protests attract 100,000 or more angry protestors physically blocking the parliament building. The last protest these people organized attracted about 75,000 people. The Greek Parliament did look at this situation-- and decided that it was time to hire some foreign workers to clean out the existing underground tunnel that leads from the Parliament building to the port of Piraeus:

For weeks I've been saying that a deal would be made, but after the events of this weekend-- especially the ones outlined above-- I'm beginning to think the worst might come this week. Make no mistake-- these are ominous developments. Would YOU want to be a Greek MP and vote for this package with the howling mob blocking the building ? If they vote it down, default and depression will follow within a fortnight.. and there will surely be serious (but in my view not catastrophic) problems with EU stock and bond markets as well as banks, beginning with the ECB, which might actually need to be recapitalized. No matter the outcome, one thing is for sure-- either way, the people of Greece will be the losers.

PS 6/14: It appears that the validity of the underground tunnel story is under serious question at this point. In addition, it appears that the Greek Parliament is only scheduled to begin debate on the 15th, but the vote is not expected until later in the month. Herein lies a good lesson for me about relying on only one media source for information.. a mistake I'll remember. Nonetheless, it appears that a number of Greek PM Papandreau's own party members are abandoning the ship and the vote is far from certain to pass.

PS 6/15: Well today was not good; at the Greek Parliament building, the crowd was near 100,000, some of them throwing molotov coctails and rocks at police. There was no debate on the new bailout, however-- PM Papandreou instead presented his head on a platter, offering his resignation. At the end of the day, there will be a confidence vote on Sunday. This was because he apparently had lost enough of his own party members' support. If he passes the vote of confidence, he'll try to push thru the next bailout package; the confidence vote will closely mirror the bailout vote. If Papandreou fails, Greek leaders will try and form some sort of coalition government, which are notoriously weak. Should the confidence vote fail, we could have a replay of the May, 2010 near meltdown in Europe. Already today there are signs of interbank lending stress. Other really bad signs were that the EUR sunk badly versus the USD and oil tanked. These were all the same signs the EU economy gave last May when it nearly melted down. 

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