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I guess the default setting is to feel better about Europe these days. The EU was successfully able to overthrow the governments of Greece and Italy (yay sovereignty!), and the new technocratic leaders are off and running. Italian Prime Minister Mario Monti got a boost when the country was able to sell €3 billion in short-term bonds this morning. The bond yield is rising today, but still under the supposed failsafe of 7%, at 6.69%.
But Europe may have a new problem in the form of the Greek opposition:
Greece’s conservative party leader on Monday vowed to reject any toughening of austerity measures in return for a multi-billion euro bailout, signalling the new coalition government may not enjoy the kind of cross-party support demanded by lenders.
New Democracy leader Antonis Samaras said he would not vote for any new austerity measures and added that the policy mix of spending cuts and tax rises agreed with international lenders should be changed in favour of economic growth.
“I agree with the goals to cut government spending … to reduce debt, to erase the deficit, to make structural changes. I do not agree with whatever stunts growth,” he told party MPs ahead of a three-day confidence debate, starting on Monday.
This comes from the leader of a party that is actually part of the government right now. New Democracy is part of the coalition under technocrat and former ECB vice president Lucas Papademos. Legislation for the new bailout deal probably cannot pass without New Democracy’s support. So unless Samaras is expressing merely a personal view, there’s not much chance that the bailout measure can pass in Greece, which means default and potentially contagion.
Up until a couple weeks ago, this would have been seen as a crisis in Europe. But with Italy, a much larger Eurozone member, in trouble, it’s not getting nearly the same level of attention. The issues still exist, however. If New Democracy votes down the austerity deal, the troika will withhold payment on the next tranche of the bailout. Default would ensue. And though there’s no mechanism for a Eurozone exit, that would be the next likely step.
To be clear, my view is that this needs to happen before Greece stops being a sovereign nation and its people are ground into dust.
There’s a confidence vote on Papademos on Wednesday, and protesters have planned a big rally on Thursday, the anniversary of a student uprising that eventually took down a military junta in Greece in the 1970s. Perhaps some tweaks can be made to make the deal more palatable to New Democracy. But at the moment, at least, Greece is on the road to default.
UPDATE: More on the false hope in Europe from Paul Krugman and Noriel Roubini.
19 Comments
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The only thing going on here is samaras is trying to find a way to have a position against the package, so he can run on that and get elected, while at the same time making sure it gets passed. The key is he said he would not vote for any “new” measures, so he will vote for existing measures.
Good point.
However, it still seems to me there is no way the euro can hold together.
The Roubini link about (haven’t finished reading it yet) does a good job of explaining the imbalances. Analogous to the imbalance as bet U.S. & China.
I find it disturbing (and a fatal flaw of the parliamentary system), that unelected banksters are being put in charge of countries to gut them. It’s like watching private equity firms take over and strip out all of the value. The MOTUs explaining on news outlets why this is good is alarming and bizarre: “So-and-so knows everyone, he can play the game properly.” Never mind answering to the people, just get those balance sheets in line.
Meanwhile, apparently, Germany is so traumatized by hyperinflation that they refuse to print free money (as Atrios recommends). What they seem to be missing, however, is that the crippling austerity being forced on people in these countries could very well be laying the groundwork for the kind of demoralized society Germany became because of hyperinflation.
I think the euro will hold for as long as it takes for bankers to replace democracy with unelected bankers and rules written to put the finances of individual countries under the control of a few unelected guys in the EU.
It could. I’m in watching & waiting mode on this issue, among many others that seem so up in the air.
I always wondered with the advent of the euro how wise it was & how long it would hold, and if it didn’t, what would be the breakup mechanism. It didn’t make me feel more confident about its future when more & more countries joined in.
“I find it disturbing (and a fatal flaw of the parliamentary system), that unelected banksters are being put in charge of countries to gut them.”
Yeah, our system is much better. The banksters buy the candidtates so they own whoever gets elected.
All “default” means is that the one percenter assholes who lost big gambling on the global economy, won’t have those gambling debts paid off by taxpayers.
Let the defaults begin. These parasites need to be gotten rid of. And for the One Percenters who are NOT complete sociopaths, it’s time for you to get the ones who are sociopaths under control. Or the 99 percenters will take care of it for you, and it might get a little ugly.
“Technocrat” solution to problem: Make it bigger. Then they’ll need a few arms deals and more war.
Lots of countries default. And are able to come back to the credit market very quickly.
What is the chance of Germany being the first Euro Zone country to drop out and go back to the Mark. They can’t supply enough capital to staunch the losses from Italy, Greece, et al.?
About the same as the chance that Lincoln would let the south secede. Too much power and ego in Germany to preside over the breakup.
I agree with that but my thought is that this multinationalism which has been a benefit (actually a weapon) of the uber wealthy and their bansksters could work against them since nationalism still exists and Germany, as you point out; is very egotistical and if everything goes the way of Greece they might just opt for Germany over Swiss banksters?
What are the odds that Samaras is just holding out for a nice check deposited in Turks and Caicos? The PTB do not have power of eminent domain over national legislatures yet, and the obvious play for a legislator is to hold out for a big bundle of cash. I’m surprised more politicians aren’t doing. Maybe they got bought off early.
If their pols are like ours he already has the checks.
I sincerely hope that Greece has the intelligence and fortitude to embrace the Argentine model to return to sovereign nation status. Reject the IMF and its shock doctrine measures and restore democracy and support for the welfare of the people.
Name some bigger ones.
Also, it’s kind of like someone who filed BK. Yeah, you can get a loan, but at what rate?
These countries depend on suckers. After a while, the suckers don’t want to be suckers anymore. Gradually, they sink further and further down.
The choice before Greece was always 100% default-all-at-once or 100% default in stages.
All the referendum grand standing and Red Carpet Extravaganzas at Cannes we’re just attempts at gaming the marks.
If you have to ask who the mark is…
GOOD!
If Greece had a leader that served Greeks,she or he would apprise Merkel that her banksters will take a haircut and the amount still owed will be paid over a designated period of time according to Greek measures,not austerity prescriptions of a Euro dictatorship that will destroy the economy ,create even greater indebtedness and hence create the perfect climate for international bankster vultures to loot and plunder our country via privatization and deregulation .Succinctly put, tell Merkel she’s the mark and if Greece doesn’t get.G its tranche
of money in one week Greek will default immediately .At present,Greece has the power to save its sovereign autonomy,a year from now it will be an impoverished free enterprise zone that will dbe forced into default and out of the Euro according to the convenience of the new dictatorship now forming .