Posts Tagged ‘greece’

What a devastating weekend for Greece. The very-similar-to what-the-Troika-proposed-conditions (which made me wonder why the referendum in the first place*) got rejected as “there is no trust” and they are still working on a deal till Wednesday.

Let me clarify for you, as it gets more complicated by each minute you read about them.

If the Germans were Americans all the media would say that they are trying to organize a financial coup d’etat (takeover of a state by violent/political/financial mean) in a democratic country.

Since Germany has a dark part, the media are embellishing the proposition.

But I do not know how to define it otherwise.

Greece would place EU50 billion of Greek State assets (ports, railways etc)  in an independent (from Greece, but dependent from the Troika)  company as a guarantee for the loans provided.

To make it clear it would be a Luxembourg based company which would be managed by Greece under the supervision of the European Commission (EG Germany).

Otherwise Greece can take a 5 year EU membership suspension to fix its own problems, with some humanitarian aid.

Now PM Tsipras has to negate all of its promises and more, becoming a German puppet government or resign (which has been always the Germany objective).

I really hope that the Greeks will finally say OXI (NO) and get the hell out of Euro, EU and NATO.

Probably the Greek Government will try to say YES and stay in the circle (and find a way around to go back on its promises).

This is clearly a financial oligopoly which do not care of people or democracy.

The markets will remain jitter prone. Still at the moment there is no contagion risk as the market goes (politically can be different)

Two interesting side – thoughts – but of extreme geopolitical instance that appeared in this round of negotiation

There is a clear “hard split” between South Europe (France, Austria, Italy) and North Europe (Germany, Finland, Slovakia).

And this was “in motion” from several years.

The most surprising (and scary) thing is that Germany, for the first time since the defeat in World War 2, completely disobeyed a US request (the US is here represented by the IMF) to negotiate with Greece for geopolitical reason.

This is most important as it means that Germany wants to rise its status as a new power (apart USA, China and Russia) within (or without) the EU.

This message will not be lost on the US (nor to Russia and China) and this shift which could have  far and reaching consequences – much more than Greece itself.

The Greeks said NO to the referendum.

Two other times they said NO – in 1940 against the Axis powers (German, Italy and Turkey) and in 480 BC in the Battle of Thermopylae (the famous 300) against the overwhelming Persian force.

Markets

Markets logically will react badly. The first back stop for the ASX is 5,150 and then 5,000 and 4,800. SP500 1,970, 1950 and 1,870. At the moment 5,150 and and 1,970 are the most logic.

So A 10% drop is the worst case scenario. At the moment there is no sign of contagion. Gold and currency moved, but not in an alarming way.

US future (n a illiquid market since the holidays and the time) are down 1.35% at 2,035

Politics

Well everybody is scrambling. Already European Parliament President announced that there is no intention to immediately cut assistance to Greece.

The Greek banks are already running out of money (apparently they have just Euro 500 million of cash).

If money really runs out….or there is a bail-in Cyprus style (the Government seizing money) or a New Drachma (already it has forecasts to lose at least 40% of its value)

There are already emergency meetings scheduled all over Europe.

The Greeks will ask for debt forgiveness – which Germany will oppose. If it is a referendum is all it takes to have better conditions Portugal (election in October, Spain (election in November/December) will follow suit. And probably Italy too. Already the anti Euro parties in France, Spain and Italy are cheering.

Syriza will have its own problems as the extremist wing of the party will be emboldened and a closure of banks and riots could make the Government fall, even with a chance for the military to take over.

The two most likely scenario are

–  Syriza will need to cut off the most extremist left wingers and form a new Government and agree with the Euro creditors on a new deal

– A Grexit.  Probably starting with a “suspension” until something is formalized (at the moment there is no legislation in regards to a Eurozone exit”

– The ECB will expand its QE program

Personal

Usually I try to keep personal opinions to myself. But not today.

Logically I am not happy about the market reaction, even if we took precautionary measures since April and our portfolios are in better position than ever to withstand this storm.

But this is the fair conclusion of a mad Greek debt binge sponsored by money crazy German lenders.

Disclosed and intercepted calls (from Reserve Banks speeches and Wikileaks) made it clear that the first Greek bailout was to transfer the Greece debt from the German banks to the European Central bank – so in reality was a German bank bailout.

Also other conversation pointed that since 2011 the EU leaders were aware that further austerity would not save Greece. As Marie Le Pens (Front Nationale, France) says it shows that that Europe is now dominated by a Financial Oligarchy that has very little in common with the concept of democracy.

Moreover, even in  economic theory (Fischer, 1933) austerity in a debt/deflation environment cannot work.

So why they did it? It was a easy way to keep the Euro down and help German exports, while kicking the can forever.

Until Syriza came into power which is not part of the Euro Financial Oligarchy.

As the  Game Theory (police versus 2 accomplishes) teaches….the game is successful for the police, unless the rules are changed. And the referendum changed the rule.

Europe will try to keep them in, as a Grexit could open the Gates of Hell for Europe, but now is just RED ALERT

What a day crash!

Good news, I checked the various markets and there is no sign of contagion “Lehman Brother” style.

This means that, at this stage, we are in for a serious bout of volatility, but not a 2008 style event.

Italian and Spanish market are off, but with no sign of crisis.

This is the hard part of the negotiations. PM Tsiparas knows that PM Merkel needs Greece in the Euro to keep the Euro weak (over 50% of German GDP is exports) and he is gambling the entire country on this.

What happens will depend a lot from Sunday referendum.

People say that Greece is little as Lehman Brothers was. A big difference is that Lehman Brothers debt was held by the private (whereas  now Greece debt is the EU or IMF) and Lehman Brothers was managing a great part of the world derivative market.

More to the point  in the US the Plunge Protection Team is at work, Draghi is thinking to increase the European QE (and more QE means devaluing the Euro – which would eliminate the problem of a stronger Euro provoked by a Greek exit….smart eh?).

Also China is now thinking QE.

At the end this could really the final bottom, for the mother of all rally, also for gold.

And on top of it….with this crisis the Fed first rate hike is likely to be pushed further out.

The jury is not yet out….but at this moment in time it seems we will have just a set back