Done Deal

Done Deal

The most anticipated default of all time has been avoided – again - for now.  Once again the politicians of Greece have given the middle finger to the Greek people, while receiving “atta boys” from the banking mafia.  
 
In a final vote of 155 to 143 the Greek Parliament decided to saddle its citizens with higher taxes and more austerity in the form of job and pension cuts (among others) to pay back banking loans that went bad when its economy tumbled in 2008.  Since then Greece has needed even more loans that are also going bad because, and this shouldn’t be a surprise, higher taxes and no wage growth lead to a lower GDP that leads to less money to pay back the old loans.  How is the solution more debt?  No matter what happens it won’t end well for the Greek people but I don’t think this is the right way.
 
Although this should be a done deal, there is one last thing that could gum-up the process: MTFS.  SocGen explains…
 
George Papandreou’s PASOK government survived the confidence vote on Tuesday night. As expected, Papandreou obtained a relatively narrow majority, with 155 votes to 143 in the 300 seat Parliament (and two abstentions). The focus now shifts to next Tuesday’s Parliamentary vote of the Medium-Term Fiscal Plan (MTFS). The MTFS includes €28bn of additional austerity measures for 2011-2012 as well as an accelerated privatisation plan.
 
The formal Parliamentary approval of the MTFS is a necessary condition for the IMF’s quarterly disbursements, with the next €12bn tranche due in July.
 
The IMF will only disburse if the EU does
 
The IMF made it clear that the July tranche to Greece can only be disbursed if the EU provides concrete assurances that it will continue to provide funding to Greece as stipulated under the EU/IMF adjustment program.
 
Because of this conditionality, next Tuesday's Parliamentary passage of the MTFS remains a critical roadblock to provide Greece with a medium-term funding solution from the EU/IMF. Although not the most likely outcome, a failure to approve the MTFS could pave the way to anticipated elections.
 
Only the approval of the MTFS will remove the policy deadlock
 
Only after the MTFS is approved can the EU officially put forward a medium-term funding plan for Greece, through to 2014. And only once Greece is funded for at least the next twelve months will the IMF give its official consent to its share of the quarterly disbursement (€3.3bn).
 
Assuming a parliamentary majority is reached on the MTFS, a decision from the EU on Greece’s medium-term funding – at least in principle -- could be reached at the EU Meeting on 3 July, rather than 11 July as initially suggested by EU Commissioner Olli Rehn. That would then clear the way for the IMF to authorise its share of the quarterly disbursements, too.
 
The latest bailout hasn’t had much of an affect on the markets overnight.  One wonders what the day session will bring. 
 
Trade well and follow the trend, not the so-called “experts.”
 
Behold the age of infinite moral hazard! On April 2nd, 2009 CONgress forced FASB to suspend rule 157 in favor of deceitful accounting for the TBTF banksters.
  

 

   

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