Greek Referendum on IMF/Troika deal

[jaichind]

Those Greeks know how to count their votes quickly. 25% counted already.

Too bad the rest of the economy is not as efficient.

[jaichind]

If the margin of victory is large which it seems like it will, it will give the ammo for  Tsipras to  take a even less conciliatory stance.  This will complicate things since the previous bailout expired there will be more complicated procedures to get the new bailout started.  For example, the German Bundestag first has to authorize the German government to enter into negotiations that might create new liabilities for the ESM.  Anyway, if pushed by Tsipras, the Bundestag will respond with "release the Kraken"  For this not to blowup Tsipras has to make a humbling speech asking for a new deal and show willingness to compromise.  Of else it will be as predicted, exit of Greece from Euro.

[jaichind]

Yes might pull through after the provisional ballots are counted.

Have you looked at the actual results? Or are you suggesting they are refusing to count the "yes" votes?

I think he meant this a joke trying to tie in the Ohio 2004 Prez election saga.

[jaichind]

Guardian saying demand is growing in ND for Samaras' resignation as leader.

This should have been done in January.

Yeah.  To think he could have prevented this whole series of disasters if he only compromised last year on the Prez candidate.

[jaichind]

Early trading has EUR down 1.25% against USD.

[jaichind]

So does this strengthen or weaken Tsipras' position? I'd say it's the latter since the creditors now realize that their demands will never be met by a Greek government so it's sensible to just cut their losses and let Greece default and exit.

Tsipras's personal position, as the Greek PM, is, obviously, strengthened. And, as for the negotiations, I am afraid they are now dead, so no issue of "strengthening or weakening" left.

The Greek Labor Minister seems to disagree.  He just said that now Greece’s govt now has strong mandate to go seal deal with creditors.  Question is, what sort of deal ?

[jaichind]

One thing that is interesting about the results so far is what Syriza had indicated earlier today that a high  turnout in Athens means that No will win.  But looking at the results it seems that Athens under-performed in terms of No.  Makes sense.  Yes, Syriza is strong in Athens, but so is ND.

[jaichind]

Eurogroup Chairman Jeroen Dijsselbloem writes in a letter to members of the Dutch Labor Party.  He seems to have given up.  Main points are

1) “Although the Greek government makes us want to believe otherwise, the referendum is about the question whether Greece stays in the euro zone or not.”

2) “Although we know now that Greece never met the entry criteria for the euro zone, a departure will have dramatic consequences for ordinary Greeks”

3) “Greece will only recover when deep-seated problems are addressed. I truly hope that honest politicians will step forward that are prepared to take."

[jaichind]

Russia's deputy economy minister Likhachev said that this is "a step towards an exit from the eurozone" and "Greece's eventual exit from the eurozone will be a kind of shock therapy for the European Union, not in a catastrophic manner."

[jaichind]

German SPD vice-Chancellor Sigmar Gabriel indicates Tsipras has “torn down the last bridges across which Europe and Greece could have moved toward a compromise” “By rejecting the rules of the game of the euro area, as expressed in the majority ‘No’ vote, negotiations on a multi-billion program are difficult to imagine”

German CSU Michelbach calls for ECB to unwind ELA and ask for its money back from Greek Central Bank.

The Germans are very angry. 

[jaichind]

The Greek banks owe ECB 89 billion EUR from ELA.  ECB can just punt on this while "talks" take place between EU and Greece. The next real deadline is July 20th when Greek government has to redeem 3.5 billion EUR  worth of bonds held by the ECB. A missed payment to the ECB may be the tipping point for the banking system. The eurogroup may present Tsipras with an ultimatum: immediately sign a preliminary agreement, in order to reopen the banks, or let the banking system fail.  Perhaps  Tsipras  can call a referendum on that ultimatum ?

[jaichind]

Since Greek banks have a large presence in the rest of the Balkans, and Greek companies invest a lot in other Balkan countries, what effect would/could a Grexit have on the rest of the Balkans? Could we see a domino-effect, partial or widespread?

I think Greek-owned banks make up a about 15%-20% of various Balkan countries. Bulgaria is especially exposed.  I think the central banks of each one of these Balkan countries already took steps to shield these banks from fallout of a complete meltdown of Greek banks in Greece.  I think Macedonia would be the worst hit as the Greek-owned backs there are in the worst shape.
 

[jaichind]

But to respond to your post, Greece is in far worse shape than Italy. That probably is why the terms were so favorable compared to Italy.

Greece was in far worse shape than Italy only because of its projected revenues and spending.  In terms of net debt to GDP Greece and Italy were similar at the 2009-2010 period with Greece perhaps a bit higher.  What made the Greek situation far worse was the spending trajectory Greece was on relative to Italy.  Greece has not yet addressed this yet and it seems unlikely it will.  Being cut off from international funding in case it does not followed by the massive economic dislocation would "address" this problem, one way or another.

[jaichind]

The Greek banks owe ECB 89 billion EUR from ELA.  ECB can just punt on this while "talks" take place between EU and Greece. The next real deadline is July 20th when Greek government has to redeem 3.5 billion EUR  worth of bonds held by the ECB. A missed payment to the ECB may be the tipping point for the banking system. The eurogroup may present Tsipras with an ultimatum: immediately sign a preliminary agreement, in order to reopen the banks, or let the banking system fail.  Perhaps  Tsipras  can call a referendum on that ultimatum ?

Way too optimistic. The Greek banks cannot reopen without additional ELA funds, which means if the ECB does not raise the limit(and legally they should call in the the entire loan) the banks cannot repopen at all. In fact, they will not even be able to meet the 60 Euro quota after tomorrow. Repeat, it is against EU law for the ELA to raise that limit again.

You are right of course.  I was making the optimistic (from the Greek point of view) that somehow ELA will continue at current levels for a while and the status quo can be maintained until July 20th when it will for sure be unsustainable.  Of course in the meantime ECB can invoke the ‘proportionality principle’ and reduce ELA even before July 20th.  The Greek financial system, which is already starting to show signs of being reduced to barter economy with private IOUs starting to float around might just fall apart in the meantime.  

So unless somehow the EU just folds which seems unlikely or Tsipras accepts a deal with terms which his government labeled as terrorist, which actually seems quite possible as he has secured his left flank, there will be another de facto ultimatum coming July 20th at the latest, most likely earlier.

[jaichind]

My sense is that Yes will be under-polled.  So with polls on Friday neck-to-neck, it should be a comfortable Yes victory.  It should be something like a 55/45 Yes win.

Looks like I was very very very wrong.  Oh well.  Can't win them all.

[jaichind]

Tsipras says that he will negotiate debt restructuring.  Hopefully he understands that conditions for debt restructuring are the same conditions he just ran against.

[jaichind]

Jaichind I hope you haven't banked your investment portfolio on a YES vote

I actually kind of did   But the impact is not that bad.   I got a large unexpected windfall which I cashed out of a few weeks ago and was overweight in cash.  So I was looking to invest in something when the referendum crisis came.  I plowed a good chunk of cash not necessary into a Yes vote but into a positive resolution of the crisis.  This investment paid off by Friday so I cashed in some of those gains.  The losses I will sustain in the coming weeks from the remaining part of this bet will wipe out the gains I locked in friday and some more.  So while I made several cleaver moves last week buying big time Monday and selling big time Friday, this vote result pretty much wiped out gains.  Oh well.  Not a big deal.  I will be net negative from last friday but not in a decisive way.  I guess you have take risk to make gains.  This one was a small net negative.  Hopefully others will be positive.

[jaichind]

If that is how next week plays out then we will have a chance to test out Professor Donald Kagan's theory on war.  I attend several lectures by Donald Kagan when I was in college and he was one of my favorite professors in college.  Donald Kagan main theory is "Unlike what Marxist historians claim, nations fight not for material interests but they fight for honor."  His theory is mostly developed from his study, ironically, of the relationships of Greek city states in the Classical period.  

If the Greek people votes on honor they will vote no.  If they vote on, to be fair, short term material interests, then they will vote yes.  Donald Kagan theory says they will vote no to preserve their honor.  We will see if Donald Kagan was right.

Curses.  I should have listen to Professor Kagan and saved some money on my investments. 

[jaichind]

We positively don't care about your investments, GTFO.

I was asked a question and responded to it.  Sorry if that offended you in any way.

[jaichind]

There might be some translation problems but it seems that Tsipras said "Greek debt relief now on the table in creditor talks."  How does he figure that?  Debt relief is not something he gets to put in the table.  Only the EU gets to do that.  He can use the referendum results to ask the EU to put it on the table.   Remind me next time my Federal tax bill come due for me to hold a household referendum where my family will vote 3-0 (I will vote for my 4 year old child via proxy) not to pay and I will tell the IRS that tax forgiveness is now on the table.

[jaichind]

Overall, Tsipras's statements seems more conciliatory than Varoufakis.

[jaichind]

Top Syriza officials say they are considering drastic steps to boost liquidity and shore up the banking system, should the ECB refuse to give the country enough breathing room for a fresh talks.
Varoufakis "If necessary, we will issue parallel liquidity and California-style IOU's, in an electronic form."
Syriza sources say the Greek ministry of finance is examining options to take direct control of the banking system if need be rather than accept a draconian seizure of depositor savings - reportedly a 'bail-in' above a threshold of 8K EUR and to prevent any banks being shut down on the orders of the ECB.

[jaichind]

Looks like it will end up being 61/39.  The projections of the Ministry of Interior made several hours ago was very much on target. 

[jaichind]

The impact on the Greek economy of this entire drama cannot be understated.   Whereas most projections of GDP growth for Greece in 2015 was for 2% at the beginning of this year, they mostly fallen to 0.4% by April and most projections are for -1% last week.  After the result of this vote and open talks about government backed IOUs as well as a takeover of the banking system by the Greek government I think GDP growth in 2015 will only fall to an even more negative number.   In the European context, I guess it will still be better than Ukraine which will most likely be -9% in 2015.

[jaichind]

So does this strengthen or weaken Tsipras' position? I'd say it's the latter since the creditors now realize that their demands will never be met by a Greek government so it's sensible to just cut their losses and let Greece default and exit.

I can see both.  This could strengthen  Tsipras's position in that he will have secured his left flank so he can do a deal that for political reasons he could not accept.  On the other hand, the size of the No victory ties his hands on what sort of deal he can accept.  The union set of acceptable solutions where the EU and  Tsipras can accept which was tiny got only smaller even as  Tsipras's ability to face down internal rebellions in case such a deal does take place has improved.