Greek Referendum on IMF/Troika deal

[jaichind]

When you go begging for money, you do well to be somewhat restrained in insulting the people you ask to give you the money. Seems like common sense.

Yeah.  If you give someone a timeline of all the functional events since Jan between the new Greek government and the various other stakeholders and exclude any technical details up to last night, one would think it is the EU that is begging Greece for money.

[jaichind]

What is ironic about this referendum is that it asks for Greek people to vote on a proposal that might no longer be on the table.   According to IMF chief Lagarde ``legally speaking, the referendum will relate to proposals and arrangements which are no longer valid.''  So I am not sure what this vote will accomplish.   Say the vote is yes, what the IMF might say is "that deal is so last week, this is the new deal."

[jaichind]

In the end it was SYRIZA, ANEL, and Golden Dawn that voted for the Referendum Proposal.  KKE actually voted against which just shows how sectarian KKE is.  This is a vote where one would expect to vote it.  But KKE rather vote with ND than with SYRIZA.

[jaichind]

Its starting.  Israel and Saudi markets down about 1.7% from thursday.  Since the MSCI world index fell about 0.3% from thursday to friday, one can infer about a fall of 1.4% in these two markets on the news  of Greek Referendum.  A lot will depend on the ECB decision on ELA.  So far it seems ECB has frozen ELA support for Greece but a final call will be made later.  In the meantime Lagarde says IMF cannot lend to Greece If June 30th payment missed.  So if ELA is left frozen I have no idea where Greece will get the cash it needs Monday.   

[jaichind]

I doubt many KKE supporters will be voting Yes in the referendum

Some might out of strategic reasons.  A Yes vote might lead to a split and collapse of SYRIZA.  In which case KKE will become the dominate party on the Far Left again.  Of course a No vote an the chaos of the Greek exit could have the same affect.

[jaichind]

ECB decided on Sunday to freeze level of emergency aid at friday's levels.   ECB said to view it as necessary for Greece to impose a holiday on its banks as of Monday as such levels will not be sufficient for the Greek banking system to operate. 

[jaichind]

http://www.bbc.com/news/world-europe-33303105

Jesus.

Lets be clear.  ELA was originally intended as a lifeline for solvent lenders that get into a cash jam.  Banks receive cash in the form of very low interest loans in return for "collateral", high-quality assets, preferably sovereign bonds, placed at the central bank as guarantee.  It was not meant to be a tool keep the entire Greek economy alive while bailout negotiations continued.

Currently the collateral are Greek bonds which given the risk of total default as a result of the risk of the referendum should really be valued at zero.  For sure it is not high-quality.  Frankly the ECB is quite justified by the recent events to pull the plug completely and demand all their money back from all the free financing the Greek banks received last few months.  To say they will just freeze the friday's levels of ELA is bending backwards.  It will not be enough of course signs of panic is already beginning to gather and the Greek banks will be sunk by Monday.  

[jaichind]

June 28 (AFP) -- The German foreign ministry recommended Sunday that Germans travelling to Greece to "take sufficient amounts of cash" as the country was hurtling towards a banking crisis.  With Greece a top vacation spot for Germans, the foreign ministry urged tourists them to keep tabs on the evolving situation and check for any updates to its travel recommendations.

[jaichind]

Tsipras announced that the Greek banks will be shut on Monday and capital controls imposed to prevent withdrawals, after cash machines ran dry.   Athens stock exchange will also be shut down.

[jaichind]

Supported SYRIZA up until the point. Supported leaving the EU. How is closing down the banks a good thing though?

But they have no choice.  With the runs on the banks already building up and no extra funding from ELA this is the only alternative to basic meltdown of the Greek financial system. 

[jaichind]

Barclays view report to clients claim that A "Yes" vote, "may trigger a national-unity government."  Under this scenario, "it is highly likely that Tsipras and possibly the entire government would step down, even if other options are also possible, such as PM Tsipras staying in power and accepting the deal with the Institutions." In the event Tsipras steps down, "moderate Syriza MPs could join other moderate parties (PASOK, Potami and ND) into a national unity coalition," one where "the new government would re-engage with the Institutions to sign an agreement as per the mandate given by the referendum." Under this scenario there could be "snap elections" but likely not until after summer. "Market reaction would likely be positive immediately after the referendum," but still "volatility is likely to remain elevated until a new and stable government is put in place and a programme is approved."

[jaichind]

Spooked by rumors concerning impending fuel shortages, drivers are flooding gas stations across Greece, leading the country's largest refiner to issue a statement reassuring there are enough reserves.

[jaichind]

What Greece now needs is a dictatorship of the proletariat. If you're not familiar with the concept, read about it before insulting me.

In my view the Tsipras regime is the most pro-rich regime I seen so far in Greece, at least in relative terms.  All its politics seems to make sure the result is a disaster and on top of it maximize the brunt born by the non-rich.  Lets look at what took place.  The Tsipras regime came into power making all sorts of noises about soaking the rich so they are sufficiently alarmed.  Then it makes noises that it is possible to continue the bailout money but get rid of the austerity so the middle class, believing this,  continues on their financial planning as usual without making the costly changes to perhaps prepare for a Euro exit.  The rich seeing that this will not work and alarmed by possible future Tsipras regime actions to "soak them" moves their money out of the country.  Just to make sure, the Tsipras regime gives the rich a 5 month head start to move their assets.  Then at the last minute, after the rich is done getting ready, he drops the bomb.   

[jaichind]

So far Europe is containing the contagion.  Greece 5 year CDS  had a massive jump from around 430 to 2300.  Portugal 5 year CDS trading at 186 from 163, Italy 5 year CDS trading at 131 from 108, and Spain 5 year CDS trading at 108 from 87.   Portugal Italy Spain 5 year CDS trading at similar as places like Turkey, Mexico, Hungary, Brazil, and South Africa.  Not great but certainly not disastrous.  It is Greece that is disastrous.  So so far the firewall is working. 

[jaichind]

The bookie William Hill has odds of 4/11 for the vote to be "yes" and 2/1 for the vote for be "no"

[jaichind]

Looking at the overall prices of various securities as well as the trading volume, it seems the investment community is calling Tsipras's bluff.  The way the market is reacting is actually strengthening  the hands of EU.  We needs to see what takes place after Greece misses the IMF payment on Tuesday.  But if that does not lead to a market meltdown and Tsipras is running out of cards to play for the Sunday vote.  The Greek voter will see the financial chaos in Greece itself as well as relative financial calm in the rest of EU.  They will know which way they have to vote to get out of this.

[jaichind]

Greece backtracked on a pledge to waive pensioners from limits on cash withdrawals, signaling that the strain in the country’s banks is now spreading to the very people the government wanted to protect by rejecting a bailout proposal.  An overnight decree to impose capital controls and cap withdrawals at 60 euros a day had originally exempted pension payments. The privilege was revoked about 12 hours later.

[jaichind]

Referendum Ballot paper



Note that the "no" box is above the "yes" box.

The question is:

Should the plan of agreement be accepted, which was submitted by the European Commission, the European Central Bank, and the International Monetary Fund in the Euro-group of 25.06.2015 and comprises of two parts, which constitute their unified proposal? The first document is entitled 'Reforms for the completion of the current program and beyond' and the second 'Preliminary debt sustainability analysis'."

Which is confusing and filled with technical jargon that I am sure only 1% of the voters understand. 

[jaichind]

Economist Intelligence Unit estimates a 60% vote for No.

[jaichind]

Tsipras hinted he might resign if the Greek people vote in favor of the creditors' proposal.   So the battle lines are drawn.  Yes means Tsipras resigns and No means Greece exits Euro with the complete meltdown of banking system.

[jaichind]

http://www.bloomberg.com/news/articles/2015-06-29/hedge-funds-wagering-greeks-will-vote-yes-in-sunday-s-referendum

Hedge Funds Are Wagering Greeks Will Vote Yes in Sunday’s Referendum

I am also looking into Greek ETFs.  But with the big market correction today there are a lot of tasty buying opportunities so might not even bother with Greek ETFs.

[jaichind]

I wonder if there is not going to be an October Surprise.   Something like a joint Tsipras-Putin Saturday press conference with a lot of fancy words of a "package" from Russia to help Greece in their "period of difficulty."  The package will be vague enough that it implies that Russia will finance Greek short term funding needs to stay in the Euro but makes no real commitment to doing so.  The point of this is for push undecided toward voting No thinking that Russia will bail out Greece when it will mostly turn into smoke by Monday after the vote, or at least a much weaker package that will help Greece in its transition out of the Euro but nothing to keep Greece in the Eurozone.

[jaichind]

Greece Asks for 2-Year Bailout Program From ESM: PM’s Office

Looks like there is another attempt at a deal

[jaichind]

I have to find out more, but two separate Greek media polls has Yes ahead.

[jaichind]

Greece Asks for 2-Year Bailout Program From ESM: PM’s Office

Looks like there is another attempt at a deal

What a colossal fück up. They're a couple of hours from defaulting on an IMF loan and then they come up with a new proposal. To be honest I think this is just a ploy by Tsipras to present himself to the electorate as the guy that tried to negotiate to the very last minute.

Of course.  Merkel already said that there will be no consideration of any deals until after the referendum.  I guess she is betting the Greeks vote yes, Tsipras will be humbled or out of the way, and then a new deal hammered out.