Thursday, May 10, 2012

Europe's problems are going exponential (MacroBusiness via Naked Capitalism)

THURSDAY, MAY 10, 2012

Europe’s Problems Multiply

Yves here. Notice how someone in the officialdom actually said “There is no alternative”. Nothing like being explicit.
By Delusional Economics, who is horrified at the state of economic commentary in Australia and is determined to cleanse the daily flow of vested interests propaganda to produce a balanced counterpoint. Cross posted from MacroBusiness.
Overnight, Greek Leftist leader, Alexis Tsipras, gave up on his attempts, or at least pretence of them, to form government. The gauntlet has now been handed to PASOK leader, Evangelos Venizelos, who again has 3 days to attempt the same.
Given that New Democracy, Venizelos’s potential coalition partner, has already failed to create a workable coalition it is doubtful PASOK will succeed. Neither Tsipras or Samaras used their fully allocated time suggesting there is little point dragging out talks as no comprises could be reached.
Greece appears to be heading back towards an interim technocrat government and new elections unless the Greek President is able to muster a workable coalition in the coming days. New elections may bring new alliances, but it is yet to be seen what the new political strategies will appear after the demolition of the centrist parties.
Overnight the EFSF board agreed to make an additional payment to Greece in order to keep it technically solvent for a few more weeks:
After a conference call, the board of the European Financial Stability Facility, the 700 billion euro bailout fund administered by the 17 countries that use the euro, agreed to make the scheduled payment, which will allow Greece to meet near-term bond redemptions and other obligations.
An initial 4.2 billion euros will be paid on Thursday, while the remaining 1 billion will be paid out later, “depending on the financing needs of Greece,” a statement said.
It said the remaining 1 billion was not needed before June.
This may appear as a back down but realistically it is just a payment in order for Greece to hand the money back again. Greece has approximately €3 billion worth of bonds held by the ECB maturing this month and also the non-greek law PSI bonds to sort out. This is very much a case of drip feeding money in order to protect greater Europe from the contagion of a default.
In the meantime the rhetoric from outside of Greece has ramped up a notch with EuropeanCentral Bank Executive Board member Joerg Asmussen quoted as saying:
Greece has to be aware that there is no alternative to the agreed consolidation program if it wants to remain a member of the euro zone

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