Greek Prime Minister Alexis Tsipras declared victory on Saturday after agreeing a conditional financial rescue deal with Europe and despite making big concessions to avert a banking collapse within days.
With his left-wing leadership pilloried by German conservatives, Tsipras insisted that Friday night's last-minute agreement canceled austerity commitments and dispensed with the "troika" - European and IMF inspectors loathed by many Greeks.
"Yesterday we took a decisive step, leaving austerity, the bailouts and the troika behind," he said in a televised statement to the Greek nation. "We won a battle, not the war. The difficulties, the real difficulties ... are ahead of us."
After often ill-tempered negotiations in Brussels, Greece secured a four-month extension to euro zone funding, which will avert bankruptcy and a euro exit, provided it comes up with promises of economic reforms by Monday.
Ireland, which had to make deep budget cuts under its own EU/IMF bailout program, spelt out the uncomfortable truth that the euro zone had yielded nothing to the Greeks, for all the brave talk from Tsipras.
"Their political problem is that this a reversal of their election position. There is absolutely nothing on the table that could be considered a concession," Irish finance minister Michael Noonan said.
"They're now compromising and compromising quite significantly," he told national broadcaster RTE, but made clear Athens had little choice. "The biggest threat to Greece was that their banking system would go belly up next Wednesday."
First, a quick recap of what happened yestrday, courtesy of the WSJ:
#1: Germany Got What it Wanted, for Now
Germany spent the last few weeks insisting that it wouldn't scrap the bailout program and still lend money to Greece. The new left-wing government of Alexis Tsipras insisted that it wouldn't extend the program and instead sought some "bridge" financing from the eurozone. In the end, Greece asked to extend the program and pledged to follow its rules. The extension lasts until the end of June, just weeks before Greece must make several large debt repayments.
#2: Greece Got the Prospect of Some Leniency
First, the eurozone appeared to offer some leeway on Greece hitting its budget target for 2015. Given the sharp deterioration in the Greek economy and government tax receipts, that seemed inevitable. The eurozone statement also doesn't repeat the budget targets for future years of the existing program, which call for the government to run a surplus, excluding interest payments, of 4.5% of gross domestic product. Relaxing that requirement had been one of Mr. Tsipras's main goals.
#3: The Deal May Not Hold
By the end of business Monday, Greece must submit a list of legal overhauls that it wants to adopt, based on the current program. Mr. Tsipras has said he wants to replace many of the mandated changes. But a number of the ones he dislikes most--such as cuts in pensions--are also the ones considered most vital by the eurozone and the IMF. If the eurozone doesn't like his proposal, ministers will meet again to discuss their next move.
#4: Greek Politicians May Reject Deal
The deal appears to go against some of Mr. Tsipras's campaign pledges. Greece will still be subject to oversight by the European Commission, the IMF and the European Central Bank, whom he had vowed to kick out. Rejecting such conditions would have left Greece without access to funds and at risk of its banks being cut off from the ECB. That could have forced Greece from the eurozone, something the Greek public still opposes. But Mr. Tsipras's Syriza party and his coalition partner may not be happy.
And next, courtesy of Peter Tchir Of Brean Capital, is one outlook on What's Next For Greece, The Euro, And Markets?
I’m sure that at this stage everyone is sick and tired of hearing about, reading about, or even thinking about Greece and GrExits, but it is impossible not to spend a couple of minutes looking at Friday’s “deal” and figuring out what that will mean for the future.
I think Friday’s outcome and the potential future outcomes boil down to a few simple things to consider
- Unless someone senior from Greece says they are defaulting, or someone senior from Germany says they are kicking Greece out, any headlines from Europe should be ignored. Over time which of the scenarios seems most likely should play out, but until then, this is mostly noise.
- I will be looking to see how Spain reacts – will Rajoy’s opposition view Greece’s extension as a victory for Greece and put renewed pressure on Rajoy? Will the Greek people feel like their leaders sold out too quickly and try to put an actual radical party in charge? It seems that a few days of EU Summits can take the radical out of a party.
All this brings us right back to the current “sword” that still dangles above the head of the markets: Greece, and the all too real uncertainty of whether they are going to remain dutiful servants bringing offerings and gifts to lay before their current masters of their universe. Or, they are going to stand with straightened backs and declare they are the keepers of their own nations soul and the “gods of Olympus and Banks” be damned.
Regardless of the how, why, and other circumstances that led to the impasse of where Greece now finds itself on the monetary world stage. The fact is an elected government along with the outright vociferous display of unity from those very people should embolden the stance of what is to be done; not allow room for clouded discussions and press-ers to be held where one has to think or over analyze at to interpret exactly what’s going on. i.e., “Are the playing cat and mouse?” Or, “Is this some form of brilliant display of game theory that we mere mortals can’t understand?”
If it is borne out to be true that what is being reported throughout many media channels is the fact that Greece has indeed nearly forfeited all its positions in-turn for some changes in language as to appear they have indeed stood up to their nemesis “and won” will not only be disappointing, in my opinion it will embolden central bankers and Keynesian devotes everywhere to view the monetary world with even more self-aggrandized thoughts and actions.
Today Greece stands not only at the crossroads of regaining self-determination as a country via its monetary policies. It also stands quite squarely as well within the cross-hairs of central bankers everywhere. For if Greece does in fact stand true to its demands, and insists on resolutions to once and for all absolve itself from its current dilemma as well as divorce itself from the religious styled worship of central banks and stand on its own two feet consequences be damned: it will indeed show that the edifice of central bankers omnipotence is in fact just that – an edifice of beliefs – not something to be worshiped as “god-like” or “all-powerful.”
Greece must standup and prove with clear concise action displaying in fact for all to see that it fully intends to reach out and cut the rope releasing the sword. If not it will do as so many others have done before it and shrink into the history books of obscurity. For that is where this current movement will surly end up if they’re shown willing to do anything less. Matter of fact they’ll be lucky if they’ll even be a footnote in the future if they don’t.
Today as we sit that one fact still remains unresolved: Will Greece and all that it proclaimed it was going to show the world follow thru and emulate the triumphs and victories against repression like the stories of old? Or, does it have more in common with the storytelling of myth and legend laced with hyperbole? Rather than the reality of a “promised” backbone.
Just imagine the central bankers gleeful recantation for years to come if it’s borne out their ability to quell such an uprising without the need to even brandish a lightning bolt. The facts will prove once again all one needs to have is a sanctioned printing press – and the power and control to rival Olympus are yours for the taking. Oh how the “lesser-gods” must envy these new power brokers. For that must surely be omnipotence worthy of praise. And their presumed omnipotence as well as power is proving to be a game winning fact if it plays out as currently reported.
For facts trump a game based in theory every time. And the fact is as I stated in an earlier article: (to paraphrase Mike Tyson) “Everyone’s got a plan – till someone gets punched in the face.”
Well Greece did indeed land the first blow. However, it’s beginning to look more and more that Greece’s first shot was more of an “eyes closed” lucky punch. And everyone knows the cold hard truth or fact that no game theory can trump: If that’s all that it was – the counter punch from their adversary is going to be nothing short of a factual resulting “hay-maker” looking to once, and for all, put the “lights out” on any and all future up-risers.
It would appear not only we but even the “gods” will have to wait till Monday as to know the fate of either. For the sword still hangs.