We begin with a headline from The Independent:
Alexis Tsipras: He’s got the euro in his hands
Roughly 10 million Greeks are eligible vote in the world’s most closely watched election tomorrow.
Polls close at 7 p.m. by local time [9 a.m. in Berkeley], with initial results reported at 9:30 and semi-final results at 11.
We can safely safe that never have so many been so focused on an election in one of Europe’s smaller countries.
But what of the likely result?
From Keep Talking Greece:
Finally, silence! The elections campaign officially concluded Friday midnight. No more shouting and screaming politicians debating on our TV screens. No more stress and fear mongering artificial dilemmas. Finally, silence! Greek voters may rise from their couches and seek some activities or contemplate on the future of the country.
Political parties may try a last attempt to convince some undecided voters here and there. It looks as if the crucial judgement will be in the hands of these undecided voters.
Publication of public opinion polls have been banned for the last two weeks, however parties have massively received the results of daily rolling polls. Secret polls, we call them here.
Even though they are not published, Greek media report of an unprecedented head-to-head race between pro-bailout conservative Nea Dimocratia and anti-bailout left-wing SYRIZA.
The party that emerges first gets the 50-seats Bonus, even with a difference of one single vote.
Media speak ff rates around 30% for the first party and a difference of maximum +/-2.5% to the second party, in some rolling polls even less.
However it seems no party can get the absolute majority of 44%.
Apocalypse next week?
Consider the remarks of a well-known British-born Harvard historian, reported by Thomas Mucha of GlobalPost:
Harvard professor Niall Ferguson said a terrifying thing Friday in an interview with Bloomberg TV.
“If there’s going to be a Lehman moment in the crisis it’s going to be next week. This is the financial equivalent of the Cuban Missile Crisis. And the missile is really a bank run, which ultimately even the Germans can’t be completely immune to,” Ferguson said.
The Harvard historian was referring to Sunday’s election in Greece, which could dictate 1) the future of the euro zone, 2) the very idea of European unity, 3) the health of the $17 trillion EU economy, and 4) the stability of the world’s economy, including the global financial system.
The video’s here.
G20 leaders await morning-after summit
Guess we know what they’ll be talking about.
From Don Lee of the Los Angeles Times:
Leaders of the world’s biggest economies are facing pressure to take decisive action to quell the Eurozone crisis at a summit meeting starting Monday, even as they tamp down expectations and brace for Greece to cause more turmoil.
Amid widespread anxiety over the Greek parliamentary vote Sunday, the Group of 20 leaders, representing nations that account for nearly 90% of the world economy, will gather for a two-day summit in Los Cabos, Mexico.
Expectations are about as low as ever for aG-20 summit. What can this self-appointed steering committee for the global economy do?
“Nothing! The G-20 cannot take any real decisions” on the Eurozone problem, said Mario Baldassarri, chairman of Italy’s Senate Finance Committee, in a telephone interview. “They cannot take a decision that has to be made in Europe.”
Even the agenda looks uncertain. Everybody is waiting to see what happens the day before in Greece, a country that makes up less than 0.5% of the global economy. Greeks will cast ballots for what is widely seen as a referendum on whether their debt-stricken country remains in the Eurozone or leaves the 17-nation, single-currency union.
The German voice, always dominant
Germany’s in a desperate struggle to preserve its continental financial hegemony, and with the Bundesbank calling the shots, Germany finance minister Wolfgang Schaeuble sounds the usual refrain: We must have order!
The price, of course, is surrender of national autonomy to Brussels, where the key decisions would be made in the interests of maintaining the unsustainable and exponentially expanding of government debt owed to private finance.
From Michael Birnbaum of the Washington Post:
Schaeuble, 69, a key ally of German Chancellor Angela Merkel, is one of the most powerful voices shaping Europe’s response to its economic crisis. For him, the European Union is not simply a pocketbook convenience but a project to avoid bloodshed. And through this crisis, he says, the bonds that tie Europe’s countries together can become even stronger.
With Spain and Italy on the brink of needing full-scale rescues and Greece in open rebellion against the painful austerity diktats that came as a condition of its two bailouts, Germany is pushing for unprecedented steps to transfer sovereign power to the European Union in exchange for sharing the burdens of borrowing and spending. Germany — Europe’s most powerful economy — would shoulder much of the burden of any such arrangement, and Schaeuble may be his country’s most passionate proponent of doing so.
“We will do whatever it takes to defend the euro,” Schaeuble, 69, said in an interview in the Reichstag, the home to Germany’s parliament that is itself a symbol of the tribulations of Europe’s 20th century history. Russian graffiti covers many of its interior walls, left by troops who held the building in the waning days of World War II, and the building stands just feet away from the reach of the Iron Curtain.
“If the crisis is severe, you will converge onto the solution faster. That’s the opportunity that lies in every crisis,” Schaeuble said, as staffers and parliamentarians preoccupied with Europe’s ailments bustled through the Reichstag’s vast halls. “Europe is complex, the decision-making as so often in democracies is not always swift, but that’s better than the old way of settling things here, by going to war with one another. . . . If needed, we can act very quickly.”
Another warning from another money lord
This time the Prime Minister of Luxembourg in his role as the head of the Eurogroup, the council of eurozone’s finance ministers.
From Michael Shields of Reuters:
Eurogroup head Jean-Claude Juncker warned Greeks not to turn their backs on the euro, saying in a newspaper interview that a win by anti-bailout radical leftists in a vote on Sunday would have “unforeseeable” consequences for the monetary union.
The radical leftist SYRIZA party is racing neck-and-neck with the conservative New Democracy party ahead of the election, which could decide if Greece stays in the euro zone and spread turmoil across global financial markets.
SYRIZA leader Alexis Tsipras is threatening to tear up the punishing terms of the 130 billion euro bailout that is keeping Greece from bankruptcy.
“If the radical left wins – which cannot be ruled out – the consequences for the currency union are unforeseeable,” Juncker, head of the group of euro zone finance ministers, told Austrian paper Kurier.
“We will have to speak to any government. I can only warn everyone against leaving the currency union. The internal cohesion of the euro zone would be in danger.”
In addition to the economic and social consequences for Greece itself, an exit would damage the entire currency union, he said, adding: “This has to be avoided. This would send a devastating signal. The Greeks must be aware of this.”
Greek bank run continues unabated
The only real question is whether the bank runs can be halted at below Northern Europe’s southern borders.
With runs already underway in Spain and beginning in Italy, it’s a serious question.
From Charles Hawley of Spiegel:
Already, depositors are rapidly moving their money out of Greece. Capital outflows are now well more than €500 million each day, with €10 billion having been pulled out of Greek banks since early May. Analysts have dubbed it a “bank jog,” but should Syriza emerge victorious on Sunday, it could turn into a trot, or even an out-and-out sprint. An unnamed euro-zone official told Reuters that Brussels is concerned about such a scenario. “It’s not even about a bank run on Monday morning after the elections,” the source told the news agency. “People can now log on to Internet banking and make transfers on Sunday evening, as well.”
Still, even if all goes well in Greece on Sunday, Europe is far from out of the woods. Indeed, zero hour would appear to be approaching on several euro-zone fronts this summer, with both Spain and now Italy showing signs of having caught the euro bug. Not quite one week after Spain requested €100 billion from the euro backstop fund to prop up its banks, interest rates on the country’s sovereign bonds have soared, and ratings agencies have slashed the country’s rating. On Thursday, rates on Spanish 10-year bonds hit an all-time euro-era high of 6.96 percent, just shy of the 7 percent mark that drove Greece, Ireland and Portugal to scream for emergency aid.
Italy, too, is finding itself at the mercy of the financial markets this week. With investors more unsettled than calmed by the handling of Spain’s banking crisis, Rome on Thursday had to pay 6.13 percent interest on 10-year bonds. “The European banking system is paralyzed,” Nicolas Veron, a senior fellow at the Bruegel think tank in Brussels, told the Associated Press. “So many banks hold massive amounts of Spanish and Italian government bonds that are losing value. We no longer have a functioning interbank (lending) market in the euro zone.”
More from Andy Dabilis of Greek Reporter:
Fearful of a stalemated June 17th election and worried over giving up the euro and returning to the ancient drachma, frantic Greeks in the days leading up to the polls took out more than $1.25 billion a day from their accounts, but were blocked from making larger withdrawals, saying as it would take two to three days for transactions to clear.
The uncertainty over who will win and whether anti-austerity parties would prevail, a step that could push Greece out of the Eurozone, had Greeks yanking out as much as they could from banks, who told customers that bigger withdrawals would take several days or even extend into next week and after the elections, the newspaper Kathimerini reported. Some customers opted for foreign bonds, mutual funds, foreign currency and foreign stocks.
Bank officials said that since the first of May, six days before a first ballot was stalemated with no party able to gain enough support to form a government, Greeks have been withdrawing at least $126 million a day, and often more than $1.25 billion. Greek banks, already weakened by 74 percent losses imposed by a former shaky hybrid government of the New Democracy Conservatives and PASOK Socialists who backed austerity measures demanded by international lenders, had to get a $24 billion cash injection from the European Central Bank worked through the Greek central bank emergency liquidity fund. A day after the May 6 elections, so much money has been taken out that officials feared a run on the banks and many ATM’s were empty.
To prevent a recurrence and limit any sense of panic, banks are working overtime to keep ATM’s full, and officials said they would make sure the machines were full of cash over the weekend, including the day of the election. Warnings from New Democracy leader Antonis Samaras that a victory by his chief rival at the polls, the anti-austerity Coalition of the Radical Left (SYRIZA), could lead to a return to the drachma and nationalization of the banks have spurred many Greeks to clean out their accounts, with reports that many are stuffing the money under their mattresses or trying to open foreign bank accounts.
The corporate/bankster Grexit
While the ultimate threat is of financial collapse following a forced Greek exit from the single currency zone, many banksters and corporateers are already staging their own Grexits.
Liz Alderman of the New York Times highlights some of the latest:
Carrefour, the giant French supermarket and retail group, said on Friday that it was selling its entire stake in Greece at a loss to its local franchise partner, so it could concentrate “on markets where it sees growth,” a spokesman said.
Coca-Cola’s operations in Greece were also downgraded by Moody’s Investors Service, which cited the increased likelihood that Greece could exit the euro zone. A day earlier, the French bank Crédit Agricole said it was ring-fencing its Greek operations to protect itself should that happen.
Two of the world’s largest import-export insurers, Euler Hermes and Coface, have recently refused to cover transactions involving companies in Greece, imperiling the import of basic goods.
Global businesses and investors are retreating both because of the uncertainty on whether they might be paid someday in a devalued currency, and because domestic consumption has plunged after three years of painful austerity.
IMF warn of more grief ahead for Spain
Both Italy and Spain have bigger economies than Greece, and the crises unfolding there pose precisely the same threats as the Greek catastrophe, but on much larger scales.
After the failure of last weekend’s bailout, things are looking especially bleak on the Iberian Peninsula.
And the IMF has the “solution”.
Yep, more power to Brussels.
Spain faces a “very difficult” outlook. The economy is in the midst of a new recession that is “without precedent, with an unemployment rate already at unacceptable levels, public debt rapidly rising and a financial system in need of recapitalisation”.
“Despite its reforms and efforts,” in Spain “market confidence remains weak” and has to be revived by continuing along the road of reforms, the IMF continues in its article on Spain, which stresses how Madrid “has urgent need of growth in employment and further gains in terms of competitiveness”. Spain needs to do more to reduce its debt and its deficit.
According to the IMF, “despite its considerable efforts, the ambitious target of a 5.3% deficit in 2012 will not be met. “The outlook for Spain will be helped by further progress at a European level. There is an immediate need for the euro area to ensure sufficient funds to its banks and to prevent contagion.
But a lasting solution of the crisis will require persuasive and concerted action in the direction of a stronger monetary union”.
Spain, in the eye of the storm
That’s the analogy employed by Ralph Bosen of Deutsche Welle:
Ever since Spain was offered EU support for its banks, the country has been in the eye of the proverbial hurricane. In the short term, an eerie silence has settled in, but on the horizon the next storm clouds are gathering.
Everyone knows the chaos, against which there is no protection, will soon return. And this is how it may happen to the Spaniards. That’s because the 100 billion euros from the European Union that Spanish banks can hope for had eased the situation somewhat earlier this week. But meanwhile, the scenario has darkened. Financial experts are expressing louder doubts that the proposed aid package for the ailing banking sector is sufficient to put the country back on its feet economically.
Stefan Schneider, head of the macroeconomics team at DB Research, a think tank belonging to Deutsche Bank, put a damper on the hope that recapitalized banks would issue loans for needed investment. Credit requires demand, he said: “It is a phenomenon of the crisis in Spain that the private sector, companies and households, are together very highly indebted, more than 200 percent of gross domestic product. The willingness to take out new loans therefore is very limited for the foreseeable future,” he said in an interview with DW. For this reason, it is currently unlikely that the Spanish economy will quickly gain momentum again through massive lending, he said.
Almost down to junk level
Violence erupts in Spanish miners strike
And the Troika-imposed austerity is the cause, just as in Greece.
From the BBC:
Striking coal miners have clashed with police in northern Spain, in some of the worst disturbances since the government imposed austerity measures.
The interior ministry said at least seven people had been injured in the clashes outside a mine in Asturias.
Miners fired sky rockets and ball-bearings at riot police who responded with rubber bullets and tear gas.
The miners are protesting at plans to cut government subsidies from 300m euros (£242m; $376m) to 110m euros.
Thousands of miners have been on strike across northern Spain for weeks.
Germans begin to fear their own bank run
Though Germany’s the industrial and financial titan of Europe, they’re still part of Europe, and now many highly placed Germans are fearing that the southern catastrophe is headed north.
From Deutsche Welle’s Dirk Kaufmann:
German investment firm Pimco reduced the number of German government bonds in its portfolio because of low yields and rising debt worries, the leading German asset manager announced Wednesday.
“Germany is losing quality due to the increasing conditional liabilities that are piling up on the [federal government],” Andrew Bosomworth, head of Pimco portfolio management in Germany, told Reuters news agency.
Bosomworth attributed the loss in quality to the enormous burden likely facing the national budget from the billions of euros guaranteed by Germany under the EU rescue fund as well as other losses that might emerge if the eurozone debt crisis were to worsen.
Preferring safety over yield in its investment decisions, Pimco said it had started buying government bonds issued by the United Kingdom, Australia, Brazil and South Africa.
Pimco’s strategy is understandable, says Wilhelm Hankel, formerly president of German regional lender Helaba and a well-known euroskeptic, saying that German leaders had ensured the country’s fate was inextricably linked with the euro.
That automatically means that if the euro is in trouble, Germany is in trouble too, Hankel told DW.
The Iron Chancellor lashes out at France
While “Socialist” French President François Hollande is no socialist, he’s not sufficiently neoliberal for German Chancellor Angela Merkel.
Nor is the French economy doing as well as Germany’s, giving the German leader an opening, with her British counterpart piling on..
From Ben Chu of The Independent:
The German Chancellor, Angela Merkel, will hold talks with other eurozone leaders tomorrow evening in the wake of the Greek vote, before flying to Los Cabos, Mexico, for a G20 meeting. In Los Cabos, Ms Merkel is expected to come under renewed pressure from her G20 peers to commit to further German guarantees for the finances of weaker eurozone nations. The French President, François Hollande, has signalled his intention to increase pressure on Germany to approve eurobonds – jointly guaranteed European debt – both in Mexico and at a Brussels summit on 28-29 June. But such suggestions have been met with stiff resistance from Berlin and there were signs yesterday of rising German irritation at Mr Hollande’s pressure.
Ms Merkel suggested that the French economy has grown uncompetitive over the past decade. “If you look at the development of unit labour costs between Germany and France, then you see that at the start of the millennium Germany looked rather worse … while the differences have now been growing a lot more strongly,” she said.
Ms Merkel’s sentiments about the potential fragility of the French economy were echoed by the former Prime Minister Gordon Brown, who warned that the rapid deterioration in the eurozone’s growth prospects could ultimately force Paris to require a bailout too. In a blog for Reuters, Mr Brown wrote: “Portugal and Ireland will soon have to ask for their second IMF programmes. Sadly Italy – and potentially even France – may soon follow Spain in needing finance as the European recession deepens.”
Meanwhile, mixed signals on the memorandum
The austerity mandate, imposed on an unelected prime minister by the Troika [the European Union, European Central Bank, and International Monetary Fund], has been the key issue in the Greek campaign.
The Troika, representing the global money players whose reckless speculation on Greek debt created the crisis, has been publicly insisting Greece pay up, raising the spectre of expulsion from the single currency zone.
But knowing full well Greece can’t pay, what with all the every-increasing exponential interest, so they’ve been sending other signals that changes could be made, leading to a bizarre series of political switches by the politicians of New Democracy and Pasok.
The latest from Agence France-Presse:
The International Monetary Fund and the Germans who dominate EU policy toward Greece have insisted on holding any new government to the promises made in the March deal.
But they will have little choice but to enter new talks with Athens, which is already well behind on meeting commitments.
“There is always room for adjustment of terms,” said former IMF economist Simon Johnson, an MIT professor.
“The question is whether the new government wants to negotiate in good faith and whether the European Union still wants to help. The IMF will do what it can, but the options are running out.”
Jacob Kirkegaard of the Peterson Institute for International Economics said a deal is likely, regardless of who takes power.
“Even a Syriza victory in my opinion is not going to lead to a Greek exit from the euro, which I continue to believe is a very very low probability event,” he said.
“The reality is that a euro exit is consistently opposed by about 70 percent of Greek voters.”
Meanwhile, other looters are busy in Greek
While the massive sell-off of Greece’s public heritage is quite legal — indeed, required by the austerity memorandum — there’s another form of heritage-robbing that’s not legal, and it’s growing.
Prompted by Greece’s severe economic crisis, a growing number of treasure hunters are scouring the country in search of antiquities and other treasures.
The trend, which is more evident in the country’s northwestern Macedonia region, is not only driven by economic necessity but also by the cash-strapped state’s failure to protect its ancient heritage.
“Illegal digs have always been carried out around the mountains in this area,” Kavala archaeologist Sofia Doukata told Kathimerini. “But the practice has recently turned into a sport,” she added.
Mount Paggaio near the city of Kavala appears to have attracted an usually large number of would-be looters. The illicit diggers, Kathimerini understands, are conducting excavations around archaeological sites hoping to find something and sell it.
In the process, they often destroy the clues that led them there in the first place: numerous rock carvings dating from the late Bronze Age to the early Christian period. The carvings were first discovered by scientists in the 1960s, but no systematic records have been kept to date.
China scoops up a British institution
It’s the financial exchange where most of the world’s speculation in metals takes place, and the buyer is the world’s single largest user of metals.
From The Independent:
One of Britain’s last great independent financial markets has agreed to sell itself to China.
The 137-year-old London Metal Exchange has agreed a £1.4bn takeover from Hong Kong Exchanges and Clearing (HKEx) after a nine-month auction process which saw bids from InterContinental Exchange, CME Group and NYSE Nasdaq.
The deal will mean massive windfalls for the LME’s largest shareholders, JP Morgan, Goldman Sachs and Metdist, the metal brokerage owned by the LME’s former chairman Raj Bagri’s family.
The deal will pull together the LME which accounts for 80 per cent of the world’s base-metal options and futures contracts with China, which accounts for 42 per cent of the world’s metal consumption.
We’ll close with a song
From one-hit wonder Barry McGuire, recorded in 1965 and never more fitting.