1.
Pasok and ND collectively get more than 50%. Then they
will have a comfortable majority in the parliament of perhaps close or more
than 180 MP’s (150 is the threshold). In this case Greece’s EU membership
should be safe for at least the foreseeable few months. The 180 number is the
constitutional supermajority that is needed to vote in a president and also
enhance the acceptance of the laws being passed.
2.
The two parties get close to 40% and manage to pass
the magic 150 number that would give them parliamentary control. In this case
however, the argument of the opposition that they do not represent the will of
the people would be strong. Implementing the actions of the Troika agreement
would become problematic. Furthermore, the newly emancipated voters might
suffer from the “Power of the convert” and become more militant. These are the
voters which for the past 40years voted either PASOK or ND. Passing the Rubicon
and giving their vote to someone else is a major self-event. The two center
parties would have difficulty putting them back in the herd.
3.
The two parties fail to reach the required percentages
and need a third party to form a coalition government. This is the volatile and
unpredictable scenario. Forming a
government would probably take more time and Greece does not have the luxury of
time right now.
The
sad thing is that none of the above scenarios are ideal. They differ only in
the perceived amount of time it would take for the coalition to collapse.
Unfortunately, almost after 3 years the crisis erupted and apart from some
extremist parties the Greek party landscape is the same. There are only a
couple of parties that speak the language and values of Europe (DRASI,
DIMIOURGIA XANA) and they would straggle to get elected. Many Greeks find it very difficult even now
to vote anything other than PASOK and ND. The typical argument I hear time and
time again is I do not like Mr/Mrs. X because of this or Mr/Mrs Y because of
that. Giving a food analogy, it is as if someone who was fed SPAM meat for
10years is now presented with a proper meal and he does not eat it because there
is no salt on the table. All kinds of self-excuses are made. No doubt
psychologists and political analysts would make a career out of this paranoia
disorder.
The
main danger is that Greece is getting divided once more. This time the division
is between Europe and Anti-Europe. The
division takes many forms. There are some like the communist party that
advocate a communist state. Their ideal is North Korea’s Kim Il Jong but with a
better hairdo. Other parties want to stay in Eurozone but do not want any of
the obligations or responsibilities that membership entails. They want to milk
the cow but not feed it or have anything to do with it. Polls show that asking
the question Euro vs Drachma the overwhelming majority chose Euro. Changing the
question to add the responsibility that Euro membership entails and the polls
get reversed.
In other words, whichever way you look at
these elections the truth is that they are transitory for Greece. None of the
parties has managed to capture the imagination of the people, perhaps because
their leaders lack the cognitive ability to form a vision for the future. In this respect Greeks must wait for future
elections and future leaders to find redemption.
Bond Dates. Failure to Pay
Greece
has a bond redemption coming in on the 15th of May and a coupon on
the 8th. It would have to pay 435million (originally was 450million)
Euro to the hold outs of this English law bond (XS0147393861). This is part of
the 6billion that refused the PSI through the bondholder meetings. Would Greece
fail to pay? The rhetoric so far from Greek officials is that there is no money
allocated for hold outs. The truth is however, that the decision maker is not
the Greek government,, assuming there is going to be one, but Europe and
Germany. They are the ones that call the shots and also have the money to pay.
So chances are that Greece would not pay this bond on the 15th. That
of course does not mean that bondholders would not get their money back
sometime in the future. It is simply too early and too close to the PSI for
Europe to start paying recalcitrant bondholders. There is of course a month grace period but
this can be used only if Greece intents to pay but has difficulties collecting
the money (operationally or otherwise).
In other words, if a Greek official comes out and states that Greece
does not intent to pay or it would not pay then the grace period does not
matter. This would constitute a far more serious event in the history of
European Bond markets as Greece would become the first Eurozone country that
strictly speaking would not honor their commitments through a moratorium or
Failure to Pay event. The PSI was a restructuring event and not a Failure to
Pay. We may have an indication on the 8th of May when a coupon is
payable on a Samurai bond (Yen bond, XS0071095045, Nov16) but as it is only 2
days after the election and involves only around 4.4million Greece might decide
to pay.
Failing
to pay the May bond would also cause cross default to most of the other Foreign
law bonds and they would become immediately payable (accelerated). With respect
to the new Greek bonds and the old ones that the ECB holds it does not matter.
They do not have cross-default clauses. Also the bi-lateral loans from Troika
would not be affected as they give the option to the loan holder to call a
default. The major blow would come from the international point of view and
also possibly from the BIT (Bilateral Investment Treaties) that Greece has
signed. How can anyone be expected to do business in Greece or invest in Greece
when the state has declared a moratorium on certain bond payments? From the
Legal point of view, Greece may find it very difficult to conduct business and
even normal payments if there are open cases against Greece in English courts.
It is a mess and the main argument of those who favour payment or another PSI
offer to the hold outs rather than the “Failure to Pay” road.
