Background
Everyone
was expecting Greece to have a rocky time sometime in 2015 possibly 2016. Not
so much because of the financial or fiscal situation but because of the quality
of the Greek political system.
Let’s
recap what has happened. Samaras the Greek PM was in the beginning an
anti-Troika, anti-MOU, anti-everything leader. Then he realized that in order
to achieve his lifelong ambition to become PM he has to pay his respects to
Germany and Frau Merkel. He did so and was crowned PM of Greece in 2012. Then
in 2014 he lost heavily in the European elections. His party came second and
SYRIZA took pole position. Samaras then panicked big time. He slammed the brakes
on any reform program and in a show of solidarity towards his European allies
he announced unilaterally his intention to exit the MOU. In his panic he forgot
that the European program was set to end on January 1st 2015 anyway,
so instead he announced that the scapegoat-IMF would be kicked out of Greece.
Markets panicked, the EU panicked, spreads went back up and the European
leaders scrambled to save the day once more. Europe said ok but the IMF took a
different view. In their eyes, the program was not finished. Greece had done
nothing the past year on the structural reform side. Instead the government
relied on the good tourist season and the fact that the recession is bottoming up
(after 6 years) to present a rosy picture. The IMF hardened its stance not
least because some of Samaras negotiators took the negotiations personally and
talks allegedly moved into an advanced form of coprolalia.
Samaras
now cornered tried to call IMF bluff. In his mind, if he cannot get the toy he
asked from Santa Troika then their elves would have to risk negotiations with SYRIZA
who’s leader is an atheist that went to Mount Athos to spend 15 meditation-minutes
alone with a miraculous Mother of God icon (Called Axion Esti).
Samaras
gambit was to bring forward the presidential election scheduled for February
2015. The president is elected by the parliament and his role is mainly
ceremonial but because of bad constitutional reforms, if one is not elected
then national elections are called. Samaras needs at least 180 out of 300 votes
in order to survive. The million euro question is “does he have them or not?” Let’s
find out.
Mechanics-Asynchronous voting
complication
A bit on
the mechanics of the election process. There would be two attempts on the 17th
and the 23rd to elect a president with 200 votes. If they fail
(almost certainly), then the third scheduled for Monday 29th needs
only 180 votes. If they fail the third time then national elections would be
called within a month, possibly on the 25th January or 1st
of February.
The way
the vote is going to take place is also important. It is an open vote, i.e.
everyone declares his or her support. But it is not time synchronous. In other
words, they call names, one by one according to region and alphabetically. So
the 180th for example knows what the previous 179 have voted. So
votes can change the last second as people see what is happening. A bit like
ordering food in a restaurant after hearing what your friends have ordered, and
changing your first choice (usually a bad move).
Neither 180 nor 120
So the
magic number is 180 and everyone in Greece and all the hedge fund managers in
the world engage in advanced numerology to foretell the result. It’s a good
game to play with your kids if you want them to be experts in mental arithmetic
for the 7+ exams.
a)
The
coalition government claims 155 (ND 127+PASOK 28). Not enough to elect.
b) The main opposition
SYRIZA claims 71. Not enough to block election
c) Communist party (KKE-yes
there still is one) 14. Usually votes NO.
d) Independent Greeks (ANEL-Party
believes in chemtrail conspiracy. Hate to see their dependent beliefs) 12. They
originally elected 20 but 8 of them saw the light in the sky and became truly independent
by leaving the party. It is not clear how the remaining 12 would vote but being
of independent mind they can split down the middle. Some say 3-4 would vote YES
e) Democratic Left (DHMAR) commands 10 out of the
original 17 they had elected. Anecdotal reports say that as many as 5 may be
YES.
f) Golden Dawn or the
Nazi party commands 14. They had elected 16 but two left after the Nazi party
they had joined was revealed to be Nazi. Eight are in prison (Another is still
in prison but left the party and joined the Independents). Some say that push
comes to shove Samaras would get one or two of them the last minute, possibly
by promising that they would not follow the other eight.
g)
Independents.
This is a large group made by the leftovers of the other parties. They are 24
and they come from all over the place apart from the communists (Comradeship
still runs strong). Some count 16 as YES.
So doing your 7+, we have
155+3(ANEL)+5(DHMAR)+16(independents)=179. This is how close it is. One more
from the independents or Golden Dawn and we have a president. One less and we
have elections.
The truth is that it all depends
on how the concoction of independents would vote. Some have come out as YES and
some as NO but the many still keep their cards secret. After all last minute
horse-trading increases the stakes and their negotiating value.
Market Reaction
As we all know, markets hate
surprises (or love depending on your positions). Samaras, managed a big
surprise. Markets reacted unfavorably to Greece as everyone is expecting high
uncertainty. But is this bad for Europe as a whole? The truth is that we are
not in 2010 when Greek debt was owned by French and German banks and any
default would have caused massive problems. Neither are we faced with Greek
contagion. In fact the PSI was done exactly for this reason. In the words of a
German official “we look at ways to immunize Greece”. Nowadays, the majority of
the Greek debt is in the official sector (EU government+IMF+ECB). So don’t expect
financial turmoil because of this.
The perceived danger comes from
the European politics. Anti-European sentiments are on the rise everywhere and
they are manifest in different forms. In Spain we have Podemos, in France
Le-Pen, in Germany Die Linke etc.
If Greece fails to elect a
president and the national elections produce a SYRIZA government with all its
anti-European policies this will be a bad sign for Europe. In this case, the
oligarchs of the EU have two choices, either make an example of Greece by
calling SYRIZA’s bluff or come to some form of an agreement.
The first scenario means disaster
for Greece (Cyprus style or worse) and showing the Spanish-Podemos and others
what awaits them. It is also good for Draghi, as he would find the perfect
excuse to speed up the introduction of QE and silence the German objections. So,
in a strange reversion Bad for Greece is Good for Europe.
The second scenario is messy too.
SYRIZA would have to make huge U-turn and fast (speed is of essence). In the
process they would lose support from the left flank that would need to be
replenished somehow (from the center or the right) if they want to stay in
power. Although this is the best scenario for Greece it has as many unknowns.
How long this would take before the Eurogroup is fed up with having to spend
long nights discussing with Mr Tsipras (leader of SYRIZA) and the radical left
with Mr Tsipras.
