Warring Greek factions may finally destroy the country
TOMORROW’S vote on the Greek austerity measures could be the do or die moment for any semblance of Greek economic survival. The Greek parliament will vote on measures to push through more public spending cuts, an increase in taxes and a sale of assets.
Greece’s creditors are seeking reassurance that Greece is taking serious measures to address its economic woes. It is demanded that Greece makes €28bn worth of budget cuts and sells off €50bn worth of state owned assets.
The Greek government scraped through a vote of confidence last week. A block vote of 155 members of Greek Prime Minister George Papandreou’s party managed to keep the fragile government intact when they passed a ballot last Wednesday. But the warring factions within the parliament could rout the chances of the vote being passed. Even one of Papandreou’s comrades, Alexandros Athanasiades, has threatened to rebel due to objections to privatisation of state owned assets.
CONTAGION RISKS
With Italian problems raging on, Belgium still without a government, Portugal teetering on the brink and Ireland close behind, should Papandreou’s government fail to push through the measures, emergency talks will undoubtedly be called among the Eurozone members.
So will the vote go through? According to CMC Markets’ Michael Hewson, in the long run, the outcome will likely be the same: “It could go either way. But what then? If the measures are pushed through, the Greeks are unlikely to accept them. Just look at the scenes currently taking place in Athens.”
Hewson says that even if the bill passes, the scenes that have been unfolding in Athens over the last fortnight bode ill. The Greek populace is certainly not showing the outward signs of a nation that will readily accept any more austerity measures, act of parliament or not. “Having endured over two years of austerity, the Greek population appears to have contracted a rather nasty bout of austerity fatigue. The thought of another five years of the same rather unpleasant fiscal medicine may not go down that well with the local populace.”
RETREAT TO SAFETY
Should the vote fall, the stocks of those banks with high exposure to Greek debt will certainly take a hit. But it is the currency and de facto currencies that will give traders the best exposure to the fallout. As long as QE2, QE2.5 or QE3 are in play in the US, the Swiss franc and gold will be the haven currencies for investors in times of volatility, and these will undoubtedly surge yet higher.
Though Cavafy said of the crumbing Greeks at Thermopylae that “brave once they are rich and when they are poor, again brave”, in this case the Greeks are undoubtedly poor, but in their refusal to accept austerity measures, certainly not heroic.