What’s Greece Been up to?

Troika Calls Week’s Truce in Haggling Over Greek Budget – Bloomberg.

The Parthenon crowns the Acropolis in Athens.

Greece requires constant supervision. You leave them alone for a few days while you tend to the Spanish catastrophe, and they start causing trouble.

The troika is taking a week off from inspecting Greece, because negotiations have reached an impasse. It seems that PM Samaras is having trouble pushing the final round of cuts through Parliament. His coalition partners, Democratic Left and PASOK, are getting cold feet.

Two different positions are coming out of Greece. The Finance Ministry is saying that the coalition has agreed to pension, wage and benefit cuts totaling €9.5bn, but the two junior coalition partners are saying that no deal has been struck.

The smaller parties want the cuts spread over four years to make them palatable to their constituents. The Democratic Left leader is striking a populist chord,

“The troika must stop attacking Greek society,” said Kouvelis. “The troika must understand there are limits.”

The question is whether he is merely posturing to appease voters or is he drawing a line in the sand. A recent survey reveals that 57% of Greeks believe that they should not uphold the conditions with the troika because these policies have failed. Logically, I believe that Kouvelis is drawing a line, but the Greek politicians have caved so much to the Germans during these negotiations that I am starting to think that they are secretly French.

Complicating matters is that the Germans are playing hardball with the Greeks and refuse to budge on the deal. No one can afford a Greek default and exit from the eurozone, but no one could afford a Lehman failure either and it happened.

This is what I think. If everything is reasonably on track, we could have an announcement of concessions at the next “eurosummit that will fix everything version 22.0.”

If Germany continues to play hardball, they will not want to risk an adverse market event before the American elections. I think we would expect to see a delay with another troika inspection to be scheduled after the elections. The ECB will continue to allow the Bank of Greece to conduct a backdoor bailout to keep Greece afloat until then:

https://dareconomics.wordpress.com/2012/08/23/tough-talk-to-provide-political-cover-for-a-3rd-greek-bailout/

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