Around the midnight, the Greek Parliament will vote on confidence in Papandreou's new socialist government: it contains a new finance minister, a guy who almost managed to bring Greece into bankruptcy just because of the 2004 Olympics.
If the government survives the vote, and the odds are just somewhat higher than 50 percent, they should wait for the next week and try to ask the Parliament to approve the measures needed for the next tranche for mid July.
Slovak finance minister Mr Ivan Mikloš, one of a very small number of similar economically trained politicians who have both a brain and a spine, made it very clear that if Greece fails to fulfill these conditions, it must immediately declare default.
“If they don’t approve all that needs to be approved, then there is nothing to talk about. Greece will have to declare a default.”If anything goes wrong in the Greek Parliament, it's likely that Mr Mikloš will be joined in his "No way" by his Dutch counterpart de Jager.
Meanwhile, British PM David Cameron who is already responsibly planning for the official Greek bankruptcy has vowed not to pay a penny to the new Greek bailouts.
At the same moment, the eurozone was thinking that the EUR 12 billion tranche is independent - and may be discussed separately - from another bailout. This reasoning was identified as incorrect by John Lipsky of the IMF. He said that the IMF will block already the EUR 12 billion tranche if there is no visible agreement in the EU when it comes to the next bailout. And you should have no doubts about it - there is no agreement about it!
Meanwhile, there is a growing consensus that any further bailout has to be partially paid by private investors. Rating agency Fitch - and, somewhat less explicitly, also Standard & Poor's - has made it clear that any such participation will be classified as a default because it's inconceivable that such a participation could be genuinely voluntary. So the default will be declared even if the next bailout proceeds according to the current most pro-Greek plans.
These days, the streets of Athens experience one strike (and power cut) after another. The Greek protesters are clueless, living in "the State [which] is the great illusion where everyone thinks they can live at the expense of everyone else." (Frederic Bastiat.)
The protesters don't seem to display a glimpse of a plan, rational reasoning, or anything of the sort. The protests are childish and vacuous.
We often hear about "contagion". Greece needs to be helped because the problems will otherwise spread everywhere. This kind of bullshit reasoning is being uncritically bought by lots of people - including traders and some economists. This is the kind of reasoning that allows irresponsible fiscal behavior in the first place. This is the kind of bogus argument that the freeloaders love to use all the time. That's really their main tool to blackmail everyone else. Greeks are doing so all the time - and in most cases, they're doing so completely openly and shamelessly.
However, this argument is complete bullshit. If Greece goes bankrupt, there will be almost no significant consequences outside Greece. If some banks will turn out to be in trouble because of the default, it will be much easier for their countries to help them than it is to help Greece - which is just throwing matter into a black hole.
Note that it takes time roughly T = M^3 in the Planck units for the matter to get back in the form of the Hawking radiation. ;-)
The bullshit propaganda about the contagion is producing mindless one-dimensional narrow-minded brainwashed investors and traders who only distinguish two states of the financial system: "good mood" and "bad mood". They don't really distinguish Greece from Ireland or France or the U.S. or Hungary or any other country or company. They only see a "nervous atmosphere" and "relaxed atmosphere".
Because of these low-brow idiotic people whose knowledge about the status of the markets, companies, countries, and prices may be nearly reduced to this single number, and there are millions of such idiots indeed, the markets don't operate properly and the prices have often nothing to do with the reality. They oscillate almost uniformly, dominated by the principal component that is derived from the "good mood vs bad mood" sentiment - which is moreover detached from any real situation of the economy and is a purely emotional quantity describing the hormone levels of the stupid mob of low-brow investors itself.
This reasoning has to go away. People must realize that individual people, individual companies, and individual nations are responsible for their own credit and a bankruptcy is primarily about their life, not about the life of others. If the people - and the mankind - will fail to understand the individual responsibilities for someone's budgets and debt, the world economy will increasingly resemble a messy corrupt communist system in which no one is responsible for anything and in which anyone can in principle steal the assets of anyone else, by claiming that not allowing such things has bad implications for the "whole".
It doesn't have significant bad implications for the whole, it shouldn't have bad implications for the whole, and it shouldn't be believed that it has significant bad implications for the whole. Greece's bankruptcy is desirable, necessary, and it has de facto already occurred. It's necessary for Greece to regain the chance to become a productive nation with a future.
It's very reasonable that Greece's exit from the eurozone is a part of all the smoother solutions. There is no tragedy about it, either. Only fundamentalist loons who want to worship symbols of the European "unity" in religious ways may be afraid of a country leaving the eurozone when it's clearly better for everyone if the country leaves. But the euro is just another currency - one that isn't connected with any optimum currency area. When people realize that it was a bad idea, it should simply be left and the European fundamentalists should simply... I forgot what's the polite verb here. They should stop annoy everyone else with their bigotry.
There is no unity in Europe. There has never been unity about such matters. The fiscal discipline, sentiments, and long-term planning of all nations have always been completely independent. The individual nations have always lived their independent political lives. Pretending that the European nations share common interests to the extent that they shouldn't care if lots of money are drifting in one direction or another is just a silly propaganda. When it comes to things like EUR 110 billion that should be drifting from some nations to a specific nation every year, it's a lot of money and the European citizens surely don't think that they're helping themselves by losing this money on a regular basis.
So please, let's stop scaring each other with nonsensical catastrophic scenarios. After the 1992 elections, I used to believe (partially) some propaganda about the devastating consequences of the decay of Czechoslovakia (and its currency). At the end, there were absolutely no problems associated with it. It helped both nations.
All the hysteria is man-made and unjustifiable by the real data. The Greek default will be just a formality because in practice, it has occurred a long time ago. After Greece goes bust, a few other banks should lose a few percent of their value and that's it. Of course, the real reaction will be more violent - but the more violent reaction will occur purely because of people's irrationality and silly beliefs in links that don't exist. There will be lots of questions for Greece how to get reborn but almost none of these questions will be facing the people outside Greece because it's not our business.
The Greek government has been building the chimera of socialism for decades. The eurozone membership has only helped to accelerate its detachment from the reality (when their drachma used to exist, the invisible hand of the free markets helped to undo the main "systematic" mistake of all the Greek politicians and citizens because the drachma was constantly losing its value as Greece was trying to live beyond its means) but the detachment has always been there. The Greek population has not only tolerated the outrageous socialist devastation of their country and the flooding of their legal systems with a jungle of socialist regulations that are always directed against the employer, always support lazy employees, and make business in Greece pretty much impossible: it has actively supported it. The Greek public is really the main driving force that has made the destruction of Greece possible. Even after Greece reintroduces their own currency, there will be lots of other things they will have to do. In some sense, they need the same transformation as the "normal" socialist countries needed after the fall of communism. The main difference is that the bulk of Greece actually still believes that socialism is a good system - it's because they have enjoyed a good life funded by others but they lie to themselves by saying that the good life was due to socialism. It definitely wasn't.
99% of their problems were created by themselves. In the real world, countries that buy and cling to socialist utopias have to end up badly. The proclamations that someone else is guilty (foreign banks? foreigners in general? a few politicians?) are untrue and offensive - and they should only help to make you more certain that every new penny that you throw to the Greek black hole will ultimately be used against you.
So please, let us stop it!
Independently of the scare tactics, there are so many other silly things that people say. For example, Timothy Geithner who should be one of America's top economists said this incredible thing:
“It would be very helpful to have Europe speak with a clearer, more unified voice on the strategy. I think it’s very hard for people to invest in Europe, within Europe and outside Europe, to understand what the strategy is when you have so many people talking.”Well, even though Mr Geithner and his blonde countrymates display huge gaps in their knowledge of geography and they seem to think that Europe is a country, Europe - unlike the U.S. - is actually not a country. (To be fair about the knowledge of the Americans, Nathan has the right answer and he has already locked in!) :-)
Just the European Union, which is not quite the whole Europe, is a confederation composed of 27 countries and half a billion of people who are almost as diverse as the people of the whole world. Aside from their national governments (that are mostly democratic and reflect diverse opinions of the citizens) and lots of international and European confederate institutions, there are lots of international organizations operating on the continent - and Europe is a continent, I forgot to say.
Just like there is no unified voice between David Cameron and Timothy Geithner even though both of them speak English, there is no unified voice between David Cameron and e.g. Spanish politicians who are, in some sense, much further from each other than the U.S. and the U.K. The Greek debt is a Greek problem so it's obvious that there can't be a unified opinion about it in the rest of Europe. To impose a pan-European unified "strategy" about all such matters, you would need a degree of a continental dictatorship that turned out to be impossible even for as ambitious politicians as Adolf Hitler. If you live in the reality, the idea of a unified European opinion about every episode such as the Greek debt is just totally silly.
So if you think that Europe is a country or that it should have a unified voice, if you need this modified status of Europe for your investments, you should better avoid investing in Europe. Or in anything else, for that matter, because in that case, you are a complete idiot who should better donate all your money to someone else and ask him to give you a hamburger on a regular basis. And if you are working for a president, you should recommend him to replace yourself by a dog because a dog (and maybe even a hot dog) would probably do a better job.
Meanwhile, FYROM - Former Yugoslav Republic Of Macedonia - erected a huge 28-meter statue of Alexander the Great, "their" national hero. Greece is angry. This is kind of funny how someone may be angry about such matters. Alexander the Great was almost certainly controlling the territories of the Yugoslav Macedonia as well as the Greek Macedonia - and he could have even been closer to the Yugoslav territory.
On the other hand, he was clearly an ethnic Greek, not a Slav, since the Slavs came to the place many centuries later. So it's kind of amusing to imagine that Alexander is a Yugoslav hero. But if they want to celebrate their identity based on the territorial and not ethnic criteria, good for them! I can't imagine why Greece should be upset about it. This would implicitly be a case of another country that de facto celebrates the Greek heritage. What's wrong with that?