Don’t you just love Greece. It
used to be the three S’s. Sun, Sea and Sex, were the reasons most people
visited Greece but now there is a new attraction called Greek politicians. Ever
since they figured out, that by screwing the country they can punch far above
their weight, in fact globally, they have vigorously engaged in the third S
with the country.
For most of the last 12months the
three parties that were previously sworn and mortal enemies (PASOK-socialists,
DIMAR-democratic left, and ND-conservative) formed a coalition in order to
avert the left SYRIZA party taking power. Under the leadership of Mr Samaras
from the conservatives they found a compromise modus operandi. They will form a
government that is to do the absolute bear minimum.
In fact they were very successful
in doing the absolute minimum. The truth is that very little was done in terms
of reforms these last 12 months and the coalition continued on the path set by
previous administrations. But that was more than enough. The fact that there
was a stable government gave a false sense of security to many, including
European politicians.
However, the minute a
controversial reform was initiated (closure of state TV) marital problems
surfaced. After all, the coalition was formed in order to gain healing time for
their party wounds.
DIMAR
leaves coalition
It looks very likely that DIMAR
the third and smaller coalition partner is going to leave the government. But
this is not the end of the government.
ND and PASOK together they have between 153 and 157 votes (majority 151) and
this is enough. Moreover, having shed the DIMAR ballast may mean faster
decision making and reforms.
What is in the DIMAR’s leader’s
mind (Mr Kouvelis) is hard to fathom. He changes his mind all the time. The
party’s main electoral enemy comes from the left (SYRIZA) and if there were
elections now chances are that DIMAR would probably not fare well.
The leader of PASOK Mr Venizelos
knows that this is his party fate as well, which is why he opted to stay in the
government and avoid elections till he has consolidated his own position
(precarious) and PASOK’s resurrection (hard to impossible task).
The only logical inference is
that by breaking away DIMAR is going to try to form a center left pole as a
counterweight to SYRIZA while PASOK and ND would merge/evolve into a new center
right party. But this strategy needs time for the reforms to work. This can be
achieved if the DIMAR is not in the government but choses to selectively
support laws and abstains from any votes of non-confidence.
So, DIMAR may remove their own
ministers (some may refuse to obey) causing a reshuffle. Removing Mr Manitakis
for example may speed up reforms in the public sector rather than retard them. Thus
despite the apparent crisis on the outside, the breakup of the coalition may
mean sunnier future.
Greek
Bonds and the IMF
Greek bonds (post PSI) have
traded lower on the Greek political crisis. On top of that there was an
announcement by the IMF that unless the funding gap that was created by the
reluctance of various National Central Banks to roll over some Greek bonds, the
IMF would stop disbursements. This is an intra-troika affair and has very
little to do with Greek developments. Adds more flavor to the German elections,
as Merkel would never go back to the parliament to ask for more money for
Greece.
Greek bonds on the other hand may
present a good opportunity at close to 12% yield. Having said that, watch for
the two bonds that are maturing on the 25th June (USD XS0372384064)
and the 5th of July (CHF CH0021839524). They are both hold outs from
the PSI and Greece needs to pay roughly 1.6billion. I am pretty sure that the
recent T-bills would cover the amount so there is virtually no risk there.
