Sunday, June 17, 2012
GREEK LEADER CAUSES TURBULENCE
GREEK ‘RADICAL LEFT’ LEADER CAUSES WORLDWIDE STOCK MARKET TURBULENCE
No one seems to be able to say with any real certainty whether or not Greece will stay in the EU, try to negotiate an orderly exit from the eurozone or be pushed out of the monetary union. Sunday’s unprecedented election saw the political establishment that has dominated the country for four decades nearly wiped out. No surprise, extreme volatility in the stock markets was one of the knock-on effects. Greek markets dropped 8% today.
37-year-old Greek politician, Alexis Tsipras, the leader of the socialist Coalition for the Radical Left (S?????), who has been charged with forming a coalition government, is being blamed for much of today’s market selloff for some of his more incendiary remarks. Mr. Tsipras wasted no time announcing his opinion that the “barbarous” Greek bailout agreement is “null and void” and should be torn up and abandoned for the sake of the Greek working class. Global markets went on a roller coaster ride as Tsipras’s words threatened to cause a domino effect that could force the country to quit the euro. Besides his opposition to the terms of the bailout, Tsipras wants to nationalize the banks, restore all cut salaries and pensions to their former levels and to bring back union bargaining.
Bad idea from the point of view of the markets, true. The Germans will most certainly be pissed, as well. But it’s probably the best outcome for the lives of the citizens of Greece, who are feeling squeezed to pay off what is widely seen to be the mess caused by the elites. If the revolt against the EU-mandated austerity doesn’t come from the left, it will certainly come from the far right.
As Tsipras has repeatedly asked: “The main question is who will pay for the crisis? The rich or the poor?”
Last September in an interview with CNBC anchorwoman Michelle Caruso-Cabrera, Mr. Tsipras said that the austerity measures inflicted upon the Greek population via the “troika” of the IMF, the European Central Bank and the EU were counter-productive and couldn’t be allowed to stand:
“The solution is to be able to get out of the memorandum (the troika plan) and to be able to get rid of the destructive policy that is being implemented right now… I think the medicine they have given us is worse than the disease itself and I think it’s going to kill us.”
In order to receive more than 200 billion euros in long-term, low-interest loans, the troika has demanded that the Greece reduce its spending. The Greek government has responded by laying off thousands of government workers, cutting the salaries of those who are left, and cutting pensions to retirees. They’ve nullified collective bargaining agreements in an effort to get wages lower so that Greeks will be more competitive in the world economy.
Additionally they’ve raised taxes and fees on everything under the Greek sun. The moves have angered Greeks, and they demonstrated this in last weekend elections by punishing the parties that agreed to the troika’s requirements, and giving many more votes to Tsipra’s Coalition for the Radical Left.
Tsipra told CNBC: “I think this will totally destroy the middle class. So I think that what is really needed is a plan which involves growth and I think fiscal consolidation can be achieved through other means. I think the rich should pay and not just the poor and middle class.”
If Greece ditches the harsh bailout terms, the money flow will stop, so the country would probably be forced to “print money” to pay salaries, pensions and the military or else resort to massive layoffs. Bet on the former, not the latter.
Sensibly, Tsipras is calling for something like the New Deal’s WPA or the Marshall plan, governmental efforts, he says, “which would lead to investment opportunities in Greece and this of course would create jobs which are much needed in the country.” Additionally, Tsipras told CNBC last year that he was of the opinion that the financial sector should be placed under government control..
“Do you know what (Warren) Buffett said? He said come on, “let me pay.” Why did he say that? He said that because he could understand the danger, the danger for his class if everything is burned.”
Smart man. He obviously gets what’s at stake. Refreshing in a politician, isn’t it?
Many Greek and European political observers don’t think Mr. Tsipras will be able to form a coalition government in just three days (the time set by Greek law). A new round of elections seems likely in June, but for the next 48-hours, the financial world has its attention directed towards Greece and the rising political star of “Radical Leftist” leader Alexis Tsipras.