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Thursday, August 16, 2012 12:24 AM

Face-to-Face Showdown With Merkel; Wicked Irony of Greece Bankruptcy

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Greece is bankrupt. It cannot pay the bills. A Spending Moratorium proves just that.

Greece will only pay salaries and pensions.

If the state owes anyone else money, they can forget about it unless the Troika sends more money. If that causes more corporate and personal bankruptcies (and it will), then tough luck.

 Even Der Spiegel admits the obvious: Only Bankruptcy Can Help Now.

Officially, at least, everything is going according to plan. In September, officials with the troika -- made up of the European Commission, the European Central Bank (ECB) and the International Monetary Fund (IMF) -- are planning to travel to Athens to check on the progress that Greece has made with its cost-cutting program. Then, according to the plan, they could disburse billions more in aid out of the second bailout package for Greece, which the euro-zone countries and the IMF agreed on in February.

But, in reality, it is rather unlikely that all of the €130 billion ($160 billion) in the bailout package will ever be paid out. And what is even more unlikely is that the money would keep Greece from going bankrupt.

The assumptions on which the current program was based in February are no longer valid. At that time, it was thought that the Greek economy would only contract by 4.5 percent this year, but now it appears that this figure will be closer to 7 percent. This would mean even fewer tax receipts and even more social expenditures. What's more, given these circumstances, it's almost irrelevant that the Greek government is expected to ask for a two-year extension, to 2016, of the agreed austerity plan.

One thing is clear: In addition to more time, Greece also needs more money. And those who have been financing it thus far -- primarily the major euro-zone countries and the IMF -- are either unwilling or unable to give the country any more.
Face-to-Face Showdown With Merkel

The Telegraph reports Greece's Samaras to face show-down with Angela Merkel in Berlin
Antonis Samaras will travel to Berlin next Friday to ask for extra time - at least two more years - to meet the austerity targets set in its second €130bn (£102bn) bail-out.

Amid continued protests and a grim rise in suicides in Greece, the German Chancellor has agreed to listen to Mr Samara’s request to slow down the austerity drive. Greece's economy is already in free-fall and economists have argued the terms of the bail-out programme - which include another €11.5bn of cuts in 2013 and 2014 - are making things worse. However Ms Merkel's spokesman Steffen Seifert warned: “The German position, which is a European position, is based on the memorandum of understanding, which is the foundation.”

The Chancellor is struggling to contain increasing domestic impatience with the debt crisis which is thought to have cost German savers €163bn or €3,125 each, according to Die Welt.Guido Westerwelle, Germany’s foreign minister, said that while the impact of the delayed elections had to be considered, there could be “no substantial changes” to Greece’s austerity programme.
Wicked Irony

Antonis Samaras wants two more years and more money to meet budget goals. This puts Merkel in a damned if she does, damned if she doesn't predicament of her own making.

Recall that Greece technocrat Prime Minister Lucas Papademos was handpicked by the Troika to replace George Papandreou simply because the latter proposed a voter referendum on the Greek bailouts.

Also recall that when the government of Papademos failed, it took two elections to come up with a successor. And in each of those elections German leaders, as well as clowns from Brussels, openly campaigned for Samaras, even though he pledged to do exactly what he is doing: asking for more time and more money.


Notice the massive irony of it all. Germany does not want to give Greece more money or more time, nor does Germany want the blame for forcing Greece out of the eurozone. However, Germany, theEU, and the ECB openly backed a person guaranteed to put Germany and the EU in such a no-win position.

Had the radical left won the Greek election, Germany and the EU could easily have walked away because Alexis Tsipras, SYRIZA's radical left leader promised a bailout rejection, which would have meant a eurozone exit.

Now Germany is in the ludicrous position of having to make a decision that will either give Greece more money or force them out of the eurozone. Germany does not want to pony up more money, nor does it want to be accused of forcing Greece out of the eurozone, yet those are the only choices.

OK chancellor, pick your poison.

Mike "Mish" Shedlock
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