“If Greece doesn’t get its next loan installment, the Eurozone will collapse the following day,” scowled Alexis Tsipras, leader of the left-wing SYRIZA, on Thursday morning. By threatening the entire Eurozone with its demise, he ratcheted up the bailout extortion racket a few more notches.
Yet, he and his party, if they were to win the June 17 election, promised to do precisely what would cause the bailout Troika to withhold payment: they’d repudiate the memorandum that the prior government had agreed to in order to get the second bailout. The “worthless piece of paper,” as he described it, spelled out structural reforms, privatizations, budget cuts, minimum wage cuts, etc. that would make the Greek economy competitive again through internal devaluation.
And it has been happening: draconian cuts in pay, benefits, and pensions; tax hikes, layoffs, spiking bankruptcies of small businesses; record unemployment; failing hospitals; pharmacies that refuse to sell medication to insured patients because they haven’t been paid by the out-of-money state insurer. The middle-class standard of living—it had defied gravity ever since Greece joined the Eurozone—has been crushed.
Tsipras wants to reverse all this. He wants to hire civil servants, nationalize companies, raise the minimum wage to where it was before, and throw borrowed euros in every direction—but he’s prepared to dialogue with the Troika. And… “If they say ‘no’ to everything, it means they want the end of the Greek people and the euro.”
But patience is running thin in the Eurozone. Politicians are on edge. Spain needs a bailout for its banks. And then for itself. And Italy is hobbling towards a bailout though it’s too big to get bailed out.
“If the Greeks don’t meet the commitments they have made,” Slovak Prime Minister Robert Fico told parliament on Thursday, “if they don’t honor their financial commitments and don’t repay their loans, Slovakia will demand that Greece leave the Eurozone.”
French President and socialist François Hollande had set the tone during an interview on Greek TV on Wednesday. “But I have to warn them because I am a friend of Greece,” he said, setting himself apart from German Chancellor Angela Merkel, who’d been depicted as Nazi occupier. “If the impression is given that Greece wants to distance itself from its commitments and abandon all prospect of recovery, there will be countries in the Eurozone that will prefer to finish with the presence of Greece in the Eurozone.”
And so the run on the banks has turned into panic—for fear of a forced conversion of all bank accounts into drachmas, followed by devaluation. And the numbers have been oozing to the surface on a daily basis. A total of €1.2 billion were yanked out of Greek banks in the chaotic week after the May 6 election. Every working day since, another €100 to €500 million were yanked out, with peaks on Fridays; a drachma conversion would occur over a weekend. This week, it jumped to €500 to €800 million per day. Cash withdrawals at the counter, bank transfers to foreign accounts, by individuals, by businesses. What keeps banks from toppling is the €18 billion they’d received from the Troika last week and the Emergency Liquidity Assistance from the ECB via the Bank of Greece.
But, but, wait…. the Athens stock exchange index, the ATHEX, jumped 10.1% on Thursday though it seemed for the longest time that it would head towards zero. The bank index skyrocket 23.4%. Over the last seven days, it was up 43.7%. Alpha Bank was the blue-chip star: up 29.7% in a single day. Yes, the very banks that are hearing the giant sucking sound of money leaving through a million holes are rallying in a death-defying manner.
And construction company Ellaktor was the second-best performing blue chip with a 27.5% gain. Perhaps speculators were counting on big fat German-funded construction boondoggles. It was a glorious day of euphoria, stirred up by … rumors.
Rumors that the conservative New Democracy would win enough votes to form a coalition government and make peace with the Troika to keep the euro. Rumors that the Troika would relax its requirements and give Greece some leeway. Unnamed “EU officials” were talking to Reuters. “The headline targets cannot be changed,” one of them said. “But there could be some tweaks to the path to get there.” And an unnamed “German EU official” said that there would be “a very clear 100-day plan for a new government.” But—stock market speculators must have missed that one: “If it’s not implemented in full, then the game is over.”
And retail is suddenly booming; people are stocking up on supplies and food, preparing for upheaval and shortages, should the euro be ditched. So, on June 17, Greeks will decide their country’s fate—or not. One thing is for sure: whoever wins will push for more bailout billions, but forget the conditions, the structural reforms, and austerity. Just the money.
Enjoy reading WOLF STREET and want to support it? You can donate. I appreciate it immensely. Click on the beer and iced-tea mug to find out how:
Would you like to be notified via email when WOLF STREET publishes a new article? Sign up here.