Fisher Investments Editorial Staff
Politics, Media Hype/Myths, Repeatable History

Gumby, Greek Politicians and Other Bendy Things

By, 02/13/2015
Ratings244.520833

Greece and its creditors had some meetings this week, and at first, they did not go well. No compromises. No credible written proposals for reforms. Not even a joint statement after Wednesday’s meeting of Finance Ministers, because supposedly one of Greece’s reps ripped it up. Now websites have snazzy clocks counting down until Greek banks lose funding and the euro implodes. But wait! Thursday’s summit between Greek Prime Minister Alexis Tsipras and EU leaders was, apparently, a love fest! But still, no compromise, and stalemate dread is spiking. The world is on tenterhooks, live-blogging the standoff like it’s 2012. And we can’t help but wonder why—perhaps everyone has forgotten this is how things went in 2011 and 2012? Back then, mere plans to have plans to have plans were seen as thrilling signs of progress—and ultimately led to compromise. And this week’s theatrics did yield a plan to have a plan to have a plan. Anything is possible, but a Greece-stays-in-the-euro compromise looks likely this time, too.

We will spare you a prolonged analysis of these negotiations. Plenty of pixels have already been spilled on that, with pundits galore busting out their old Game Theory textbooks, trying to get inside alleged Game Theory maestro (and Greek Finance Minister) Yanis Varoufakis’ head. We are not in his frontal lobe, so we don’t know whether he and Tsipras are serious when they say Greece wants a six-month bridge loan, a debt swap and over $150 billion worth of World War II reparations[i] from Germany—and that they’ll get Russia to help if eurozone leaders don’t pony up.[ii] We also don’t know whether German Finance Minister Wolfgang Schäuble is serious when he calls Greece’s demands nonstarters. Maybe they’re all bluffing. Who knows! But opening gambits in tough negotiations have a long history of being far-fetched.

So what do we know? Well, in their roughly three weeks in power, Tsipras and Varoufakis have flip-flopped. A lot. We documented last week’s flip-flops here. More came this week. Monday, Varoufakis told Greek lawmakers he and Tsipras have no plans to “tear up” the bailout agreement—contradicting campaign pledges to, well, tear it up. They completed another U-turn Tuesday, ordering the privatization agency to proceed with the privatization of the Piraeus Port Authority, just weeks after cancelling the sale and pledging to end state asset sales. But that encouraging flip was apparently followed by a discouraging flop Wednesday, when Tsipras’ chief of staff supposedly tore up a joint statement from Greece and eurozone officials, in which Greece pledged to explore “extending and successfully concluding” the existing bailout program in exchange for that bridge loan and other concessions. But that flop was followed by more flap Thursday, when Varoufakis slammed “dubious claims based on dubious leaks,” so who knows. This is the same guy who, in a single speech, said first that eurozone finance ministers should “contemplate breakdown” of their talks before Wednesday’s meeting, then that he and his cohorts weren’t “seeking a clash.” But then there was that lovey-dovey summit on Thursday, where Tsipras and German Chancellor Angela Merkel apparently became fast friends.

Meanwhile, the ECB has done its own flip-flopping. Last week, it stopped accepting Greek debt as collateral, essentially cutting Greek banks off from traditional financing. But it boosted Emergency Liquidity Assistance—funds channeled through Greece’s central bank at a penalty rate. Funding was supposedly increased this week and can keep going as long as Greece remains in the eurozone. Greece’s government has enough cash to last through early March. So those countdown clocks probably aren’t very meaningful.

Anyway, most involved say the next step is this: They all get back together Monday and talk some more, then talk some more after that, and then some more, etc., and hopefully find some common ground. It’s a plan to have a plan! To kick the can!

We’ve seen this so many times. Like whenever Greece tried to unlock bailout installments in 2011 and 2012. And when former Prime Minister George Papandreou threatened to hold a referendum on austerity. And when Germany threatened to put Greece under conservatorship. And when the ECB threatened to upend Greece’s debt restructuring by refusing to take any writedowns. And when we were told every week was a “critical week for the euro.” Every time, these supposedly insurmountable stalemates were surmounted. Turns out politicians are really bendy.

Seems to us like this is just the latest sequel in Greece’s formulaic crisis cinema saga. You have Greece’s populist politically motivated demands, other nations’ politically motivated allegedly unbreakable NOs, a fungible deadline, live-blogging, overactive editorial pages and a lot of “it’s different this time.” Somewhere, we suspect Sir John Templeton is shaking his head at all of it—the more things change, they more they stay the same. Particularly where bendy politicians are involved. Greece’s new politicians have already proven they’re no less bendy than their predecessors, and the EU/ECB/IMF troika is run by the same bendy politicians from 2011 and 2012. They will probably drag this out as long as they can, doing their best to scare us all and force better terms, but ultimately, they’ll most likely meet in the middle.

 

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[i] By the way, the likelihood this happens, rounded to the nearest whole number, is zero.

[ii] We have a hard time seeing anyone falling for this one. Russia is hemorrhaging hard currency because of sanctions and low oil prices. They’re dealing with double-digit inflation and near-certain recession and just passed emergency funding measures. Unless Greek officials plan to pay their debts in rubles, this seems like a nonstarter. 

 

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*The content contained in this article represents only the opinions and viewpoints of the Fisher Investments editorial staff.

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