EUCOM Economic Analysis - Part I

[Firn]

The Greek Manufacturing PMI has fallen considerably since Syriza was poised to win the elections, reversing a strong upward trend. Correlation is no causation but there has been lots of reports in fall that many of the haves feared their victory and investments and business slowed.




The Guardian, with it's excellent live coverage brought my attention to a handy list of Mr. Varoufakis, which is obviously fully imerged in the referendum campaign.

Greece’s finance minister, Yanis Varoufakis, has published a short’n’snappy bullet point list of reasons to vote no on Sunday.

It includes the fact that Greece’s debt is unsustainable and should be restructured, and a promise that a No vote won’t lead to Greece leaving the euro.

So what does he state?

Greeks should say “a big NO, he concludes. Here’s why:

1. Negotiations have stalled because Greece’s creditors (a) refused to reduce our un-payable public debt and (b) insisted that it should be repaid ‘parametrically’ by the weakest members of our society, their children and their grandchildren
   
2. The IMF, the United States’ government, many other governments around the globe, and most independent economists believe — along with us — that the debt must be restructured.
   
3. The Eurogroup had previously (November 2012) conceded that the debt ought to be restructured but is refusing to commit to a debt restructure
   
4. Since the announcement of the referendum, official Europe has sent signals that they are ready to discuss debt restructuring. These signals show that official Europe too would vote NO on its own ‘final’ offer.
   
5. Greece will stay in the euro. Deposits in Greece’s banks are safe. Creditors have chosen the strategy of blackmail based on bank closures. The current impasse is due to this choice by the creditors and not by the Greek government discontinuing the negotiations or any Greek thoughts of Grexit and devaluation. Greece’s place in the Eurozone and in the European Union is non-negotiable.
   
6. The future demands a proud Greece within the Eurozone and at the heart of Europe. This future demands that Greeks say a big NO on Sunday, that we stay in the Euro Area, and that, with the power vested upon us by that NO, we renegotiate Greece’s public debt as well as the distribution of burdens between the haves and the have nots.

My take:

1. I agree pretty much, although he does of course just focus on the pensions while ignoring other stuff like much needed reforms.

2. Fully agreed.

3. Have to check it.

4. Misleading at best, only a few players out of many have.

5. At least in part it is due to Syriza and his unique negotiating and neither are deposits safe, nor is Greece certain to remain in the Eurozone or EU even if there a lots of legal questions about the latter.

6. We don't know what a No or a Yes will mean and it is of course politically expedient to tell the Greeks that a No just means better terms with the creditors.

All in all I'm still not sure if the duo just wants to get the Greek people to vote to have a pretext to exit the Euro while telling them a No will also mean that they will remain in. The creditors will then be blamed by them because their offers were humilating and stupid (partly true) and twice didn't respect the democratic voice of the Greek people.

As I said a Grexit will be mean much suffering but is at this point in time highly likely the best outcome for Greece. It's more difficult to gauge the impact on the Euro zone.