Are you out of your f*%ing mind!
Are you out of your f*%ing mind is what Papandreou has to be asked by Merkel and Sarkozy. The decision by Greek PM Papandreou to hold a referendum on the European plan to Save Greece is basically a call to the Greeks of whether they want in or out of the euro more than a vote on the latest bailout plan. The Greeks don’t want more austerity but they want to stay in the euro and that’s why the referendum will likely get a yes vote but we unfortunately have to wait until January for this. A no vote will lead to a collapse of the bailout, a hard default and a complete mess for everyone else. French bank stocks in particular are down 10-15% in response. Merkel and Sarkozy have to be furious as they apparently had no inclination that Papandreou was going to pull this after he was handed a 50% cut in their obligations to private bondholders. Knowing the mess this potentially creates, the main political opposition leader in the Greek parliament said his party “is determined to prevent at all costs such gambles” of a referendum. The DJ is reporting that he claims “Papandreou is blackmailing the Greeks in order to stay in power.” In Asia, China’s state business weighted PMI fell to 50.4 from 51.2, the weakest since Feb ’09. Taiwan’s PMI fell to 43.7 but South Korea’s rose by .5 pt to 48 and India’s rose to 52 from 50.4. Australia cut interest rates by 50 bps to 4.5% over concern with the global economic slowdown. Australia refilled their monetary policy gun with rate hikes over the two years when they realized the emergency was over and thus have plenty of flexibility to respond.
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November 1st, 2011 at 8:24 am
That it was basically a surprise is unbelievable… How many SDRs does the IMF have. .. we may find out, very soon.
November 1st, 2011 at 8:35 am
surely this has scared the $#1t out of merkel and sarkozy, but let’s be frank: greece is destined for austerity one way or another, there is no way to resurrect the good old days pre 2008.
the reasoning behind this referendum is: do we want to give up sovereignty, do we want to be paying 20% of our budget revenues in interest expense when we can use that money more productively?
November 1st, 2011 at 8:50 am
adding to the thread .. wonder what a gallon (liter) of gas would be in Greece post “sovereignty/interest expense” .. wonder what the value of a horse is to be?
November 1st, 2011 at 9:10 am
Greece got into a bad situation years ago; the question now is who recognizes the losses.
Methinks there is a case to be made that absent this referendum, any promises from Greece would be as worthless as the ones made all the way down into the pit they’re now in. I take this as a gamble that has little or no downside.
November 1st, 2011 at 9:16 am
[...] own political survival than the econ0mic stability of the world, has taken the psychotic step of calling for an austerity referendum less than a week after agreeing to the EU rescue plan that was so hard for the rest of the [...]
November 1st, 2011 at 9:25 am
Outstanding theatrics. But the most Interesting aspect is that the Greek people have a vote on the matter. Th somehow that gets lost.
November 1st, 2011 at 9:28 am
Governments default all the time, it’s past time for the market to re-remember this. Greece can not afford to pay with a 21% haircut nor a 50% haircut. It’s going to be well past 80% and most likely 100%. However what I’d like to know is how many trillions in CDS and other naked gambling is going on in the derivatives market. I think this is the very first time a sovereign default is tied to this sort of leverage. The damage could be unreal…
November 1st, 2011 at 11:44 am
The financial markets conditioned to run on inside information and media leaks finds a lump of coal to digest with the sudden and unexpected news that those asked to cover big money mistakes might actually have a vote.
November 1st, 2011 at 12:20 pm
Calling a referendum is a brilliant move by Papandreou. What the rest of the world does not realize is that Greece is becoming ungovernable, and that implementing the latest bailout plan would be impossible without a new mandate from the Greek people. In particular, the new plan calls for the Troika to oversee Greek finances, a huge loss of sovereignty by Greece. A successful referendum will give Greece the mandate to move forward and implement the needed reforms.
As for the potential no vote, well, as things presently stand, Greece would likely fail to implement their bailout, which would lead to a default in any case. This way, the resolution comes quicker, and provides a mandate for Greece leaving the Euro.
In a perverse way, the referendum is a win-win situation.
November 1st, 2011 at 1:58 pm
[...] Are you out of your f*%ing mind! – Peter Boockvar, TBP [...]