Mon May 30th, 2011 at 04:41:16 AM EST
According to the FT, Greece is in the process of completely relinquishing its sovereignty to its creditors:
European leaders are negotiating a deal that would lead to unprecedented outside intervention in the Greek economy, including international involvement in tax collection and privatisation of state assets, in exchange for new bail-out loans for Athens.
This is pretty much an explicit call to plunder the country. So much for solidarity it seems...
Promoted by DoDo
Zerohedge has the story
and they quote TF Market's Peter Tchir stating the obvious, at this point:
If Greece stops paying, the lenders cannot 'foreclose' on it. There is no law that dictates how to proceed like chapter 11 does. The bonds have very few if any covenants. The lawsuits would have to be won in Greek courts and then enforced by people employed by the Greek government. Good luck with that.
The reason the lenders have an almost irrational need to avoid a default, is they don't know what they will get if Greece does default. There is no good way to analyze it. Their ultimate recovery will be based on some threats of future lending, rights of set-off, and maybe some threats of trade sanctions, but unlike a mortgage or a corporate bond, there is no good way to analyze the potential outcome. There is a reason 'vulture' funds focus on corporate debt much more than sovereign - there is a way to analyze the outcomes, it is not just guess work.
So people can continue to comment on whether Greece should be allowed to default, but that misses the point. Lenders can make it easy for Greece to make payments, but choosing to default or not remains solely a Greek decision and they should do what is best for them.
Tonight, after the huge (and unreported) demo at Syntagma today (part of the "real democracy" movement that started in Spain) the people's council floated the idea of a tax strike should IMF or ECB
fiscal stormtroopers managers be involved in tax collection. This I consider to be only the first of many acts of the Greek population that will de facto make impossible the pursuit of the creditors' plans, except by deadly and massive force, if that.
This is bizarre even from the EU/ECB/German perspective. They are forcing the Greek government either to make a stand and default, possibly leaving the Euro, or go down history as a quisling government, incapable to even do the dirty work that is assigned to them.
If the Papandreou government does the honorable thing under the circumstances and defaults, the scenario of what would come after, was thoroughly and convincingly analyzed today by economist Yanis Varoufakis who concludes that:
It is in this sense that the threat to expel Greece from the euro is a cheap form of empty blackmail-like threat, the purpose of which is to exact from the Greek polity many pounds of flesh, by which to impress Northern Europe's despondent electorates that Greece deserves another huge, expensive loan. As is so often the case with naked blackmailing, an incredible threat is pressed into the service of an ill-conceived goal: To the issuing of a fresh gargantuan loan to an insolvent country that neither needs nor wants it.
Should these scenarios materialize then (if they are not propaganda tricks that is), if Varoufakis is correct and the creditors' bluff is not called, I cannot imagine how a government that accepts them will even be able to escape the country. Not enough helicopters.