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Monday, July 20, 2015

Greek "Scarecrow" To Terrorize Spanish,Portuguese Elections



Submitted by Tyler Durden on 07/20/2015 14:15 -0400
 
(A troika public service announcement: voting for "radical" leftists may lead to capital controls)

Last week, after the Greek parliament legislated away the country’s sovereignty, PM Alexis Tsipras executed a cabinet "reshuffle" aimed at ridding his government of "radical" leftists who oppose the conditions attached to the country’s third bailout package.

The move was confirmation of what we’ve said for months. "It is becoming increasingly clear that the Syriza show will ultimately have to be canceled in Greece (or at least recast) if the country intends to find a long-term solution that allows for stable relations with European creditors," we argued in May. 


That’s a nice way of saying this: EU officials are determined to effect political change in Athens because i) Syriza, as it existed before last week simply wasn’t receptive to EU demands around fiscal discipline and stepped up austerity, and ii) allowing the new Greek government to push back forcefully against the troika risked emboldening political sympathizers in Italy, Spain, and Portugal. 

In short, "come hell, high water, or 'Grimbo,' the EU was going to extract its pension cuts and VAT hikes from Tsipras, and not because anyone seriously thinks it will make a difference in terms of putting the country on a 'sustainable' path, but because the EU simply cannot afford for Syriza sympathizers in more economically consequential countries like Spain to get any ideas about rolling back austerity (of 'fauxsterity' as it were) and using EMU membership as a bargaining chip."

With recent events having confirmed everything we’ve said about the troika’s intentions to usurp the democratic process using financial leverage, the question now turns to whether Brussels’ hardline negotiating stance and, more importantly, Germany’s steadfast refusal to discuss "classic" debt writedowns in the face of pressure from the Christine Lagarde (who can’t decide if the IMF is the "good" cop or the "bad" cop), has had the intended chilling effect on other anti-austerity political movements across the EMU. 

As noted last week, Nacho Alvarez, economic policy chief for Podemos (the ascendant, anti-austerity Spanish political party led by Pablo Iglesias), was careful to differentiate Spain’s situation from that of Greece in what certainly appeared to be an effort to play down the idea that talk of Greek debt relief would cause Podemos to seek re-profiling for Spain. Via Bloomberg:

Greece and Spain are 2 different economies that require different strategies, Nacho Alvarez, said Tuesday in Madrid.

Alvarez says Greek deal is not a failure for Podemos, but for Europe.

Alvarez says change doesn’t necessarily mean restructuring of public debt.

Fast forward to Monday and it’s readily apparent that Iglesias understands precisely what took place in Greece. Again, from Bloomberg:

Creditors Tried to Carry Out a Coup on Greece, Podemos' Iglesias

Creditors tried to bring Greece to its knees and enforce a new "Versailles Treaty," Pablo Iglesias, leader of anti-austerity party Podemos, said Monday

Iglesias says he has a lot of sympathy for Greek PM Alexis Tsipras

Tsipras succeeded in bringing debt relief to negotiating table: Iglesias

Iglesias says Spain situation is different to that of Greece: "Our problem isn’t external debt, creditors or Germany, it’s the Spanish oligarchy"
 
This is merely obfuscation (while Spain's debt-to-GDP ratio is considerably lower than that of Italy and Portugal, to simply suggest that the country has no "problem" with external debt, creditors, or most importantly, Germany is to overstate the case) and willing obfuscation at that. With elections just around the corner, Iglesias isn't keen on provoking Brussels (or Berlin) - yet. 

But the real question is whether or not the ATM lines, empty shelves, and gas station queues in Greece have had their intended psychological effect on Spanish (and Portuguese) voters. In other words, the question is whether the troika has succeeded in undercutting the democratic process outside of Greece by indirectly strong-arming the electorate. Bloomberg has more on the periphery's "spooked" voters.

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