Sunday, July 5, 2015

Great Relief - A Clear Referendum Result!

Earlier today, when predictions were still for a very close race, I tweeted the following:

"My hope for the referendum: one of the two sides gets clobbered! Otherwise national schism!"

I did think that this was wishful thinking on my part because everything seemed to suggest that it would be a very close call. Now I am very pleased that it turned out the way it did. 61% of the total is definitely not a close call. Instead, it is an avalanche.

To be sure, in terms of material substance, I doubt that it makes much difference whether the vote was 61% against or 61% for the referendum's proposal (whatever that was). Either way, Greece is presently outside of any program and a new program will need to be negotiated from scratch. SYRIZA is confident that the referendum strengthened their negotiating hand. Time will tell.

Personally, I saw this vote not as a vote about a non-existing Troika proposal nor as a vote for/against a Grexit. Instead, I saw it as a vote of confidence for the government. The SYRIZA/ANEL government has received a resounding vote of confidence from the Greek people. It is good that this is now on record.

Having watched scenes from Athens on TV, I am certain of one thing: everything bad that may/will come upon Greece in the next few days (such as a break-down of Greece's banking system) will be blamed on the creditors and not on the government.

One thing has become even more clear to me in the last week than it was ever before: this assortment of sectional interests which calls itself a party by the name of SYRIZA will not lead Greece toward a better future even if they succeed in striking a favorable deal with creditors. Alexis Tispras and Yanis Varoufakis are masters at devilish linguistic and emotional manipulation. I compliment them for having transfomed a battered people into the positively frenzy crowd at Syntagma this evening. But the next time when the Greek people lament that they have been mislead by evil politicians, they won't be able to point the finger at anyone but themselves.

Another thing should be made clear. This regime change which the creditors allegedly desire will not take place. The franchise of voters who have nothing to lose is getting larger with every day. My guess is that this franchise is already large enough to assure that SYRIZA will remain the largest party for a long time, particularly if they can be linguistically and emotionally manipulated.


  1. "SYRIZA will remain the largest party for a long time."

    I don't see how that's going to happen .

    Simply put, the outcomes for Syriza are three:

    1) A new MoU.
    2) Continuous asphyxiation of the economy with catastrophic results. Varoufakis already half-admitted that the next salaries and pensions will be paid in IOUs. The general public hasn't yet grasped the consequences of this because capital-controls have been implemented barely a week ago. If they had, they would vote differently in the referendum.
    3) A return to the drachma.

    Frankly speaking, I don't see how Syriza is gonna survive in any of these three outcomes.

    Syriza is trapped, and that's the price to pay for a deeply uncompetitive, unproductive and unreformable economy.

  2. Hopefully I'm right in thinking that the MSM speculation of Greece exiting the EZ/EU is nothing more than the wet dreams of journalists - fuelled by the social media echo chamber.

    Also yet another example of Pollster Predictions being hopelessly wrong. Scottish Referendum, UK elections, Turkey elections, Greece Referendum all "Too Close to Call"...

    Presumably the ECB can restart the ELA at the drop of hat? If it doesn't then Draghi should indeed go the way of Gounaris, exiled to Corsica at least.

  3. What is the source?

    1. I think you can assume Mr. Kastner wrote it as creative writing. It's meant to illuminate about the plan and the media-handling, but isn't necessarily fully true.

  4. What is the source of, "To: Alexis. From: Yanis. Subject: Thank you!" you posted?

    1. My guess: Same as that famous speech of Tsipras ;)


  5. Mr. Kastner,

    To be honest i was hoping for a 50/50 vote which would lead to a national government of all parties. But it didn't happen.

    I like your views made all above. I also did not see the referendum in the end as a Yes/No for the Grexit, but more about a message that something needs to change. Going to my voting district I see people are quite aware that the near future will be painful to say the least. But it doesn not mean that they can not express their views openly on what was asked on the referendum. Regardless of the media bombardment and consiquiences of our choices.

    But we also need to understand that that 60% would have been even higher if people weren't scared so much. Like posted on Saturday the logicaly response to the ref was yes, the emotional was no. Well we got a result. What does it mean? We want europe (70-80% still want the euro) but not with measures of austerity. This is quite a problem and i am uneasy to see how it will be resolved. Because both wants requested by the people are like putting two positive charged magnets to each other. It is a total contridition.

    Greeece needs structural reforms but i doubt Syriza will be able to achieve this. This will be their demise. But what will help them maintain power alittle longer is that there is no real other party that can present some kind of an alternative.

    To be honest it is up to German IMO, what will happen to Greece. Although we have a difficult problems to deal with which are contridictory to what we want euro/no austerity, i still do not want to burden my fellow europeans. So much support and solidarity has been expressed this last week and i really do not want them to pay out for us anymore.

    In the end as i said we will need to work out our own problems but we will need help for sure. No money so much but new ideas.

    I feel like I just finished the battle of troy and on the boat going home with Ullysys. The odyssey is only just starting. If there will be pain as to finally achieve our home desitnation, we I believe as a people are prepared. There is not one person who is not aware of this. Everyone by 100% whom i spoke to knows hell is coming.

    I am really curious to see what will happen.

    Always thanks for your support and good views.


    PS: I believe Varoufakis leaving is a small positive sign. At least in respects to our creditors.

  6. Imho a government that did turn a difficult economiuc situation into utter desaster, without being able to improve anything, can't and won't last long. Even Greek voters aren't that easily manipulated to totally ignore reality.

    1. You can leave out the fake "humble" in imho. And we have all heard quite enough ignorant German opinions to last several hundred years.

      The basic problem in Europe is the architecture of the eurozone; the secondary problem of the eurozone is Germany, which puts its own interests before that of Europe. If that is the desire of the Volk, then just leave the European Union and the euro. We do not want you. We do not need you.

    2. Oh how convenient for Greece, xenos. You'd like that, wouldn't you. A monetary union with fiscal transfers. And then Greece could run fiscal deficits, like it has gotten used to for decades.

      Thankfully that's not gonna happen. And here's the beauty of it, it doesn't matter if Greece stays in or leaves the Eurozone. Both options require it to become seriously more competitive pronto. In fact, a return to the drachma would require serious competitiveness immediately, since Greece would have to restructure agricultural production and stock-farming in short notice in order to address food shortages.

      Time's up, xenos. Why don't you just realize that and stop boring us with your pathetic leftist tirades?

      Greece can't continue with the rotten practices of the past. It can't continue with hairdressers that retire at 50 and hospitals with 10 gardeners and no garden. It will reform, or it will die.

    3. @Jim. You may be surprised that I don't disagree with your views about Greece and competitiveness. That does not alter the basic fact that the structure of the eurozone is a disaster that has benefited only Germany.

      As far as fiscal trasnfers are concerned (and that was not what I meant anyway), for such a system to operate would require a transfer of economic sovereignty away from the nation state and to a not-yet-existing European authority, to determine fiscal policies. Since this is effectively what the Troika has been trying to impose on Greece, it would be better to do it as a matter of law and with democratic accountability, and legal obligations on all parts. The mess over the last 5 years is because of an ad hoc structure -- largely because no country in Europe wants to have a properly functioning monetary union.

      This has nothing to do with leftism: it is about how to run things properly. If you cannot see that, then it is because you are full of right wing crap about free markets -- failing to realise that markets require a fairly strong state to allow them to operate properly. It is the operation of that state that distinguishes left from right; and the operation of the greek state is clearly very problematic. You do not solve it by putting corrupt politicians of the corrupt parties back in charge -- as the troika did.

    4. And you may be surprised that I agree that the Eurozone is neither an optimal currency area, nor a properly functioning monetary union. But it is what it is, and everybody knew the rules when they joined.

      So here's the thing. Greece knew that it couldn't devalue anymore, therefore it had to resort to different measures to retain competitiveness like, oh er, hard fiscal policies, moderate wage and pension policies, measures to contain irrational lending and booms.

      Instead, it did THE OPPOSITE!

      If you're objective you'll agree with this.

      Now, if you're a realist you'll also agree that there's very little chance of a haircut on official sector loans. Rollover and extension of maturities is the best deal that Tsipras will get.

      Also, although it's fashionable to blame the ECB for the closure of the Greek banks, the reality is that if deposit outflows had continued (and let's be real, they would have continued), the banks would eventually run out of collateral and capital controls would have to be implemented anyway.

      Also, let's stop pretending that the banks were solvent. They weren't. If NPLs and deferred taxes were recognized for what they were, banks would immediately be declared insolvent and a bail-in would ensue. It was just another game of extend and pretend.

      Therefore let's admit it, Greece has made colossal mistakes and it still refused to reform. Nobody is going to reward Greece with a haircut for as long as it refuses to reform. If they do, it's gonna be in exchange for really hard measures to restructure the economy, but they're gonna have to be monitored by foreigners since we know by now that Greek governments will sabotage them.

  7. Mr. Kastner,

    As a banker please comment on this. Is this just BS or business as usual.

    Can a greek default or grexit provoke a Lehman event on DB? If so then i understand that a grexit isn't so much scary for only greece but the whole continent.


    1. Over 3 years ago, I wrote an article implying that Deutsche was the most dangerous bank in the world (see below). The good news is that they have recognized this situation and, for several years now, are making all sorts of strengthening move. Some with more success than others. They are stronger today than they were then but still highly exposed. The difference between Deutsche and Lehman is that there is no question whatsoever that Deusche would be bailed out in one way or another, should something ever hit the fan.

  8. Assuming that the creditors will not surrender - and they have no reason nor any benefit from abandoning their previous course - imho the change of short term outcome did not depend on the result of the referendum.

    And schism will reign in Greece when the sad realities become in pretty future. I am not at all sure that Tsipras will stay PM after Grexit.

    Still assuming that we soon will have Grexit I see one fantastic achievement of Tispras: With a clear "no" as result of this referendum he clearly has won the blame game!!!


  9. Well, you enabled Syriza by being much too nice to them all of the time, Klaus. Especially to that demagogue Varoufakis. You'll have to live with that responsibility. Whenever you see the misery arising from the salon commies wrecking the economy, be aware that it's your fault, too.