Archive for June 2012
From the moment Spain announced that it will need EU support for the recapitalisation of its banking system the immediate market reaction was to seek clarity over the details and most importantly the level of seniority of the official sector over existing Spanish bondholders. The debate has intensified over the last two weeks.
Sony Kapoor’s, from Re-Define, is probably the most coherent piece on the matter, where he summarises that a senior bailout is a much better option than no bailout, adding that all previous IMF bailouts have been senior so there is precedent. Sony’s post is highly recommended for anyone interested in the debate and wants to get a better understanding over the seniority topic.
Is the issue of seniority then overblown, as Juncker also suggested in the press conference after last week’s Eurogroup?
Here is the view of a market participant who understands this sovereign debt crisis like very few:
Since democracy was restored in Greece after the fall of the junta in 1974, the Greek political establishment developed on the basis of polarisation, most notably since the late 1970s when the socialist party of PASOK, under the leadership of Andreas Papandreou, established itself as a political force to be reckoned with.
After the result of the May 6 elections, the political system has lost this balance as PASOK has paid a severe price for an austerity program that completely destroyed the economy and violently changed the lives of the majority of Greek society. The radical left party of SYRIZA has risen to become a challenger with undisputed momentum to take the first spot in the coming elections.
This new uncharted territory of the local political dynamics, combined with SYRIZA’s admittedly lack of cohesion on views related to the economy – a product of the various factions that the SYRIZA coalition incorporates – forced Greece’s political system to invent the new dilemma that will polarise the June 17 elections and create familiar waters to navigate through during the campaign.
The new divisive question is pro or anti mnemonio, as Greece’s memorandum with the troika is called.
Greece’s politicians yet again fail to rise to the challenge and they are missing the opportunity to have an informed debate about the country’s response to this devastating crisis. Most importantly, they remain incapable of finding areas where their views can converge and shape a national strategy in the negotiations with the troika that all parties could support after the elections.