Greek Tragedy: The Vote, French And German Banks Negotiation, And China27 June, 2011, 4:27. Posted by Zarathustra
Tags: Euro Crisis, Europe, France, Germany, Greece
The Greek Parliament will be voting on the austerity plan on Tuesday, while the debate is probably underway now. Earlier, I pointed out that one government MP has said that he will vote against the plan. Another MP Thomas Robopoulos said on Friday that he will also vote against the austerity plan. And according to the latest, two more MPs (Chryssa Arapoglou and Panayiotis Kouroublis) are reluctant to vote for the plan. This will cut the government’s majority further to
3 seats 1 seat only if all four of them vote against. In any case, the chance of passing the austerity plan is really not far off from 50/50.
The MPs are right to vote against the plan, said Wolfgang Münchau, as the EU/IMF deal imposed new burden on Greece’s taxpayers. There is little doubt that the plan is deeply unpopular, as Greece’s central bank governor warned that the austerity will put the Greece’s people’s tolerance to their limits. As a result, one should not be surprised to see even more MPs to vote against the plan at last. If the parliament can’t pass the plan, they can’t get funding from EU/IMF, and default will be the outcome within weeks, if not days.
Outside of Greece, things are not so certain as well. German banks, for instance, would like to see the government to provide incentives to rollover Greek debt according to Bloomberg. Their demand include guarantees, which the Finance Ministry feels impossible. In France, however, the French treasury agreed to allow banks to reinvest only 70% of the proceeds from maturing securities according to Reuters, 50% will be going into new 30-year Greek bonds, while 20% will be going into zero coupon fund of stocks. These will happen, I assume, only if the Greek parliament pass the austerity plan.
As the Europeans are figuring out what to do with the mess, Chinese Premier Wen Jiabao shows his support for the European Countries as he tours Europe. In Hungary, he pledged to buy Hungarian bonds, and will continue to buy more Euro-denominated bonds. He later further added that China has been increasing its holding, and has not sold any Euro-denominated bonds despite the worries on Greece, according to Robert Peston of BBC. Far from being specific about what to buy and for how much, some might be prepared to take that as a good news. But what can China do to help, realistically? Buying bonds from EFSF?
In any case, the next two days will be the key.