Monday, 6 July 2015

Tsipras after the Varousectomy - Jaffa or Studmuffin?

First a quote from the man whose name I borrowed for my own. (h/t JG for bringing it to my attention)

"Power concedes nothing without demand. It never did and it never will. Find out just what people will submit to, and you have found out the exact amount of injustice and wrong which will be imposed upon them; and these will continue until they are resisted with either words or blows or both. The limits of tyrants are prescribed by the endurance of those whom they oppress.” Thomas Paine

Let's look at what happened in news and markets over the last 12 hours.

-No Vote - Instant conclusion Greece is out of EU and no deal possible
-Base cases of banks swing to Grexit, though bank base cases are as solid as jelly these days and ought to be examined under high frequency trading regs.
-Equity futures were down 2% shortly after Sunday night/mon morning open.
-They recover into Monday opening when suddenly Varoufakis steps down. Or rather is pushed under a bus by Tsipras on the basis that there is more chance that Eurocrats will reopen deal talks if it isn't with him.
-This is naturaly seen as positive and a pointer towards a willingness to satisfy EU conditions for further debate.
-The markets then stepped up their rally and we are now trading at levels that would be considered normal in any other day.
-Twitter and media reek of disappointment and Robert Peston once again gets it wrong when calling for market disaster last night.

This is not how I saw it panning out. The original plan was to see markets dump, the media hype go into overdrive and continue recycling late Sunday comments from Germans that a deal was even further away, culminating in a blow off spike of nastiest tomorrow only to see a forced rescue/resolution kick in from the EU and a bounce ensue. But the ‘Varousectomy’ bounce has changed that and I am now wondering if this is a resell level for further disappointment as the markets have so suddenly swung to pricing a compromise.

But what compromise?

The No vote hardly opens up room for compromise from the Greek side even if the new Greek finance minister is a great guy and is much more pro EU. The vote has not so much even Tsipras a mandate, as he claims, to negotiate a deal that involves debt forgiveness, but locked him in to only being able negotiate a deal that involves debt forgiveness, which was the red line that the EU would not cross in the first place. So what’s new? The room for compromise is less than it was before the vote unless the EU backs down.

Will the EU back down? On the face of it there is no reason for them to change their stance. If anything the chances of it are lessened after being told No by Greece (I was very surprised even the regions dominated by tourism were such strong No supporters). The quality of German rhetoric appears unchanged but the volume of their rhetoric does appear to have been turned down this morning whilst that coming from the French appears to be turned up. The French / German interface is the point to now carefully watch for clues towards EU compromise. Though I can’t for the life of me see why negotiations now stand more success just because the Greek Turkeys have voted for Christmas.

So now I wonder if the price recovery we see is totally a reflection of discounting good Greek news or encompasses anything else. But I can't see it (what with China shakedowns and oil tanking)  other than fighting a fickle short term positioning. That positioning is now most probably set for yet another swing as German hardline attitudes are reaffirmed indicating that, despite what Tsipras is saying, his potency has been reduced after the Varousectomy and he  is now firing blanks as far as the EU negotiators are concerned. The Jaffa of Athens.

So perhaps it is best to play the game that has seen us fare best throughout the whole Greek debate. Fade expectations and expectations now appear to be for a deal. This week's price action already looks like last week's.


theta said...

"I was very surprised even the regions dominated by tourism were such strong No supporters"

Tourism hotspots are the ones to lose the least from Grexit. They may even benefit on an absolute, not only relative, basis from looser taxation that allows them to pocket hard currency in cash from tourists and declare less (and anyway pay less drachma taxes).

theta said...

"the Greek Turkeys have voted for Christmas"
Shouldn't that be "against" Christmas?

Leftback said...

Peston = knob.

Tsipras in good shape here, this is effectively a new and stronger mandate and he can still play the Russia card. This has been badly misplayed by the Germans, who spend too much time reading their own electoral mood and not that of Greece.

I suspect maturity extension is the main ingredient of the fudge being concocted. After all, it worked for Germany after WW2.

Polemic said...

theta - No surely they have just voted to have their economic throats cut by the EU?

LB - Having s stronger mandate to demand something the creditors have spent the last 5 months refusing to give him doesn't seem like progress to me. Guaranteed intransigence more like. Yes re the Russian card, When he insists he will have a deal in 48hrs perhaps we are looking the wrong way? And yes to Peston.

theta said...

I interpreted it the other way: turkeys are asked to vote for xmas (the actual question of the referendum), they vote no (hoping for a better deal), xmas comes anyway and with worse terms for them. Semantics I suppose.

Polemic said...

Theta . I think the semantics are just that the Greeks voted and think they will be sitting AT the Christmas table.. Not On it.
Cheers Pol.

theta said...

I see, thanks

Anonymous said...

"Having a stronger mandate to demand something the creditors have spent the last 5 months refusing to give him doesn't seem like progress to me."

Unless the game is actually Chicken (

charles said...

A) Tsalakotos is NOT "much more pro EU". see

B) the real goal of the referendum for Tsipras was to get legitimacy to use emergency powers from the Greek constitution together with the president (hence the meeting will all party members and the president)

C) Varoufakis is not the right person when the going gets tough. He talks too much (plans for Grexit/ IOU / Euro banknote printing whatever must stay secrets) and is too soft with Europe.

Polemic said...

Thanks Charles