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Preston Clive in Preston Clive - THE IRRITATED AMERICAN, Wielding The Digital Hatchet,

Greece: Heading For The Twilight Zone?

"Submitted for your consideration .  .  a powerless country, threatening others." ( © CBS TV) 

Most financial eyeballs are maniacally observing the politico-economic hardball being thwacked back and forth between Greece and the ECB and European member states. One one hand you have the new Greek "anti-austerity" cabinet acting like an election completely wipes away the past, rendering all previous agreements null and void.. and on the other you have the central bank of the Euro Zone which is trying to keep the tottering nation on a sound footing to repay its debt obligations and keep it on the required path of extreme restraint (austerity) whereby a path to fiscal health is at least viable.

The situation is rather wild: the process of electing one cabinet over another typically doesn't affect a government's past agreements; what it does do is affect that government's policy on issues in the future. 

However, with Greece and it's "anti-austerity" government in no mood to abide by previous conditions of their pre-existing bailout program, we're looking at an ex post facto attempt to revise the recovery framework out of a past (and in this case still existing) catastrophe. This reminds me of Germany in the years following WW1 with its aching desire to tear up the Treaty of Versailles. Germany of course had launched a costly and destructive Russo-European war which they lost, costing countless lives and endless fiscal and physical damage on the zone of Europe and Russia .  .  .  but when the reality of the reparations (which were indeed harsh, especially when it came to the shrinking of the country's borders) set in and the horrible inflation and depression of the 1920's turned the German mark less viable than toilet paper as currency, suddenly there appeared the person of Adolf Hitler who was a personification of the anger cultivated by the national sentiment of awful fiscal suffering and desire to break free. 

Similarly, thus cometh the Greek Anti-Austerity government. Of course we know that there is nothing similar between Hitler and the Greek cabinet aside from the desire to get away from a tough fiscal arrangement. But: we all know that the crisis in Greece has been unfolding with utter devastation over the past five years or so, almost six actually. Tracing back to 2009, we have seen riots, endless unemployment, government collapse, and repeated fear that the nation as a viable, sovereign entity will not have any future on this planet. The Greek people are naturally fearful of their future and wax to and fro between flat out terror and going completely apoplectic with rage. They want to, like every other human being on the face of the earth, have a world in which their children can grow up and have better opportunity than they have had.

In their desire to restructure their bailout terms and acquire more cash at the same time, the new government has been rubbing salt in some member state eyeballs. They need more money and they want to nullify payment terms with existing creditors and begin again. They have found a friend in French Finance Minister Sapin who proclaimed with equanimity,    

"First: we have to respect the Greek vote. A new government was chosen. It is not possible to ask this government to do exactly the same thing we asked from the previous government. Second: Greeks need to know that rules exist in Europe, in the relationship with the IMF, with the ECB, with the European Union. We all have to respect each other and there will be room for an agreement."

That's an awful friendly thing for him to say. Typically new governments can change the direction of future policy, not alter the present policy which was written into agreement prior to the swearing in of that government. 

The hardball played by both sides led to a proclamation from the Greeks that if they cannot find the assistance they require from Brussels, they will look elsewhere. A threat? Judge for yourself:

"What we want is a deal. But if there is no deal - hopefully (there will be) - and if we see that Germany remains rigid and wants to blow apart Europe, then we have the obligation to go to Plan B. Plan B is to get funding from another source," Kammenos told Greek television on an overnight show running into early Tuesday, as reported by Reuters.

"It could be the United States at best, it could be Russia, it could be China or other countries," he said.

At the present moment, the Greek stock market shot up 8% on the hopes that a deal will indeed be hammered out with Brussels tomorrow evening. That may be optimistic. Apparently, nerves are fraying badly in Brussels as comments fly from Twitter and unvetted through other press mechanisms. Greek creditors are getting annoyed by what they claim are outrageous claims popping out of Athens without any basis whatsoever. Check this out:

The carefully orchestrated dance between the new Greek government and its European creditors appeared to crack Tuesday, with top Brussels officials infuriated by what they see as wildly misleading claims coming from Athens.

Apparent claims from Athens officials to other governments suggesting that the U.S. Treasury supports a plan by the Syriza-led government to alleviate Greece’s debt, and that the European Commission president Jean-Claude Juncker either backed the plan or had an alternative himself, have enraged senior economy officials in Brussels.

A senior European official, who spoke on condition of anonymity, described the situation as “berserk” and said, “there is no plan.”

He added that the European Commission and U.S. Treasury were both perturbed at the way they had apparently been represented externally by Greek officials. A team from the U.S. Treasury led by Daleep Singh, deputy assistant secretary for Europe & Eurasia, was in Athens late last week.

“The Greeks are digging their own graves,” the EU official said.

God knows where all of this is headed, because at the moment it is just a flat out mess of public relations. The haughtiness of Greece is understandable internally--shades of Versailles and assuaging public panic and despair with a muscle flex here and there--but in terms of public relations with their creditors it borders on outrageous. 

Whether or not they will get the infusion required to float them into operation through to September is almost undoubtedly going to happen. It will squeak through, but it will happen since nobody wants to see the country sink.

If they were actually serious about turning to China or Russia .  .  .  we would formally enter the twilight zone in this unfolding drama. But I seriously think this is an empty threat on behalf of the Greek  to keep them from having to beg before their public. 

THE IRRITATED AMERICAN

Preston Clive

2/10/2015***