Given the Australian Budget overnight I didn’t have time to spend on Europe’s events this morning. However there have been some important developments so I thought I would spend a minute or two highlighting what is going on.
As I explained yesterday Greece’s New Democracy leader has already passed on trying to form a government and it is now the responsibility of the leftist Alexis Tsipras, leader of SYRIZA, to attempt to form a coalition. Alexis’s party members appears to have been creating quite a stir with some very “interesting” comments about their intentions for the banking system:
Dimitris Stratoulis, newly elected MP and member of left-wing SYRIZA, the party that currently leads exploratory talks to form a coalition government, shocked Greeks on Tuesday morning when he spoke of “utilization” of citizens’ bank deposits for development.
Speaking to TO VIMA FM, Stratoulis said that when SYRIZA will come to power, it will nationalize banks and ‘seize’ people’s deposits and use them for developments.
Stratoulis: When a left government emerges, we will guarantee citizens’ bank deposits through the public control of the banks.
Journalist: Will you seize them [deposits]?
Stratoulis: We will not seize them. On the contrary, we will utilize them together with the banks assets for development and production reconstruction of our country. Banks assets and citizens’ deposits are used to increase the profits of the shareholders of the banks. Shouldn’t they be given for markets cash flow, for loans to small and medium enterprises, for loans to the people to buy real estate and consumers’ loans
Mr Stratoulis later tried to clarify his position, stating that he was in fact framing his “deposits” in the context of capital controls but bank stocks took a battering anyway. On top of his members comments, Alexis Tsipras himself certainly wasn’t helping European confidence as he laid out his plans for a future Greek coalition:
“The popular verdict clearly renders the bailout deal null” Alexis Tsipras, leader of left-wing SYRIZA, said during a press conference shortly after he received the mandate to form the next government of Greece.
Saying that “3 million voters rejected the austerity-bailout”, Tsipras revealed the his party’s conditions for future government coalitions:
1. Immediate annulment of the austerity measures, especially those concerning wages and pensions cuts
2. Annulment of austerity programme provisions that exterminate workers’ rights.
3. Moratorium for the debt repayment.
4. Immediate changes to election law [50-seats bonus] and annulment of the law protecting ministers from being accountable.
5. Public control of the banks and immediate release of the Blackrock report.
6. Establishment of an international committee to audit the public debt.
7. Cooperation in European level.
“The crisis is not Greek, it is European,” he said.
None of that sat at all well with the other members of parliament leading to some tit-for-tat politicking:
Tsipras also asked ND leader Antonis Samaras and PASOK’s Evangelos Venizelos to write to the EU and IMF to inform Greece’s lenders that their written commitment to abide by the terms of the bailout could no longer stand because of the election result. This prompted Samaras to accuse Tsipras of risking Greece’s membership of the eurozone.
“Mr Tsipras, with his statements Wednesday, is doing everything possible not to form a government,” Samaras said, adding that the leftist was asking him to “put my signature to the destruction of Greece.”
The conservative leader said his party would be prepared to back a minority government “as long as it secures the country’s position in the eurozone and its national interest.” But, he said, the leftist leader’s statement left no doubt “that he has no intention of safeguarding Greece’s European identity and future” and revealed “unbelievable arrogance.”
Venizelos issued a statement saying that his position on keeping Greece in the euro was non-negotiable. Tsipras met Tuesday with Democratic Left leader Fotis Kouvelis, who said he would support SYRIZA if it could form a majority government. The Ecologist Greens, however, rejected the leftists’ overtures, arguing that SYRIZA did not have a clear plan for exiting the crisis.
SYRZIA has stated that it will take the full 3 days in an attempt to form a coalition, but fortunately for the rest of Europe, at least in the short term, it appears Alexis Tsipras has little chance of getting there:
The leader of Coalition of the Radical Left (SYRIZA) Alexis Tsipras is due to meet the heads of PASOK and New Democracy on Wednesday but his slim chances of forming a unity government seem to have disappeared and Greece is likely to hold new elections next month.
Tsipras spent Tuesday, the first of three days he is permitted to try to form a government, in talks with leftist parties but had mixed success in convincing them to support his effort to form an administration that would challenge the terms of Greece’s bailout. However, the SYRIZA leader’s decision to set out certain terms for any cooperation, including the rejection of the loan deal with the European Union and the International Monetary Fund, prompted a strong reaction from PASOK and New Democracy, which made it clear that there is hardly any ground for agreement.
The gauntlet will next be handed to PASOK, but given New Democracy has already passed on the idea it seems very likely that Greece is headed for new elections. The question now is obviously who is going to pickup the votes second round through given that only sitting parties can take part in the election. The far Left and Right are telling people what they want to hear, no matter how dangerous the result, but the outcome is less than secure at this time. The obvious question is what happens if either the Left or Right gain in strength at the expense of the centre.
Greece, however, wasn’t the only point of concern overnight:
The Spanish government conceded yesterday that it is planning a state rescue of Bankia, with the details to be unveiled on Friday.
Spain’s economy minister Luis de Guindos said depositors should not flee the bank, but markets are now expecting a bailout to the tune of €7-10bn – though analysts say it is not clear if that will plug the gap caused by a legacy of toxic property loans.
The group that owns Bankia, BFA, has already received a €4.5bn cash injection, but Bankia itself – which is a grouping of local savings banks – avoided a direct rescue and instead floated in Spain last summer after convincing retail investors to buy its stock.
Any bailout is likely to involve a change in ownership structure between BFA and Bankia as well as a management overhaul. In its latest results, BFA claimed that its core capital was 8.2 per cent – just below the nine per cent regulatory minimum.
But UBS analysts point out: “BFA still values Bankia, in its individual accounts, at its book value (Bankia trades on 0.3 times book value), listed stakes (Mapfre, NH, Indra) are not fully marked to market and we estimate further provisions could be required to increase coverage of repossessed real estate assets above the current 50 per cent given land exposure.”
That means a rescue of the group could balloon beyond current estimates, the analysts suggest.
So I guess we’ll now learn the true extent of the issues with the Spanish banks balance-sheets. I won’t be surprised to see some serious losses “suddenly” appear now it is the taxpayers responsibility to pick up the tab.