Dimitris Rapidis

After an all-night session and a lot of drama, the Greek Parliament voted in favor of the third bailout deal. Amid fierce debates, personal accusations, complaints against Zoe Konstantopoulou, the President of the Parliament, for impeding the process, and a deeper rupture inside Syriza party, Greek Minister of Finance Tsakalotos is now negotiating -or better delivering- the outcome of the voting and expects from its counterparts the first tranche of around 24 billion euros to be dispatched to Greece.

The majority of Eurozone leaders have welcome the result and stated that Greece is on the right path. For that reason, they added, Greece should be shown solidarity and support. The implementation of the program and the firm commitment of the Greek government to make this bailout succeed have been received with content by Eurozone leading figures.

The Greek government has completely adjusted its program and priorities towards the successful voting of the bailout, having left behind a party in full unrest. 42 Syriza MPs voted against or abstain from voting yesterday, thus widening the gap between the Tsipras team and those supporting an alternative route. In this respect, there are many questions on the next moves Alexis Tsipras will choose to follow. Will a confidence vote be brought to the Parliament after August 20? Will that be a call for elections? Will the PM decide to move on under the current fragile balances, and wait until October (i.e. second phase of voting and possible discussion of debt restructure/relief) so that it can capitalize its work so far, given also the support media blatantly show to Alexis Tsipras despite growing social and political grievances? Each one of these options is open for the moment.

Fact No 1: The Bridge Loan

The bridge loan is what Germany’s Minister of Finance Schauble has proposed. The draft of the loan has been delivered to the Greek government, despite unofficial statements for the opposite. The draft was already prepared, even before the Greek voting yesterday, and it was just a matter of time for Germany to put it in the table. Why proposing this intermediate plan? Because despite positive and supportive statements for the effort the Greek government has put to the bailout deal since July 12, Europeans know that this deal is truly harsh and really hard to get implemented by the Greek authorities. So they keep a second door open, and if Minister Tsakalotos is convincing during today’s Eurogroup, this plan will be abandoned and Greece will receive the fist tranche of the package destined to recapitalise the banks and pay ECB bonds in August 20.

Fact No 2: No Debt Haircut

Despite statements, especially from the French Minister of Finance Sapin, that the request of the Greek side for re-evaluation of its sovereign debt is planned to be discussed in October, it is highly unlikely that this discussion will take place. As we have clearly stressed out in a previous post, elections in Spain, Portugal and Ireland, expected in autumn, are going to block such a delicate issue. All three countries have unsustainable sovereign debts, and considering the fact that France and Italy are also questioning the viability of their own debts, Eurozone is not going to trigger such a tricky debate. In addition to that, there is another sensitive part in the whole thing: debt restructure or haircut, if finally done, will be coupled with possible bail-in or it would just mean extension of debt maturity in the next 40-50 years. This practically means nothing for Greece, as nominal cut would not signify a fresh restart for the local economy and, hence, would not create a more trusted business environment that could incite investments and long-term financial projects.

Fact No 3: What is going on with the IMF?

The complexity of the Greek case is further intensified when the IMF is included in the discussion. The Fund has made its voice clear, repeatedly pointing out that without debt restructure, there is no way to participate in the third bailout. Here there is another factor that could be equally problematic for Greece: Schauble stated yesterday that without IMF participation in the program, Eurozone should really think of putting forth a bridge loan, and then discuss again how the IMF can get involved later. However likely or not this might sound, it is reality. At the end of the day, Greece might be left with the bailout’s fiscal side burdens in the one hand, and the insecurity of the bridge loan on the other, waiting for Eurozone and the IMF to finally decide on the financial side of the bailout, causing more instability and panic in the Greek political system.

To contact the author Dimitris Rapidis:

Email: rapidisdim@gmail.com

Twitter: @rapidis

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  1. Saudi Arabia already in crisis.

    Expert assessment of Academy of Geopolitics.

    The budget deficit of Saudi Arabia can reach 20% of GDP. The country for the first time for the last eight years started borrowing money in the financial markets. One of bonded loans was placed this week. But experts believe that the saved-up reserves to the kingdom will last still for a long time, and Riyadh won’t refuse the policy of strengthening of oil export. This week Saudi Arabia placed state bonds for 20 billion reals ($5,3 billion). It is the second loan for this summer — the size June made 15 billion reals ($4 billion). The kingdom can attract $27 billion by the end of the current year. Money was necessary for saudita because of double falling of prices of oil, receipts from which export form almost all income of the country. In 2015 the budget was under construction of calculation of price of oil in $105 for barrel. We will remind that at Saudi Arabia the income from export of oil makes more than 90% of state revenues. Deficiency of the state budget of the country, according to experts of Academy, can make 20% of GDP this year. These are about $140 billion. For comparison: the budget deficit of Russia is predicted in the current year of 3,4% of GDP, or about $40 billion. Saudi Arabia closed the arisen hole at the expense of an expenditure of the saved-up reserves until recently. Since August, 2014 for maintenance of the public expenditures the kingdom spent $65 billion from the state reserves which $672 billion equal at the moment. It should be noted that the budgetary problems of Saudi Arabia turned out to be consequence her politicians in the oil market. The kingdom supports the excess offer of oil and low price level to keep the market share and as much as possible to complicate strengthening of production of slate oil in the USA. And here the IMF considers that to make real GDP growth next year — 2,7%. In many respects, it manage to achieve due to maintenance of high level of state expenses, including due to decumulation of reserves. $672 billion very impressive sum, but experience of other countries ( including Russia) shows that it can be spent very quickly, especially, if to support state expenses at the current level. Therefore the kingdom, most likely, will continue to borrow money in the market.For Russia it not the best signal. Present forecasts of the government assume an increase in prices for oil next year and if it isn’t, the budget will continue to be under pressure. And reserves at Russia are almost twice less, than at Saudi Arabia.

    Besides the country is under sanctions, and economic growth negative. All this does the Russian economy more sensitive to falling of oil quotations, than economy of the Saudi kingdom.

    Same strengthens positions of Riyadh at negotiations with Moscow on such sensitive topics as Syria, Iran and Palestine. Saudita do all new trade offers to the Kremlin that that refused support of the Syrian president Bashar Assad.

    At the negotiations of Foreign Ministers Adel al-Dzhubeyra and Sergey Lavrovcompleted the other day, it was talked, for example, of the contract for delivery of the Russian Iskander missile systems. Riyadh also offered investments into $10 billion. Thus, as experts of Academy of Geopolitics believe that the change on the Syrian question is quite possible. However, are for this purpose necessary not only the Saudi billions, but also positive shift in the Russian-American relations as in the Kremlin perceiveRiyadh only as the ally of Washington.

    Arayik Sargsyan, the President of Academy of Geopolitics, the academician, the Honourable Consul of Macedonia in Armenia.http://moskprf.ru/index.php?option=com_content&view=article&id=18861:saudovskaya-araviya-uzhe-v-krizise&catid=165:mir-v-kotorom-my-zhivem&Itemid=645&lang=ru

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