Greek Cuts Approved
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02/13/12

It might as well have been Nancy Pelosi telling the Greek parliament to vote for the austerity package.  She famously told the U.S. House to pass health care legislation “so that you can find out what is in it” in the spring of 2010  The problem is the Greek’s know what is in the legislation they passed last night.

It is more people being unemployed, when they already have 20.9% unemployment and half of all young people are jobless.  It’s a 22% cut in the minimum wage.  It is 15,000 public sector job cuts immediately with 135,000 more over the next three years.

What the parliament didn’t do is address the $430 million dollars cut that was supposed to come out of pensions.  The parliament didn’t vote on these cuts.  They were not endorsed by the coalition cabinet.  Prime Minister Lucas Papademos has three days to meet with his cabinet to specify these cuts.

The Eurozone Finance Ministers are meeting on Wednesday and will require these cuts to endorse the austerity plan.  Greece continues to drag their feet.  They are making progress, but the finance ministers and other eurozone leaders said last week that all the cuts had to be passed by the Greek parliament and endorsed by all political parties before more money would be advanced.

Again, the Greek government is going to the Eurozone Finance Minister’s meeting with their hat in hand, but without full implementation.  Greece is going to have elections in April.  They need bail-out funds by March 20 when $19 billion dollars worth of bonds come due.  If they cannot make these payments, there would be a default.  This would throw the eurozone into chaos.  Other bond rates would spike and the euro would plunge in value.

There were riots around the country yesterday.  Authorities report that about 100 people were injured, including 68 police officers.  In Athens, 150 shops were looted and 93 buildings were burned or seriously damaged.  Antonis Samaras is the leader of the conservative New Democracy party.  He is the front runner in the upcoming elections, and says he will not sign a document promising to carry out the budget cuts.

This is a key requirement of the eurozone.  Yesterday, he told the Greek parliament “I am calling on you to vote for the new loan agreement because I want to avoid falling into the abyss, to restore stability, so that we can have the possibility to negotiate and change the policy that is being imposed upon us today.”

Would that make you feel warm and fuzzy about handing over another $170 billion in bailout funds?  What is the end-game in Greece?  Nobody can see the light at the end of the tunnel yet.

Vassilis Korkidis is head of the Greek Commerce Confederation.  He told Reuters “Yesterday’s vote in the parliament may have saved the country temporarily from default, but the Greek economy is going bankrupt and country’s political system is failing.”

The Greek population is learning the hard truth of socialism.  When you run out of other people’s money the party is over.  As Winston Churchill said “The inherent vice of capitalism is the unequal sharing of the blessings.  The inherent blessing of socialism is the equal sharing of misery.”

The market has greeted the Greek vote as a green light to move higher.  The deal is not done yet.  Greece has not met all the conditions set by the troika.  The U.S. market is overbought.  It still seems like a good time to sell stocks into the strength.

The information presented in this newsletter is based on generally available news releases, corporate filings, current events, interviews and the editor’s opinions.  It may contain errors and you should not make investment decisions based solely on what you believe you have read here.  Do your own research, it is your money.  If you lose it, it is your responsibility, not ours or your grandmothers!  The editor may or may not have a position in any securities discussed.  The editor may have held a position in a security earlier, or in the future.

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