A swift series of announcements signaled the newly installed [far left Syriza] government would not back down from its anti-austerity pledges, setting it on course for a clash with European partners, led by Germany, which has said it will not renegotiate the aid package needed to help Greece pay its debts. Even before the first meeting of the new cabinet, ministers had hit the airwaves to reassure voters they would honor campaign pledges to roll back the tough economic policies imposed under Greece’s 240-billion-euro bailout program.
The planned sale of a 30 percent stake in Public Power Corporation of Greece (PPC), the country’s biggest utility, was halted while ministers pledged to raise pensions for those on low incomes and reinstate some fired public sector workers. . . .
Faced with the prospect of a Syriza win (and, doubtless, with memories of the recent crisis in Cyprus still fresh), some bank depositors had already decided that Greek banks were not the safe haven of choice:
Withdrawals from Greek banks exceeded 14 billion euros ($15.9 billion) in the run-up to the snap elections that catapulted the anti-bailout Syriza party to power, including 11 billion euros that were taken out in January, the person said. Between Jan. 19 and Jan. 23 outflows were greater than in May 2012, when Greece was on the brink of exiting the euro area.
And the stock market hasn’t exactly rejoiced either. The Financial Times:
Greek bank shares suffered their biggest falls on Wednesday as investors took fright over a looming liquidity crisis amid rising uncertainty over the government’s plan to renegotiate the country’s €240bn bailout… Piraeus, the country’s largest bank by assets, whose share price has halved over the past month, led the fallers as its market capitalisation plunged by 29 per cent. That was followed by National Bank of Greece falling by 28 per cent and Alpha Bank and Eurobank each plummeting by 22 per cent.
The declines represent a third consecutive day of double-digit losses for Greece’s biggest banks following Syriza’s election victory. They are set to tap the Greek central bank’s emergency liquidity assistance facility in order to replenish funds in the face of increased withdrawals by depositors and foreign banks’ reluctance to lend….
Over at the Daily Telegraph, it’s just like old times. Ambrose Evans-Pritchard’s column is topped by that familiar photograph of a lightning storm over the Acropolis and he’s forecasting dark days ahead:
Germany’s finance minister, Wolfgang Schäuble, said in Brussels that debt forgiveness for Greece is out of the question. “Anybody discussing a haircut just shows they don’t know what they are talking about.”
Mr Schäuble said he was sick of having to justify his rescue strategy. “We have given exceptional help to Greece. I must say emphatically that German taxpayers have handed over a great deal,” he said.
In a clear warning, he said the eurozone is now strong enough to withstand a major shock. “In contrast to 2010, the financial markets have faith in the eurozone. We face no risk of contagion, so nobody should think we can be put under pressure easily. We are relaxed,” he said.
Hubris, I note, is a Greek word.
Back to Evans Pritchard:
Officials in Berlin are irritated that Mr Tsipras [Syriza’s leader] has gone into coalition with the Independent Greeks, a viscerally anti-German party that seems to be spoiling for a cathartic showdown over Greece’s debt.
The Independent Greeks [ANEL] want Germany want to pay more in the way of reparations for the war. Oddly, that doesn’t play well in Germany.
So what now?
The best guess continues to be that some sort of deal will be cut. Most Greeks want to keep the euro. They know that a return to the drachma would wipe out the value of what remains of their savings. Added to that, the distrust that so many of them feel, quite understandably, for the institutions of the Greek state makes them want to be sure that Greece remains at the heart of Europe, that is to say the euro zone. At the same time Greeks want to see (often, but not always, for bad reasons) a significant relaxation in the austerity and reform program that has come with the bailouts, something that horrifies those who have not only handed Greece the money (it’s gone, Meine Damen und Herren), but who also dread the precedent that it would set elsewhere (starting with Spain, which also has an election this year).
Syriza must know that it will not get all that it wants from Greece’s creditors, but it must also be gambling, not unreasonably, that (after the requisite kabuki) those running the euro zone will go a long way to meeting Greece’s demands. The principle of irreversibility is central to the idea of both EU and euro zone. However “exceptional,” Greece’s departure from the monetary union (“Grexit”) would leave that principle badly battered if not necessarily shattered. More than that, there must, for all the tough talk, still be a real fear that Grexit might trigger a broader crisis, that it would be, so to speak, not another Bear Stearns, but a Lehman.
And then there’s the new Greek government’s Russia card . . .