The Dow rose 217 points yesterday, even though Greece missed a $500 mln. loan payment to the IMF.
And the country needs to come up with another $8 billion by 20 July, when it’s scheduled to pay back the principal it owes on bonds held by the ECB.
Greece reached an agreement with its creditors on Sunday night that would, in theory, allow it to tap further emergency loans. But in practice, there are two major stumbling blocks.
First, Greek Prime Minister Alexis Tsipras faces rebellion in Athens.
Many in his coalition government don’t like the terms of the latest deal. They’re already vowing to oppose it when it comes to a crucial vote in parliament today.
Second, Greece’s creditors need to come up with a ‘bridge loan’ to tide the country over until the details of its third emergency bailout can be worked out.
This is likely to be a bridge to nowhere…
A learning experience
We are writing this on the streets of the Pláka neighbourhood in the heart of Athens, with the Parthenon at our back and the Agora down below.
The sun is shining. It is getting hot.
On the opposite sidewalk, there is a tall, lean, and handsome waiter. He is a cross between George Clooney and Omar Sharif, with salted hair swept back from a fine-featured face.
He has found his calling. He stops middle-aged women. He chats with them. He invites them into the restaurant. Smiling broadly and suavely, he escorts them through the door — and turns them over to a plump colleague.
Down the street, two gypsy women — in long, dirty skirts — are smoking a joint. They pass it back and forth. When a suitable tourist approaches, they quickly put it away. They jump to their feet and offer to read palms.
You have no particular reason to care about what goes on in Greece. It is a tiny economy by global standards, with little impact on the rest of the world. And for the US, Greece’s importance is vanishingly small. Exports to Greece account for about 0.004% of US GDP.
But it is part of the Great Zombie War — if it doesn’t affect us directly, there are probably things we can learn from it.
Hero or traitor?
Tsipras came back to town yesterday and was greeted either as a hero or a traitor, depending on how you looked at it.
He is certainly a hero to international bankers. He has agreed to play their game by their rules. The deal he struck in Brussels will continue to shuffle money from lenders to borrowers and back to lenders — and all the zombies along the way.
But many of the zombies — not to mention the honest, hard-working citizens of the Hellenic Republic — see him as a traitor.
Hadn’t they just exercised their right as democratic citizens a week ago? Hadn’t they clearly expressed themselves? Didn’t they say to the bankers loud and clear: drop dead!
To fully understand the Greek front of the Great Zombie War you have to realise that this is mostly a battle between two zombie factions.
On the one side, there are the big, international zombies who want to continue to earn fees by lending money to bad credit risks. On the other side are the smaller local zombies, who hope to keep taking the money with no intention of ever giving it back.
‘The Greeks peaked in the time of Aristotle,’ said a companion at dinner. ‘It’s been downhill ever since.’
But you can’t accuse the Greeks of not being clever. They happily take the Northern Europeans’ money — whether from tourists or bankers. It’s all the same to them.
‘They’ve got a special retirement system in Greece, like your Social Security system,’ continued our friend.
‘If you are in a career that is considered “hazardous” you are allowed to retire with full benefits when you are only 53 years old.
‘And guess what they consider hazardous? All kinds of things…including cutting hair. They get so much money that we’ve seen three generations, all living on one retirement pension.’
We gave the man another ‘thank you’ and went off.
Greek zombies take to the streets
Last night, the retired hairdressers, along with the overpaid hewers of wood and carriers of water — the little local zombies — gathered in Syntagma Square to demonstrate their dissatisfaction with Tsipras and his government.
They claimed he had sold them out in Brussels.
Tomorrow, the remonstrations will continue with a 24-hour strike by civil servants.
The banks were originally supposed to be closed for a maximum of a week. Already, their doors have been barred for double that time.
Originally, they were closed to slow the outflow of deposits. Now, they are closed because they are broke.
That’s the problem with not being in charge of your currency: You can’t print more when you need it.
And if the voters desert Tsipras — or the bridge loan collapses — the Greeks may become desperate.
What a pity we had to leave, just when it was getting interesting!
For The Daily Reckoning, Australia