Greece Agrees to New Bailout Deal, But Signs Its Death Warrant

Early this morning the Greek government agreed in principle to an €80 billion bailout with creditors. The deal eases any immediate concerns over a potential Grexit. But the outcome of this long running saga is far from certain.

Athens must now vote through a raft of unpopular reforms in Parliament by Wednesday. Should the deal pass, it’ll be one of the most extraordinary political backflips in recent memory.

To call this a humiliating capitulation would be generous. This is one of the most blatant about face decisions in European politics.

The worst aspect of the deal isn’t even the shame that comes from surrendering to European authorities.

Not a week ago, Greece flatly rejected any compromise over a bailout. Now they’ve accepted terms far more punishing than any before it.

The government believed they had the upper hand in negotiations. Now they’re choking on their own hubris.

That referendum from a week ago? It means nothing now. The Greek people voted no to austerity. And what do they get in return from their government?

They get something worse than austerity: slavery.

But at least now we know why finance minister Yanis Varoufakis had to go following the referendum. He says he quit, but he was kicked out.

The government made him the sacrificial lamb in the negotiations. His removal led to renewed hopes over a bailout agreement.

Varoufakis was an obstacle because he wouldn’t agree to put up with creditor demands. He knows the troika have no interest in restructuring Greece’s debts. Here’s what he had to say at the time:

This country must stop extending and pretending. We must stop talking on new loans pretending that we’ve solved the problem when we haven’t. [We have] made our debt even less sustainable on conditions of further austerity that further shrinks the economy. [And it] shifts the burden further onto the have-nots, creating a humanitarian crisis.’

He saw what was coming. And now it’s here. The game of extend and pretend is here to stay.

What does this mean?

Make no mistake; Greece, if it wasn’t already, is about to become a vassal state of the European Union. The EU isn’t a union of states upholding the institutional rights of its members. It’s a core of bullies, messing in the affairs of peripheral ‘servants’.

And that’s what Greece will become: a state without sovereignty.

The Greek government gave the keys to its state assets in return for nothing. Greece doesn’t benefit in any way from the terms of this bailout.

There’s no debt restructuring on the way. There’s no easing of punishing liquidity cuts. And there’s no end in sight to the capital controls that would allow people to access their savings.

Most importantly, there’s no relief for the Greek economy or its broken people.

Prime Minister Alexis Tspiras has handed over 25% of Greek GDP over to EU policymakers. Along with that, they’ve more or less given Brussels a quarter of their sovereignty.

Long live the European Union, with its “democratic” institutions…

The EU, meanwhile, is to become the new owner of some prized Greek assets.

A new, independent 50 billion euro fund is the base from which Greece will surrender its public assets. From airports; to key infrastructure and Greek banks; everything must go.

The banks are the real reward here for the EU and ECB.  Control the banks, and you control the nation.

That’s the new form of modern warfare after all. You don’t need tanks, or infantrymen. You don’t even need the threat of nuclear power. All you need is a pliant central bank (which Greece has) and control over its banking sector. Get that, and you control the rest of Greek society.

Will the agreement pass through European and Greek parliaments?

Greece and its creditors have agreed the deal in principle. But it still needs approval from both Eurozone and Greek parliaments.

The bailout is dependent on the Greek parliament approving pension and sales-tax reforms by Wednesday. They’ll also have to vote through a rule that would allow depositors to take losses.

The one hope for anti-austerity supporters is that Syriza doesn’t control the parliament. But the easy thing to do is to vote through the bailout terms. Like their European partners, they’ll choose to kick the can down the road.

Then there’s the issue of other Eurozone members. Not every government is keen on extending loans to Greece.

They shouldn’t prove too big a problem to handle. These are, after all, submissive governments. If Brussels says the deal is to their liking, the others will fall behind them.

That’s especially true for other indebted nations who are staring into their own economic abyss. The governments of Spain, Italy, Portugal and France are nervous for good reasons.

If Greece opted out of the Eurozone, these respective governments would have a lot of explaining to do. They’d be faced with the hard task of convincing voters that austerity is preferable to self-determination.

Now that Greece has capitulated, they won’t need to worry.

How the markets reacted

As expected, the markets reacted positively to the bailout agreement. The rally should extend throughout the day as global markets reopen.

The Euronext 100 finished 1.81% higher, while Germany’s DAX was up by 169 points, closing 1.49% higher.

The Down Jones ended 217 points higher, moving up 1.22%. The S&P 500 also rose, gaining 1.11% by the close of trade.

Asian markets missed out due to time zone differences, but they should continue their gains from yesterday.

The ASX finished 1.65% higher, finishing on 5,550 points. The Hang Seng and Nikkei 225 were up 1.28% and 1.43% respectively. The Shanghai Composite Index, on the other hand, remains in a rut. It was unmoved in trading yesterday.

The Greek deal isn’t likely to soothe investors in China when markets reopen either. Chinese investors have their own, home-made, issues contend with.

But global markets could rally throughout the week. That will certainly be the case if the bailout passes through parliament on Wednesday.

The markets got what they wanted in the end — a Greek compromise. All Greece had to do was give up its sovereignty, and its future.

Mat Spasic,

Contributor, Markets and Money


PS: A Grexit may have been avoided, but the threat of a major Chinese stock market crash remains all too real. Any Chinese share market decline will weigh heavily on Aussie markets. Investors are wary about the future of the ASX, and rightly so. Both China’s and Australia’s economic prospects look poor. That means the ASX will face several challenges in the coming month.

Markets and Money’s Vern Gowdie sees a major correction across the ASX in the future. Vern is the award-winning Founder of the Gowdie Family Wealth advisory service. He’s been ranked as one of Australia’s Top 50 financial planners. He believes we’re set for a catastrophic crash in stocks in the future. And he thinks the ASX could lose as much as 90% of its $1.8 trillion market cap.

Vern wants to help you avoid the coming wealth destruction. That’s why He’s written ‘Five Fatal Stocks You Must Sell Now’. In this free report, he’ll show you which five blue chip Aussie companies could destroy your portfolio — and you almost certainly own one of them. To find out how to download the report, click here.

Markets and Money offers an independent and critical perspective on the Australian and global investment markets. Slightly offbeat and far from institutional, Markets and Money delivers you straight-forward, humorous, and useful investment insights from a world wide network of analysts, contrarians, and successful investors.

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