EIB Inserts Drachma Clauses in Loans to Greek Firms; Troika-Backed Coalition has One-Seat Majority in Poll for May 6 Election

I keep pleading for someone, anyone to put Greece out of its misery. Greek voters have a chance on May 6th to do just that.

Please consider Greek ruling parties to get wafer-thin majority

The two main parties in Greece's ruling coalition would together get just a one-seat majority in parliament if elections were held now, a poll showed on Thursday, less than three weeks before the May 6 vote.

The conservative New Democracy and the Socialist PASOK party, which both back the government of technocrat Lucas Papademos, have seen their ratings drop over recent months because of the unpopular austerity measures imposed in return for a new EU/IMF bailout.

They would jointly win 37 percent of the vote or 151 of the 300 parliamentary seats - a result which would just allow them to renew their coalition, according to a survey by pollster Pulse for Pontiki newspaper.

Lovely Isn't It?

Somehow 37% of the vote will translate into a tad over 50% of the parliament, just enough for the Troika imposed clowns to retain control.

Deadlocked Elections

However, Evangelos Venizelos, the former Greek Finance minister most responsible for selling Greece down the river, now admits Elections are Leading to Deadlock

PASOK leader Evangelos Venizelos admitted on Saturday that next month�s elections are leading to a deadlock and promised to ask for an extension from two to three years for the application of the measures to collect an extra 11.6 billion euros.

In an interview with Skai television Venizelos said that �the elections ahead of us have our very existence at stake and should leave Greece standing and stable. Opinion polls are showing that we are heading for a deadlock. We need to go to a national agreement. The first place is a necessity for PASOK,� said the former Finance Minister.

He added that the crisis is far from over and the risk of exiting the eurozone and returning to the drachma still exists, as �Europe does not decide rationally.�

He said he will push for the measures for the collection of 11.6 billion euros in 2013 and 2014 to be spread across three years instead and stressed there will be no extra tax burden and no horizontal cut to pensions.

On Saturday former minister Stefanos Manos, the head of small liberal party Drasi, accused PASOK and New Democracy of ruining the country saying �they should not even get 20 percent between them.�

Manos has been elected on both New Democracy and PASOK tickets in the last 25 years.

EMU Fed Up With Greece (and Vice Versa)

Venizelos can push for the moon but that does not mean he is likely to get it. Brussels is plenty fed up with Greece. Moreover, any thinking Greek citizen should be fed up with Brussels.

Those of us waiting for the inevitable are fed up with the delays getting to the inevitable.

What if the Coalition Holds?

Inquiring minds note the IMF Sees Greece Deficit Over 7 Percent in 2012

The budget deficit this year will be greater than the Greek government has forecast, according to a report published on Tuesday by the International Monetary Fund, which also stresses the need for additional spending cuts of at least 15 billion euros (7.7 percent of gross domestic product) between now and 2017.

The IMF expects the deficit to end the year at 7.2 percent of GDP, up from a forecast for 6.7 percent as seen in the supplementary budget passed by the government in February. The Washington-based Fund�s report that accompanied the new memorandum Athens signed with its creditors in March had forecast a deficit of 7.3 percent.

The new government to emerge from the May 6 elections will have to decide on measures amounting to 11.6 billion euros for 2013 and 2014. However, yesterday�s report seems to suggest that the fiscal adjustment will continue well beyond 2014 and will have to rely almost exclusively on spending containment: From 48.9 percent of GDP, spending will have to go down to 41.2 percent of GDP by end-2017.

First Task of New Government is More Spending Cuts

Assuming the Troika sponsored coalition holds (or even if it doesn't), the first task of the new government will be more spending cuts, more firings, more pension cuts, and higher taxes.

Is that going to fly?

EIB Inserts Drachma Clauses in Loans to Greek Firms

While the election drama plays out, EIB Inserts Drachma Clauses in Loans to Greek Firms in preparation for a hard default and Greek return to the drachma.

The European Investment Bank is hedging itself against a Greek exit from the eurozone by inserting drachma clauses in the loan deals it signs with Greek enterprises.

The first such deal was two weeks ago when the management of Public Power Corporation (PPC), the country�s electricity giant began negotiating with the EIB about a 70-million-euro loan to fund its new natural-gas-powered plant at Megalopoli in the Peloponnese.

The EIB proposed for the first time two new terms, one of them being the possible renegotiation of the agreement should Greece leave the eurozone or should the common currency area break up. The second was placing the agreement under British law, in case of any irregularities in the payback process.

Sources suggest that the bank has made it clear to the political leadership of the Finance Ministry that the whole of the new contracts for loans to Greek companies will have the so-called �drachma clauses� and will be under British law.

The EIB has committed itself to issuing loans of 600 million euros up to January 2013 to the Greek market, to climb to 1.4 billion euros by the end of 2015.

Laughable Clauses

Pray tell what good are clauses if there is a total default? The proper course of action is to prepare for the inevitable and stop making loans to Greece at all.

Moreover, the proper course of action is for every Greek citizen to pull all of their money out of Greek banks immediately.

Greece is going down, and going down soon. It makes no sense to pretend otherwise.

Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com
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