Greek gamble

December 9, 2014

Greek Prime Minister Antonis Samaras smiles during a news conference with Egypt's President Abdel Fattah al-Sisi and Cyprus' President Nicos Anastasiades after their summit at the presidential palace in Cairo

The Greek government has taken a huge gamble, bringing forward by two months to next a week a parliamentary vote on a new president. Two further rounds of voting will be held before the year-end.

A super majority is required for the government’s pick so Prime Minister Antonis Samaras needs to secure the backing of about 25 lawmakers who are not in his coalition. If he falls short, he will be forced to call a snap election that opinion polls suggest left-wing anti-bailout Syriza would win.

The decision came after euro zone finance ministers said on Monday they were in favour of granting Greece its request for only a two-month extension to its bailout programme, a boost for Samaras who has been pushing for an early exit from the programme which is deeply unpopular in Greece. Nonetheless this is a big step into the unknown.

Nothing is certain but Samaras is likely to speak publicly today and may name his nomination for the presidency. He must clearly believe that now is his best chance and there are some two dozen independent lawmakers in play.

Syriza has recently taken a somewhat more moderate line but it is still avowed to abandon any cooperation with EU/IMF lenders and reverse years of austerity just as the economy returns to growth, a stance that could see it shut out of the markets and put it back to square one. That gives Greece’s euro zone peers a powerful incentive to help Samaras as much as they can.

Today’s Ecofin meeting of all 28 EU finance ministers is due to discuss Ukraine’s dire financing needs. They will also hear from the EU’s energy commissioner after Russia scrapped the South Stream pipeline project to supply gas to southern Europe without crossing Ukraine and instead named Turkey as its preferred partner for an alternative pipeline.

An International Monetary Fund mission will visit Kiev for nine days from today for talks with the new government regarding a $17 billion bailout programme. Near-penniless Kiev wants the next loan tranche, worth $2.7 billion, before the end of the year but the Fund wanted a government to be formed before holding talks on the payment. It has already received $4.6 billion in two chunks.

The next tranche of IMF cash cannot be paid until a budget for 2015 is ratified. New finance minister, U.S.-born Natalia Yaresko, said the cabinet would work to have a budget for 2015 adopted by the end of the year. Russia has been burning through its reserves to shore up the tumbling rouble and its central bank may increase interest rates sharply later this week to the same end. Kiev is in a far more parlous position. As of the end of November it was down to about $10 billion of foreign currency reserves, a vanishingly small number, and faces hefty up-front gas bills from Moscow.

Moscow and Kiev appear ready for another meeting of the “contact group” in the Belarussian capital Minsk this week in an attempt to resurrect the September ceasefire deal. But both sides continued to snipe at each other over ongoing violence in eastern Ukraine.

On the sidelines of the Ecofin, France has called a meeting to review faltering attempts by 11 of its members to agree on a financial transactions tax. EU diplomats told us on Monday that the 11 remain divided – over issues such as how to levy the tax and whether to include derivatives – a day before a self-imposed deadline to agree on its broad outlines, casting doubt on whether the levy can be implemented in early 2016. The plan, led by Germany and France but opposed by Britain, aims to make banks share the cost of cleaning up Europe’s debt and banking crisis.

British Prime Minister David Cameron is in Turkey meeting to meet President Tayyip Erdogan to discuss how to stop Britons crossing into Syria and Iraq to join up with Islamic State fighters via the Turkish border.

The British Retail Consortium reported overnight that a “Black Friday” shopping spree pushed retail sales growth to a three-month high in November – up 2.2 percent year-on-year.

German imports posted their steepest drop in almost two years in October, while exports from Europe’s largest economy also fell, trade data showed. Angela Merkel will address the annual congress of her CDU party today.

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