Bundestag kick starts the next episode of the Greek tragedy

A view of the plenary chamber, German Bundestag.

It’s quite astonishing to watch the German Parliament, the Bundestag, voting on Friday 30 November, with the overwhelming majority of 473 deputies in 584 present, saying yes to a third in a row aid programme for Greece, while all the major media insist, that the public opinion in this country is against any help Berlin should or could offer to Athens. This obvious discrepancy, between political reality and the anti-Greek media “ideological construction”, means that either almost every German deputy does not care much about his or her re-election, an allegation that cannot be true for any politician in the world, or what?

The answer to this “what” is probably the same all over the civilised world, where a good part of major media, printed or electronic, report more “truths” than the one based on facts. Or probably, is it true that the political elite of Germany serve other interests than the long-term welfare of their compatriots?

Given that the right answer to the last question cannot be yes, in more or less normal political circumstances, it must be the media industry which has to be held responsible for the false impression, about what the average German thinks on Greece. True, the German taxpayers hates to pay more taxes to support the “lazy” southerners. It seems however that the majority of voters in this country are convinced for two things. First, they intuitively know that the real cost in actually outgoing money to keep Greece in the Eurozone is negligible, and that the large percentage of aid consists of guarantees, which may cost nothing at the end.

In relation to this they also know for sure that Greece, despite that it has gone bankrupt three times in the past two centuries, it has repaid all its debts to the last cent. Secondly, it is more than certain that the majority of Germans prefer to keep Greece in the single money zone, not only because the cost of a Grexit (Greek exit from Eurozone) may be larger. All well-educated Germans have also an emotional conviction, that modern Europe would be immensely poorer without its direct references to the perennial Greek values of rationalism and democracy, principles that have given the western world a sense of legitimacy for precedence.

Lower Greek debt

Now coming back to earth this vote in the Bundestag, opens the way for the application of the third Memorandum of Understanding (MoU), Greece is to sign in mid-December with the troika of its creditors/auditors, comprising the European Commission, the European Central Bank and the International Monetary Fund. The new MoU provides for a package of more loans and other facilities. The initial disbursement would be of a total amount of €43.7 billion, €34.4 billion of which will be disbursed in December. The remainder will be paid in three sub-tranches in the first quarter of 2013 and will be linked to the implementation of agreed “milestone” actions by the Greek government.

Before any disbursement is released however, on the insistence of the IMF, Eurozone, through its European Financial Stability Facility/European Stability Mechanism has to buy back Greek debt. The buy-back should cover debt paper of a nominal value of at least €30 billion, while the real price to be paid should not exceed €10 billion or something around it. The idea is that holders of Greek bonds may accept to sell them at current prices, presently not exceeding 30% of nominal values in the secondary market.

This operation will be conducted because IMF insisted that new targets for the Greek debt level have to be established, with a figure for the debt-to-GDP ratio of 124% in 2020, to decline to substantially below 110% in 2022 and continue falling significantly thereafter. If those new targets are not served with today’s action, the IMF would consider the Greek debt unsustainable and therefore the Fund cannot go on participating in the troika.

To avoid this tragedy, Eurozone decided to proceed to this buy back of Greek debt in the first ten days of December. The operation is expected to star on Monday 3 December and will last for one week. Athens will kick-start the auction, by issuing an invitation to private debt holders, asking them to participate voluntarily and offer for sale the bonds they hold. Information from the Greek capital says that those Greek bonds are of a total nominal value of €60 billion, with half of them held by Greek agents, of whom the banks account for €17 billion. Markets will be holding their breath until the exercise is concluded successfully.

A view of the plenary chamber, German Bundestag/Unger