Tuesday, July 7, 2015

Greeks vote No. What events will get them to Yes?


We get the feeling that in Greece if you had money in the bank, you voted Yes to the Greek referendum.

For those that voted No, what will it take to get to Yes?

If the Greek Government can't reach a bailout deal soon, the Greek people will be facing missed pension payments, an end to vital imports (including pharmaceuticals, food etc), and more closed ATMs, layoffs and empty store shelves.  Its almost like dire consequences need to be staring everyone in the face before the Greek Government agrees to another round of austerity and reforms. Its easier to vote No when you have food in the cupboard and some cash in your mattress, but that can change quickly.     

While Greek PM Tsipras "won" a vote of confidence from the Greek people, the rest of the EU is under pressure from their own constituents to stick to Greek austerity and reform plans.

A parallel to the No vote could be drawn to the 2008 financial crisis with the US TARP vote.  The US House of Representatives voted against TARP in September 2008, only to reverse course and vote for TARP a few days later after US Equity markets fell sharply.

It seems like economic consequences will need to become more dire before the Greek Government is forced to embrace another round of EU bailouts, reform and austerity.

Sometimes you have to see the consequences of the first vote before you agree to a bailout.  

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