Machiavelli wrote:Merkel is a lame duck, IMHO. Her successor will take a much harder line toward bailouts.

Polls seem to suggest that while her party, the CDU/CSU is not losing much support, their coalition partners (the liberal and pro-market FDP) are being hammered. The Social Democrats are up a bit on the 2009 elections, but still would need coalition partners. The Greens are making the most of the gains and have been in partnership with the SPD before. The Left are not likely to make big gains, but could potentially have the balance of power, but relations between them and the SPD at national level are not great.

The election is not due until 2013. Seeing as the government looks likely to lose, and the smaller partner are facing oblivion, an election is very unlikely to be called early. And Frau Merkel is still popular within her own party and it's Catholic partner. While the SPD are being the opposition at the moment, I can't see them being that much more nationalistic over bailouts.

However, when it comes to a change of government, surely you have been looking more at Italy and France. Berlusconi is wobbling again, and the Socialists seem to have a good candidate to put up against Sarko.

Machiavelli wrote:Ahem. As I was saying....

Well, yes, on the confined point that Greece's PASOK government will 'fall' and that Papandreous will no longer PM you were right. Ish.

But it was not to the end that you said:

Machiavelli / Nostradamus wrote:Endgame is well underway. Upcoming events: Greek referendum fails (unless the Greek government falls first, six of one, half dozen of the other);

Now, that suggests to me that you think that the government falling would have the same outcome as a 'No' in the referendum. In reality, what is happening is that Venezelos will have a parliamentary mandate to proceed without a referendum and with an election to be held in 4 months' time. So the outcome is not quite the same thing as what you were suggesting.

Will Spain, Portugal and Italy ask for haircuts? Possibly, but I doubt it, not all of them. And France nationalising it's banks? Let us see. Do you have a date by when these will happen?

...and why should anyone think they won't take a loss on Italy and Spain? For that matter, why should anyone think Greece will come anywhere close to their budget reduction requirements? They'll lie--convincingly at times--and keep spending until the last Euro is gone.

So, do you have dates by when your predictions will come to pass?

Why are you so focused on dates, Dan? I can't say--much depends on how much of their national treasure the Germans are willing to throw down the Euro hole before they pull the plug. It matters not--the Euro periphery is insolvent, and the core is rapidly becoming so. The Titanic has struck the iceberg and it's going down, but you want to quibble over whether it will take one hour or three. Rearrange some deck chairs and listen to the pretty music, Dan--it'll make you feel better.

Because I like to compare your predictions with reality. Perverse, I know.

Here is my fifty cents. For two years Germany IMF ECB investors, and those low life credit raters (moodys S&P) have been stabbing Greece in a very slow and agonising death.They knew before and they know now that its impossible for the Greeks to repay. The Greeks under Papandreou (no S here guys) have adopted unbelievable austerity measure that no German or british would ever imagine. I believe one german politician recently said that had those measures being adopted in G they would have the same riots.

Papandreou said two important things in his parliamentary speech. The referendum was a way for a) to force the New Democracy party who has been playing dumb,refusing the eu deals and asking for elections, to commit to a deal and share the burden. b) to show to the world that control of a country's finance and politics must be exercised by the people and not investment cooperations (moodys).

Unfortunately for Papandreou, his own party went against him and threatened not to pass vote in the parliament. Papadreou had to step back, left the referendum aside, and accepted to resign in due time. The new democracy party still wanted elections. Papandreou did the honourable thing and will propably resign tonight in order to find a mutual;y accepted primenister to SIGN the deal GET the money and then go to elections (february). The latter unfortunately will be catastrphic. NO party will gain autonomy in the parliament hence the country most probably will become unstable. In sum New Democracy will ruin the country just because its leader doesnt want Papadreou to run the show!

As for the people none likes austerity but deep down they know euro is for the greater good. and i beleive Papadreous referendum was a way to force tthe people themselves to take a share in the burden.
An ingenious method but...

Yes the euro will fall. PAtching old wounds (70s) with new patches wont solve anything since the system is broken from the beginning.

I strongly suggest to watch the american doc "Inside Job" and the greek one "Debtocracy" (easily accessible on www.debtocracy.gr or youtube with english subs)

Apologies for my spelling. It's been a while since I went to Greece, and my recollections of how ou / ous / os endings in the Anglicised versions is hazy.

I can see why ND are being quiet, given that it was under them that the Goldman Sachs deal to pretend that deficits were only 3% was in operation. I expect that they don't want to remind the Greek people of that, and how it was received by the Eurozone.

A hung parliament in February will be difficult and a repeat of the current dealmaking, but it's a process that Greece will have to go through. The main issue is to have a stable government that can set the deal in motion. Whoever ends up in a coalition will have little choice but to accept the past.

As to whether the Euro will fail? I still don't know about that. The key is Italy rather than Greece, and Berlusconi is doing more to make things worse than Papandreou has done.

CYPEG

I believe one german politician recently said that had those measures being adopted in G they would have the same riots.

Yes. But the riots would be far better organized.

cypeg wrote: For two years Germany IMF ECB investors, and those low life credit raters (moodys S&P) have been stabbing Greece

Indeed. Stabbing them by giving them billions of Euros. I wish someone would stab me!

Not 'giving'. Lending with strings, while badmouthing.

Yes, capitalists should lend money without any preconditions. The nerve!

There's a lot of focus on this leader or that leader and which government will fall, but at the end of the day, isn't this really a crisis of debt and living beyond one's means? Austerity isn't fun no matter who is in charge. But I don't see another option.

Well, government lending is not always 'capitalist' and the conditions are sometimes political rather than economical...

There is more to it than simple 'living beyond your means' arguments. Being in debt, and increasing that debt, is not necessarily a problem per se. The terms of that debt, and changes to those terms, can have a great effect. The main problem is the cost of borrowing, and in that case it's bond rates (and at one remove, the yeild rates of traded bonds). Market perception affects those rates, and confidence is a large factor. If investors see a floundering leadership, as is the case in Greece and Italy, theywill have less confidence. With a stable leadership, even if the actual policies are very similar, confidence would return.

Markets do not like uncertainty at times like these. Elections cause uncertainty, especially where it's likely to end up without one party having a clear majority.

I agree that austerity is no fun, and that the solutions for the PIIGS will include a hefty chunk of it. But governments still rely on consent, and imposing austerity - especially if as a result of external pressure - is never going to be popular. So democracy makes things a bit messy. Equally, in countries where for years it's been seen as ok to shave on taxes or pay the odd backhander, it's going to be difficult for the people involved (often people in business and with some money) to accept the blame and the bill. Tax rises and stricter enforcement are also a big part of it too.

However, there's a side effect to spending cuts and tax increases, which is to affect economic growth. And markets also react badly when growth falls. So there will always be a debate about how fast and how deeps spending cuts/tax rises should go as well as who ends up paying. The debate itself causes uncertainty. Once a path is set, even if it's not the ideal one, confidence can return.

rickyp wrote:CYPEG

I believe one german politician recently said that had those measures being adopted in G they would have the same riots.

Yes. But the riots would be far better organized.

Hah! And they'd end at 5pm. Sharp!

Here it comes: from Reuters.