The Battle For Greece Is Not Over

The Real Battle Over Greece Still Lies Ahead

The agreement allows Greece to lower previously agreed targets on reaching a primary budget surplus. In return, it will refrain from unilateral actions that may jeopardize fiscal targets and will abandon plans to use about 11 billion euros ($12.5 billion) in leftover European bank support funds to help restart the Greek economy. Sakellaridis acknowledged that marks a turnaround from a previous target.

Finance ministers will hold a conference call Tuesday to discuss the Greek response, after which the deal, if approved, will be put to national parliaments next week. Austria’s Hans Joerg Schelling said that a new Eurogroup meeting will be called “immediately” if the list of measures is deemed insufficient. Greece’s Yanis Varoufakis said he was confident his counterparts will approve his government’s measures, or else “this agreement is dead and buried.”

The breakthrough removes the threat of the ECB pulling the plug on the nation’s banks, a prospect that would have risked Greece crashing out of the euro. Capital controls are now out of the question, according to a euro-area official. Deposit withdrawals from Greek banks reached 20 billion euros since December.

 My view:

The Greeks, and by extension the Eurozone, received a temporary reprieve from financial calamity on Friday.  The neo-marxists of Syriza may enjoy a temporary victory for a few months as financing measures kick in keeping the government liquid and functional.  What will be more telling in the June to August time-frame is whether this was a band-aid to allow Greece to exit the Euro and transition to the Drachma or not. 

The Euro common currency project is flawed and fragile.  Its very core is hollow and prone to disruption as sovereign states like Greece and Portugal look after their own interests by borrowing sums that are impossible to repay to support their economies, while Germany enjoys an artificially low currency that allows its export machine to flourish.

In a sense, Germany has completed its domination of Europe as it has desired for all these years. Now, over the next few months, it will be telling to see whether this dream is a utopia or purgatory for the non-German members.

While we expect gold to provide lackluster performance until the crisis grows nearer, we remain mindful, that it remains the sole currency that is without counter party claims.  In a fiat currency world, gold still shines as a beacon for those of us who refuse to believe the logical fallacy that a debt problem can be resolved with even more debt.