Greece's Renege Stance Versus Permanent Troika Monitors (NBG, GREK)

The ‘deal’ on Greece has been pushed back yet again. The stance that Greece can try to renegotiate its deal down the road is a deal-breaker for the lenders, and the lender’s desire to set up a permanent Troika as adult supervision is not going to be well received by the Greeks.

What is interesting is that Greece’s bank ADR is up while the Greek ETF is down.  The ADR for National Bank of Greece (NYSE: NBG) is up 3.5% at $3.51 and the Global X FTSE Greece 20 ETF (NYSE: GREK) is down 2% at $17.22.

You know what United Nations peacekeepers do after wars have been broken up in countries?  They keep the peace, supposedly at least.  Now there is again talk that international lenders are demanding that a permanent Troika be established in Athens to monitor and govern how Greece spends and brings in money.  In short, this is called parental supervision.  This is the notion of a Troika (ECB, EU and IMF) to oversee and monitor financial developments in the nation’s treasury activity. 

This is not the first time that the talk of installing a permanent Troika has come up.  It probably will not be the last.  At issue is one simple task: How do you make the Greeks live up to their promises and commitments without permanent supervision? 

Many of the Greeks already believe that they can renegotiate their position after the next election and you know that some politicians will be running on the ‘break out of the shackles’ platform.  The New Democracy leader Samaras has even been referred to by the media as saying the equivalent of “Just go ahead and sign the bill and we will renegotiate after the elections in April.” 

With delay after delay, and with condition and after condition changing, one outcome looks very likely from an outsider’s point of view: Greece’s chance of a future in the Euro is dwindling rapidly.  Our take is that the Euro does not need Greece, and ultimately Greece does not need the Euro.  The nation’s exercise of turning in their printing presses and taking on a diluted Deutsche Mark (the Euro that is) has been a disaster.  Who do you think can have the more mechanized and organized workforce… Greece or Germany? 

One additional caveat that is floated out there is putting Greek bailout monies into an escrow account where funds can be withheld if Greece does not live up to its agreements.

This has become a serious mess.  It is also growing rather tiring for outsiders, and the Greeks are now sure to have years of further adjustments to their expectations.  It seems almost impossible to make financial math work in Greece.

Intrade currently has a market showing only a 32% chance that ANY country using the Euro will announce its intention to drop it by midnight on December 31, 2012.

JON C. OGG