If Greece gets past its vote of no confidence this week, which still remains a very big if, it will have the opportunity to knock the ball back into the court of the European Union, according to Societe Generale analysts.The next big date for the Greek parliament will be its vote on the new set of austerity measures. That vote will provide an opportunity for a Greek “no,” a new election, and a set of austerity measures more to the liking of Greece’s conservative party.
From Societe Generale:
June 30 (TBC) – Greek Parliament expected to vote on MTFS: The Greek Parliament is expected to vote on €28bn of austerity measures. PM Papandreou’s holds a narrow 5-seat majority. This will be the critical event. If the Greek Parliament fails to agree a MTFS, the principle of conditionality that has been at the core of the EU/IMF solutions to date will be challenged. A No vote on the MTFS would likely trigger a general election, bringing the conservative opposition into power. It is important to note that the opposition is not against austerity per se, but wants to include tax cuts (including a flat tax corporate tax rate of 15%) to boost growth and aims to renegotiate the EU/IMF agreement. The most likely outcome from a No vote to Papandreou’s MTFS is thus a new government, but still one conducting austerity (similar to what happened in Portugal and Ireland). Holding an election, instating a new government and then passing a new Fiscal Strategy would take considerable time, and no doubt see new market turmoil.
The problem with this is that it will leave the European Union’s leadership, including Germany, having to give more money to Greece without confirmation that spending cuts will actually happen. Thus, the ball will be firmly in the EU’s court.
Thus far, all signals out of Germany suggest they would be unwilling to just give more money, on the assumption a new Greek government will get an austerity deal done. But it will be firmly her and the rest of the EU leadership’s choice between unruly default and kicking the can.
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