Spanish Bond Yields Back Above 6%

Yield on the 10-year Spanish bond is up 22 basis points to 6.06%, having hit a high of 6.08%.

It’s Not Contagion

Expect to hear talk of “contagion” blaming problems in Greece as a spillover into Spain. However, the fact of the matter is Spain is in deep trouble no matter what happens to Greece.

Tsipras Plans to Nationalize Banks, Halt Additional Austerity Measures

Bloomberg reports Greek Leaders Given Bailout Ultimatum

Alexis Tsipras of Greece’s Syriza party squared off with political leaders before talks on forming a coalition, handing them an ultimatum to renounce support for the European Union-led rescue if they want to enter government.

Tsipras said he expected Antonis Samaras of New Democracy and Evangelos Venizelos, the former finance minister who leads the Pasok party, to send a letter to the EU revoking their written pledges to implement austerity measures by the time he meets them today to discuss a government alliance. Samaras and Venizelos rejected the request. Samaras said he was being asked “to put my signature to the destruction of Greece.”

No More Cuts

“The bailout parties no longer have a majority in parliament to vote for measures that plunder the country,” Tsipras told reporters. “There will be no 11 billion euros ($14 billion) of additional austerity measures; 150,000 jobs will not be cut.”

Tsipras said he aimed to link up with parties in a government that would nationalize banks, place a moratorium on debt payments and cancel the bailout and measures such as labor reforms and pension cuts. 

Samaras said that his party is prepared to support a minority government as long as it ensured Greece’s membership in the euro and its national interests.

Venizelos said Pasok’s proposal for a national unity government with the participation of all parties with a pro- European orientation was the only solution. Greece must remain “safely” within the euro while pursuing changes to the bailout accord to boost growth, he said.

Venizelos won’t accept the mandate if it is handed to him and will ask the president to call a meeting of political party leaders immediately, Proto Thema reported today, without saying how it got the information. That meeting will either decide to call new elections or form a national unity government, it said.

The group of EU, ECB and IMF officials known as the troika canceled a visit to Greece planned for the middle of May amid concerns the political turmoil could derail the rescue effort, the German newspaper Sueddeutsche Zeitung reported today, citing unidentified EU officials in Brussels.

“The mission has not been ‘canceled,’ as there has never been a fixed date for the mission,” commission spokesman Amadeu Altafaj said in an e-mail. “As soon as there is a government, there will be a mission.” The ECB declined to comment.

What is Tsipras’ Plan?

Alexis Tsipras simply has to know that none of what he demands is remotely compatible with Greece staying in the Eurozone, yet he does not call for Greece to leave the euro.

The reason is he would lose some support the moment he explicitly makes such a statement. Rather, he is saying all of the right things to win the next round of elections if he cannot work out a minority government now.

In contrast New Democracy leader Samaras is a wishy-washy clown who is determined to stay in the Euro at any and all costs while pledging to work on changes to Troika bailout conditions.

Given that no changes are acceptable to the Troika, Greece’s days in the Eurozone are numbered. It will be a good thing for Greece (albeit initially very painful), once they finally get the nerve to tell the Troika to go to hell.

Mike “Mish” Shedlock
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