Five to six votes, maybe 10 is all that stands between Greece agreeing to the latest austerity package and a temporary bailout and the country lurching towards default and a possible return of the GFC.
The Greek government has 155 members in the parliament, and a five seat majority. But according to media reports, some of those don’t much like the austerity package.
But there was good news overnight with reports that a number banks in France had reached some sort of deal to rollover some of the Greek debt they hold, but do so without triggering a default.
The market immediately anticipated other banks would follow the French lead.
All this is about the 12 billion euro fifth lot of cash from the EU and IMF, not the second bailout package which is contingent on the austerity package and associated asset sales being agreed to this week.
One should however remember the voting on America’s Tarp in late 2008 which was designed to help stabilise the country’s financial system after Lehman Brothers collapsed in mid-September.
The $US700 billion Tarp project was defeated on a Sunday night (US time) Congress by an unholy alliance between Republicans and conservative Democrats and it took the best part of a week to get the proposal back on track and approved.
Sharemarkets fell sharply over the five trading days after the defeat and money markets started freezing up.
But the program was approved and went on to be used to bail out banks, some insurers, car companies and other groups (the US will make a profit on the deal).
But it was eventually approved, just as a defeat of the austerity package in the Greek Parliament shouldn’t be taken as a headlong rush towards default.
But it will be difficult.
The vote will either come Tuesday night or late Wednesday morning, Greek time. Reports are a bit confused on the timing.
Respected Financial Times columnist and Associate Editor, Wolfgang Munchau says that he would have normally urged the Greek Parliament to vote for the package, but now has doubts, "Until last week, I would have said: definitely Yes. The country is running a large primary deficit.
"The austerity imposed by the EU and the IMF is mild compared with the austerity that would be required if the country were to be cut off from any source of external finance. A messy default would destabilise the global financial system and could force Greece to abandon the euro.
"Such an argument is vulnerable to relatively subtle shifts in circumstances.
"One such shift may have occurred last week, when EU and IMF negotiators imposed a new tranche of austerity. The measures included a cut in the tax-free allowance, and a tax levy of €100-€300 for the self-employed.
"The decision triggered angry protests in Athens. I see it as a political provocation and an act of economic vandalism. It could derail the entire crisis resolution process."
"Greek MPs are now facing the choice between a lie and a disaster. Considering what is at stake, the EU and the IMF should never have put Greece in that position."
A very good point from someone with a solid reputation as being a supporter of the EU and all things European.
But there will be a second vote on Thursday for enabling legislation that, if passed, will mean the 28 billion austerity package (and associated 50 billion in privatisations) will be put into law.
While lots of commentators are preaching doom and gloom, we should wait until the vote happens before deciding to line up with the lemmings and head for the nearest cliff.
But it will be close.
Media reports overnight suggest the political climate in Athens is rising and very delicate. The ruling Pasok party’s five vote majority has to hold.
The opportunistic opposition, which is responsible for the problems because of poor governance and administration, plus outright incompetence, will oppose the vote.
Werner Faymann, the Austrian Chancellor, said on Sunday he "can’t rule out" a Greek default and Wolfgang Schaeuble, the German finance minister, revealed that Europe is preparing "for the worst".
"We are doing everything we can to prevent a perilous escalation for Europe but must at the same time be prepared for the worst," Mr Schaeuble said in quotes in media reports in London.
"If things turn out differently than everyone expects that would of course be a major breakdown. But even in 2008, the world was able to take coordinated action against a global and unpredictable financial market crisis."
London reports also said the UK government is quietly pressuring the country’s big banks to volunteer to rollover some of their Greek debt (and take losses) to help underwrite the bailout.
Chinese premier Wen Jiabao yesterday promised that China would continue to buy European sovereign debt. Noting that it had just agreed to buy Hungarian bonds, he said: "That is China lending a helping hand to Hungary at a time when that country is in difficulty. We will do the same thing for other European countries.
"[Since the sovereign debt crisis,] China has actually increased the purchase of government bonds of some European countries and we have not cut back on our euro holdings."
And Greece’s deputy prime minister, Theodoros Pangalos, sought to shore up support, describing talk of Greece quitting the euro as "immense stupidity" in widely reported comments yesterday.
But the head of the Greek central bank wondered why the government hadn’t done more to chase down tax evaders.
