Was Greek Finance Minister Fired Because of a Slip of Tongue?

Friday, June 17, 2011

Faced with a debt crisis that will finally see no other cure than a Greek default Premier Georges Papandreou has reshuffled his cabinet on Friday, replacing Finance Minister George Papaconstantinou with Evengelos Venizelos, who held the post of Defence Minister until now.
According to Bloomberg G-Pap fired his finance minister in orer to quell a rebellion amongts his own party ranks.
But there may me more to the story. On Wednesday Ransquawk.com ran an alert saying "PAPACONSTANTINOU: GREECE CAN'T ACCESS MARKETS"
This alert, where Papaconstantinou effectively conceded Greece's default, was never followed by a backup story and was never seen on any other newswire.
It may have been exactly this slip of tongue sending Greek yields somewhere close to the moon. 30% yields are certainly designed to shut out Greece from capital markets. Or could you afford that?
The theory gets a little more weight from 2 contradictory statements from Berlin on Wednesday morning. First Berlin called for a delay of negotiations until September and only a few minutes later the German government came out saying that Greece could expect emergency help at any time.

While it is understandable that no finance minister in the world would survive an autonomous call of bankruptcy, his panicky replacement, the former defense minister, does not sound as he is up to the least wanted job in the world. Venizelos is a professor of constitutional law who earned his doctorate from the Sorbonne.
First statements from Venizelos, who is also seen as a possible future party leader, do not sound very encouraging as he seems to be less willing than his predecessor to reduce the size of the state in Greece. From a population of 11 million, some 700,000 Greeks are on the public payroll.
Concluding that Greece will remain on the lame side in terms of action as austerity measures make people revolting the country will stay in the limelight for the summer. Greece has only two last lenders of resort left: the EU and the IMF. Expect a couple of emergency billions more forked over to the Piraeus in the next 3 months to keep the show rolling. The breaking point of the Euro will only be delayed, but cannot be averted anymore.

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