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Explaining the Greek Negotiations to Your Mother

Tiffany Notes Mom disc charm and chain
Photo: tiffany.com
Tiffany Notes Mom disc charm and chain

Another Greek “deadline” passes, with still no agreement on the private sector debt deal, or the terms for the 130 billion euro ($170 billion) bailout money.

And on the key negotiation — between the Greek politicians — there is still only noise about a “tentative” deal.

Whenever you despair of understanding the mess in Greece, try — as I have — to explain it to your mother.

Mom: “Robert, why doesn't Greece approve the austerity measures? It seems like it’s that or complete chaos.”

Me: “There's a big problem, Mom. The real negotiations aren't between the private debtholders and the Greeks, and the troika and the Greeks. The real negotiations are between the caretaker Greek government and the Greek political parties.”

Mom: “Don’t all the parties recognize that they have to approve these measures?”

Me: “They understand that they are under big pressure, but there's elections coming in April. The conservatives, the socialists, and the far-right parties are all vying to win the election, and they don't want to vote on anything that will not get them elected. And voting for austerity will not get them elected.”

Mom: “Surely they understand that the interests of the country have to come first.”

Me: “It gets down to politics, Mom. Imagine if the International Monetary Fund was negotiating with the U.S. to give us a loan, and it insisted on big austerity cuts. Cuts in Social Security, cuts in pensions, cuts in the minimum wage. Big cuts: In Greece they're talking about a 25 percent cut in the minimum wage, 35 percent cut in supplementary pensions, and closing hundreds of state-owned businesses. Thousands of jobs will be lost. Now imagine if that was happening here, and the Democrats and Republicans both had to sign off on the deal, a couple months before a presidential election. Do you think both parties would do that?”

Mom: “They can't even agree on extending the debt limit, but there really isn't any choice, is there?”

Me: “Sure there is. When push comes to shove, you could say that chaos is not any worse than what we have now, and maybe not worse than signing off on the austerity plans. It’s probably not true, but at least you have staked out a position.”

Mom: “That's a pretty big leap into the unknown, Robert.”

Indeed, but that's why Greek politicians are actively discussing a default, along with the rest of Europe. Bottom line: Resistance to a default seems to be waning.

Elsewhere:

1) German Chancellor Angela Merkel, meeting with French President Nicolas Sarkozy, said that there will be no Greek deal without meeting the troika terms.

2) Tax stimulus less likely? Greg Valliere from Potomac Research makes a good point about Friday's jobs report — it lessens chances of a payroll tax extension. “Prospects for getting a full-year payroll tax cut extension by Feb. 29 have slipped,” he writes.

3) IPO week: 10 IPOs price this week...Caesar's Entertainment, which owns Bally's, Caesars, Harrah's, and other casinos, is seeking to raise 1.8 million shares at $8 to $10 a share, pricing tonight for trade Tuesdsay.

4) China slowing? According to Bloomberg, China has seen the lowest Lunar New Year sales since 2009. The Lunar New Year is a major gift-giving period.

5) Earnings: Medical companies in focus:

Humana shares fall 3.6 percent after the health insurer lifted its prior forecast for 2012, though it remains below analysts’ estimates. The company raised its 2012 outlook by 10 cents to $7.50 to $7.70 a share, versus the Street’s $7.99 expectation. Humana reported a big rise in fourth-quarter earnings, in line with estimates, boosted by higher membership in its Medicare plans. The company expects a hike in membership for its Medicare Advantage plans, forecasting a 12 percent enrollment increase to 40,000 in 2012.

HCA Holdings soars 8.2 percent after the hospital operator declared a special $2 a share dividend and posted fourth-quarter earmings per share of nearly $3.50 above analysts’ expectations: $4.25 versus a 76 cents a share estimates. HCA’s results include a pretax gain of $3.13 a share from the company’s recent acquisition of a controlling interest in HealthONE, a Denver-area hospital system. Like other health-related companies, HCA faces pressure from tighter government budgets and consumers delaying hospital visits as they try to save money. On a same-facility basis, equivalent admissions raised 3.2 percent though revenue per admission declined 1 percent with fewer surgeries and Medicaid reductions.

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