16 February 2015   Leave a comment

Greece will be negotiating with the troika today, and the outcome of these discussions remains unknown.  The fear within the troika is that any outcome that gives Greece significant relief will lead to “contagion.”  Contagion refers to a movement in other struggling countries (Spain, Italy, Portugal, Ireland, and, to some extent, France) to follow Greece in demanding relaxation from austerity. Right now, the governments of Spain, Portugal, and Ireland are publicly supporting a hard line, but there is substantial evidence that the publics in these countries are actually sympathetic to the Greek position.  Contagion also refers to the possibility of private bondholders of sovereign debt may become fearful of other countries refusing to pay back their bonds in full.  Fear is a difficult condition to measure accurately, so the bargaining position of the troika is somewhat problematic.

The talks between the Greeks and the troika collapsed after 4 hours as Greece rejected a proposal to request a six-month extension of its current arrangement.  The language after the collapse was acrimonious, and money is fleeing from Greece as depositors in Greek banks fear that the banks cannot survive.

Currently, Israeli Prime Minister Netanyahu is scheduled to give a speech to Congress on 3 March.  It appears, however, that relations between US President Obama and Netanyahu are worse than we imagined.  The US has decided to limit the amount of information it gives to Israel about the negotiations with Iran because it believes that Israel has been leaking selective information about the negotiations in an effort to derail them.  If this Washington Post report is accurate and the Israeli position is that Iran cannot have any nuclear enrichment capability at all, then there is no way to avoid a confrontation between the US and Israel.  Iran will never give up its right to enrich uranium, a right that is guaranteed by the Non-Proliferation Treaty.

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Posted February 16, 2015 by vferraro1971 in World Politics

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