· According to recent reports, political parties in Greece owe to Greek banks a-lot-of-cash (272,5 million Euros). And given their recent downslide in votes and popularity, they could soon be triggering a 'credit event' that will eventually end, according to our opinion, in the first political bail-in of the developed world.
Allow me to elaborate. PASOK for example, the previously ruling (for 2 decades+) socialist movement, has total liabilities of 125 million Euros, due in the next 2 years, towards 2 recent 'bad banks' and 1 future Mega (bad) bank. That is after they have drunkenly swallowed more than 20 million yearly in state-subsidies from taxpayers money, to reportedly spend most of it on Travel expenses without any invoices evident. Apparently some 45,000 tickets were issued in just one year ! Those, among others, were the findings of a (Gov-ordered) study from major auditors, for period 2004-2010, resulting in a 100 million deficit for Pasok.
Now the problem is that the (bankrupt) Greek Banking system is incapable of absorbing another huge write-off and should be soon foreclosing on collaterals of these liabilities, especially since they now involve exposure to just 1 'systemic bank'.
Although most high-street loans have got some kind of collateral, be it property, shares, dividends or future cash flows, this does not apply for loans towards political parties (NGOs) as all they have collateralised is their future state-subsidies, up until 2020 in many cases!
But as their 'Unpopularity' grows to unprecedented levels, the previously ruling parties are being diluted into smaller and smaller clans in parliament, resulting in diminishing and soon-to-be vanishing subsidies. Liability though, should not vanish or stop on the NGO (political party) but should extend to also include its Operatives.
This is where our Bail-In proposal arrives, a mixture of practices imposed to Cyprus, Greece and soon to one of the other 'PIIGS' near you.
Former MP's of the parties defaulting on their loans, would 'voluntarily' participate in an asset-exchange program with the (state-funded and controlled) banks, in order to bring back their party's Capital Adequacy Ratios back to 'viable' levels, or declare bankruptcy and enter liquidation of assets, managed by the new Asset Development fund.
A 'Task-Force' of IMF and EuroGroup experts will be called in, to evaluate which MP's received the 'Lion's share' in pay and expenses and determine their respective 'contribution'. Of course collective action clauses (CaCs) must apply so if the asset participation/liquidation from the 'Lions' is not enough, then all MP's that ever received public pay as members of the defaulted entities will be forced to participate in the repayment scheme, pro rata.
The very recent legislation passed, to immunise Banks' directors from DNO Liability for providing all NGO loans will be in force, but an amendment will be introduced for the event of the liquidation product being inadequate-therefore triggering claims against insurers of the risk, up to the amount of damages induced.
Whoever fails or refuses to comply, should face of course the same fate that directors and board members of defaulting businesses see on a daily basis in Greece.
Jail time, seizing of assets and public humiliation.
Anything less would be preferential treatment...
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.