Greek Finance Minister Varoufakis wants Greece to go "cold turkey" on loans

Outlook:

The news this week in the US is a ton of corporate earnings, including ExxonMobil and the automakers, plus a messy jobless claims report on Thursday and the payrolls number on Friday. Employment is going to be messy and all but impossible to interpret because of bad weather during January. The same thing might get said about today’s personal income and spending, normally a top-tier bit of data because it includes Personal Consumption Expenditures, the Fed’s darling data. We also get the US ISM manufacturing PMI.

The big news—and from left field—is a strike in the US by oil refinery workers at facilities producing 10% of US output. A complete walkout could affect 64% of output. According to the FT, “The industrial action entered its second day on Monday after the United Steelworkers Union rejected a fifth contract offer made by Royal Dutch Shell, leading talks on behalf of other oil companies including ExxonMobil and Chevron.” It’s the first action by the oil workers since 1980. “The USW is calling for annual pay rises twice as large as those set out in a previous agreement as well as better health cover and a reduction in the use of non-unionised contractors. Tom Conway, USW international vice-president of administration, said: ‘Oil companies are too greedy to make a positive change in the workplace and they continue to value production and profit over health and safety, workers and the community. This industry is the richest in the world and can afford to make the changes we offered in bargaining.”

This is a genuine “holy cow!” moment. The labor movement in the US has been falling almost to the vanishing point for decades, starting with the air traffic controllers (Reagan) but continuing with union abuses in the public sector that bankrupted cities and states (Detroit). Unions can be a good thing (think income inequality) but they overplayed their hand.

On the world stage, we have no read on what the Greeks are doing or how the world is going to respond. FinMin Varoufakis,visited France to a friendly but inconclusive reception, and is now in London. The last tranche of the bailout is due at end-Feb but the FT reports “The finance minister said Athens would reject any further loans under its international rescue plan, despite Greece’s €172bn bailout expiring at the end of the month.” Varoufakis wants Greece to go “cold turkey” on this loan but expects the ECB to prop up the banks.

We do not have a clear picture of what, exactly, the Greek plan may be, assuming there is one. So far we have a promise from Tsipras that it is not intending to linkup with Russia, but he still wants to dissolve the troika. The German are prickly about that, saying the troika is in keeping with the ESM and can’t be “unilaterally changed.” Varoufakis is continuing his tour with visits to Rome and Berlin later this week. At a guess, the confrontational negotiating style is a bad idea, and not just the wardrobe. Lenders’ backs are up. The tour could be a giant failure, fomenting more instability in financial markets. The Fed is fun to make guesses about, but Greece is no fun at all. It’s hard to see how the euro can rise, however creepily, on what will develop on this front.