Deutsche Bank: "Greece Will Need To Activate Both IMF And EMU Packages Within The Next Month"

Tyler Durden's picture

And here we were thinking that a $2 billion successful Bills auction, (not really) backstopped by everyone and the kitchen sink would sound the all clear on the country with the 16% budget deficit. Alas, with the 10 Year still at 350 bps over Bunds nothing at all has changed for Greece. And here comes Deutsche Bank, which has billions at risk among the PIIGS, saying Greece will very likely be forced to protect its creditors asap, or within the next month, whatever comes first if it has no market access. Alas, as real Greek bonds are still trading just south of 7%, this pretty much means the market doesn't care about the country's long-term prospects, which in our books is equivalent to "absent market access"  to anything more than oilve oil and Ouzo. And the cherry on top: several European governments will be forced to have a parliament vote to approve the bail out. It appears the market still has not figured this virtually certain collapse trigger to the rescue package. When it does, the end game for Greece will truly be there.

On Sunday afternoon Euro Area Finance Ministers, the ECB and European Commission finally made some significant progress on a financing package for Greece. We are still lacking some important detail but believe that the announcements represent an important step forward. Most of what was lacking last week, thereby fuelling the market’s sell-off, has been clarified. We have an amount (EUR30bn for the Eurogroup’s contribution), a price (approximately 5%) and a package timeframe (3 years).

The EU authorities continue to state that Greece has not officially requested aid but with discussions to continue tomorrow, with the inclusion of the IMF, we should move closer to a scenario whereby aid can be disbursed in a timely manner if needs be. Discussions of a 3 year programme suggest that the EU authorities now acknowledge that this is a problem which will require more than just a one-off quick fix.

There are still a number of hurdles to overcome and discussions over the coming weeks could prove difficult. At least some Euro Area governments will be forced to hold a parliament vote to approve aid – we cannot exclude that 1 or more votes fail. Are we in for a TARP-style cliff hanger?

Assuming no hiccups, the details of an IMF programme should take 1-2 weeks to agree upon, followed by a further 1-2 weeks for IMF board approval and disbursement of the first tranche. In terms of size, Dominique Strauss-Kahn stated that this will be determined ‘to the extent needed and requested by the Greek authorities’. An EUR15bn stand-by agreement would imply a loan equivalent to 1600% of quota – the largest stand-by agreement since the onset of the crisis has been 1200% of quota (Latvia). This will bring the total package to EUR45bn. Note that the IMF will probably only disburse a maximum of 40% of this upfront. The sovereign will need a minimum of EUR10bn in funding by 19th May. In the absence of market access, Greece will need to activate both IMF and EMU packages within the next month.

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Cursive's picture

And here comes Deutsche Bank, which has billions at risk among the PIIGS,

Please tell me the DB was also buying the auction today.  That would be so fitting.  Double down, double down.  Whocoodanode it would blow up?

Sudden Debt's picture

I actually still hate those germans, so I hope greece will default en pulls germany down!

Mako's picture

TPTB: I am serious I have a bazooka in my pocket

Market: I don't believe you

TPTB: Really, I am super serious it's a big one too

Market: Let me see it

TPTB: Well, we will pull it out when it's needed

Market: I don't believe you, matter of fact here is punch in the face to show you we don't believe you

TPTB: Damn man, you gave me a black eye, don't do that again or I might have to pull out the bazooka on you

sushi's picture

"Tell me honey, is that a bazooka in your pocket or is it just a Hank Paulson?"

yellow submariner's picture

Certainly not *gg*, the greek debt keeps the EUR low and boosts our (german) exports, by making german goods cheap. Greece debt increaseses the strength of the german industry ;) .

ZackAttack's picture

Perfectly reasonable reaction by bond vigilantes... no check has actually been written yet, all that has been done is a few slight movements of the jawbone.

Show the world the money, Germany.

Truth's picture

2 ways to profit:

1) in the summer purchase some Puts on DB (after the sheeple think the coast is clear)

2) in 3-5 years time buy some apartment buildings in Greece when the locals are lining up for bread and milk).

Mako's picture

I would say most of the world will be in a combination of bread lines, prison camps or war or civil war in 10 years... Greece is only one of the starting countries... this will be coming to your country and/or State as well in due time.

Greece isn't doing anything the rest of the world isn't doing.   Playing with an unsustainable equation is a deadly game at the end of the line.


Truth's picture

Agreed.  U.S. is a house of cards (....for starters, California is worse than Greece...).  only way out will be to inflate but there will probably be another episode or two of deflationary scares that 'the system' will hit the public over the head with, causing enough pain (job losses, pay cuts, service cuts) to then be able to make inflation more palatable).  Besides, this scenario gives the housing bubble a couple doses of medicine via lower interest rates during these deflationary moments.

Mako's picture

There is no way of inflating out, we have been inflating for 66+ years.  The equation always wins in the end.  The global financial system will collapse into a heap of a mess, there is no out, there is only in.

Truth's picture

In principle, I agree but inflation will always serve the elite (read Howard Katz at  unless there is some scenario where there is some way that deflation will serve them best. 

Mako's picture

We have been inflating for 66 years, if someone had magical power to keep the game inflating there would be no problem/s.   Nobody has unlimited power to supply the equation long-term, which is what you would need to inflate out of this mess.  You show me someone with unlimited power, then what you said would make sense... absent unlimited power... all you have is a bunch of jaws moving.

Humans have no ability to inflate out of this mess, although Helicopter Ben has tricked you in believing he has unlimited power.  Ben nor anyone else on this Rock has unlimited power, the credit system will collapse due to use of an unsustainable equation. 


Mako's picture

If you can fund your own credit, then the credit wouldn't exist. 

The Fed has power to influence and to put on a big appearance that they have power, but they do not have unlimited power which the equation needs long-term. 

This was caused by humans continuing to use a unsustainable equation, after about 60-80 years the amount of power humans needed to keep the system working is not provided... eventually collapse.   Whether someone does some wierd thing like start issuing million dollar checks is really irrelevant for the most part.... the system is over it's peaked and now comes the collapse.


chistletoe's picture

Creating and encouraging inflation does not require any more "power"

than a weak will and a finger which can push the "on" button of the printing press.

Hulk's picture

Agreed. Stupidity, greed and corruption, the killer combo.....

john_connor's picture

Off topic, but the paper gold cartel just delivered their normal AM punch, about a $6-$7 haircut in 30 seconds.

ExistentialSkeptic's picture


Too bad I don't have any $FRN to buy bullion today.  But, given that it's expiry week, the sale price might jut be good all week.


Truth's picture

buying opportunity.....

Hephasteus's picture

Bank of New York doing a little sideline exporting and then immediately reimporting.

Alexandra Hamilton's picture

In the absence of market access, Greece will need to activate both IMF and EMU packages within the next month.

Seems, like a self-serving prediction considering the amount of debt they hold. Maybe it's not (only) Greece who is so desperate for the bailout money but rather Deutsche Bank (and some other banks)?

Madcow's picture

I see no plan to stop all these bailouts.

GM, AIG, Greece, Spain, Japan, Citi, Iceland, Japan, the USA ... blah blah blah.

We're looking at 3 decades of depression, falling tax receipts, sovereign bailouts, politically connected banker bailouts, escalating taxes, increased borrowing, etc. etc. etc. 

There's no mechanism in place to stop the disease. All these tax-gobbling-banker-schemes are good for is temporarily treating the symptoms. 

Either the bankers step out of the way and allow a massive deflationary wipe-out of Western finance - or we continue building a draconian police state that leads inexorably toward hyperinflation. 

If i were a cynic, i'd think that the bankers and politicians are just trying to buy a little time so they can get their affairs in order and prepare to flee to South America, the Carribean, the Channel Islands, Monaco, Mauritius, etc. 

From there, they can watch the West burn to the ground on the tele.

bugs_'s picture

Madcow agree on them getting their affairs in
order EXCEPT if they were that smart they
would already be gone.  No the ones that are
left are arrogant enough to think they can
keep a lid on this doomsday machine and ride

bugs_'s picture

Sounds like DB is holding some GB

ignorant's picture


stay by the dream buying buildings in Greece.

tell u wht also to some others here smirking , this is Greek state debt tks to corrupted bastard politicians and german bribing college courses (how to manipulate and bribe goverments). we don't give a fuck whtever happens,  Greeks doesn't owe a penny to anybody and fyg hv enough pocket mony & real estate to support 2 generations and they worked hard for tht my dear. The largest tonnage wwide if tells u something.  

Summer coming already 22c  so let us enjoy our salads with feta ouzo octapus and our dives in the aegean blue waters.

kalimera sas

rhammer1's picture

Tomorrow at 11:00 AM the President of the Federal Reserve Bank of Richmond is speaking at West Virginia University and taking the students "tough" questions. 

I, as a student at WVU and religious reader of Zerohedge, would like to ask the Zerohedge community for a list of "tough" questions for Mr. Jeffery Lacker.

I will be given the opportunity to ask any and all questions.  What should I ask him?

Any questions would be greatly appreciated.

Thanks ahead of time.  Let's come up with some good stuff.

Alex Lionson's picture

Does Mr. Lacker have any idea if the Federal Reserve is planning a Quantitative Easing 2.0, and if Yes, when it begins?

Hansel's picture

The Fed printed $1.55 trillion last year to buy treasuries and MBS securities off of bank balance sheets.  Recently, Volcker and Bernanke have stated the need to raise taxes on the American people to cover the country's debts.  Why is the Federal Reserve willing to conjure money, which takes no work to produce, into existence for the sake of the banks while not giving the same consideration to the American people?


For severely indebted countries and U.S. states on the verge of default, why do world governments and the IMF think loaning said country/state more money is the answer?

Orly's picture

He is not going to answer any "gotcha" questions, so you have to lay it out as a hypothetical.

I would like you to ask Mr. Lacker about the FX swaps that the US sent to Europe to the tune of half a trillion dollars.

I understand that it was to stabilise the holdings of foreign banks and to stop the meltdown of USD-denominated assets.  Now that that scenario is over, is the money being repatriated?

In what form is the repatriation?

If the money is not being repatriated, what percentage of the money was put into the equity markets and what would happen if that money were withdrawn to close the FX swaps?

sushi's picture

The US has been implementing a policy of "money for nothing."

When does the second half of the song kick in? When do we get the "chicks for free?"


Alex Lionson's picture

And now, kindly imagine yourself being owed by Greece EUR 300 bln, then Greece says I can not pay, the EU will pay some EUR 50-60 Bln for me and the rest is a big, big question, what would you do? Would you buy an additional EUR 50-60 Bln of newly minted Greek bonds? I doubt, that probably explains a 368 Bps current spread...

yabs's picture

people underestimate europeans
they do not bend over and take it like the english and the americans. If taxpayers from germany and France end up bailing out greece there will be full scale civil revolt especially
in France. Its actually illegal anyway and law suits will eb filed straight away. I really doubt there will be a bailout
its just talk

WmWallace's picture

The silent Coup d’ etat of the United States of America
The silent Coup d’ etat of the United States of America is nearly complete. Congress is giving nearly unlimited authority to the private Federal Reserve Bank ("Fed"), owned by the big banks, to regulate themselves. They are then giving the Fed authority over most every publicly traded company with the simultaneous unconstitutional authority to print money to be used to purchase trillions of dollars of stocks and to monetize the Debt of the United States government. They are also working to subordinate the Fed and Congressional authority to the globalist/fascist International Monetary Fund. Once this occurs which is happening in Congress, the Coup will be done. The international globalist fascist bankers will have conquered the United States of America and the ultimate act of treason will have been performed in plain sight of an unsuspecting dumbed down American public....

This video will show you exactly how this evil was performed in Argentina in 2001 and is being performed on Greece and Europe right now
Argentina's Economic Collapse

6 steps to accomplishing the coup...

Step 1 - Create a Crisis

fantastic articles and links more...

zenon's picture

I don't think Greece wants to activate it. Can they get away without doing so? Well as long as they have a 3-year implicit guarantee, they could borrow shorter maturities at least until May (for the 10B). Then they don't need much during the summer. They could stick it out a bit longer and see what happens with the great global recovery that is now in progress. They will also make sure their deficit numbers show great improvement.  The European banks that are heavily nvested in Greek bonds have a vested interest for a smooth outcome. That, plus a but of jawboning could ensure that they role over their maturing bonds. Hell they could repo these bonds with the ECB and show a nice profit. Point is: Once  country is deemed too big to fail, it doesn't.

yabs's picture

I admire youer optimism
but in this case It cannot be bailed out like bank
Its illegal and even if it was the greeks will riot when they have to take IMF medicine. Its a no win situation
complete chaos, maybe civil war will ensue

M.B. Drapier's picture

several European governments will be forced to have a parliament vote to approve the bail out

Not to mention the constitutional challenge that is apparently to be expected in Germany.

yabs's picture

still the markets like it
back into green now
another day, same ramp

litoralkey's picture

This is why the 17th Amendment should never have been ratified in the United States.


Welcome to the Kakocracy.