"The ECB Would Like To Thank The Academy" - Here Is What Happens After Greece Defaults: (The PG-13 Theatrical Version)

Tyler Durden's picture

A few days ago we presented a realistic, if somewhat somber, outlook of what would happen when (not if) Greece finally pulls the plug on its vegetative existence, and its paralyzed body will no longer serve as a breeding ground for maggots of the financial innovation variety. Today, we present a far more comedic one, courtesy of the ECB's Christian Noyer, who makes it all too clear: Europe is not in it to bail out itself and its banks which would topple like a house of undercapitalized, under-MTMed, and uber mismarked cards, but only to protect those poor sad souls of Greece from the "Horror" that would be unleashed when a Greek free fall bankruptcy finally arrives. Truly, the humanist ECB is doing god's work on earth. Try not to laugh while reading this.

From Bloomberg:

The first section constitutes a statement made by Noyer.
The remainder is from a question-and-answer session. Noyer spoke
in French.

“If we restructure Greek debt, that means Greece
defaults.”

“And what are the consequences of a default? The banks
with the most Greek bonds are Greek banks. The Greek banks
themselves will be badly damaged. When the banking system is
stricken, what do you have to do to prevent the financing of the
economy from collapsing? You have to recapitalize the banks. Who
will recapitalize the Greek banking system? The Greek state.”

“That means the Greek state will gain nothing. It will
invest in the banking sector everything that it has gained in
the restructuring.”

“Next there are the Greek insurers and pension funds” who
will be hurt. “That means it will weigh on the Greek
population’s savings, which could cause a drop in consumer
spending
and Greek growth will take a hit. This counters the
Greek recovery.”

“Then, what else is there in terms of Greek creditors?
There’s the European public sector, European governments and the
central banks. This is directly tapping the European taxpayer.”

“If we make European states pay, the mechanism of European
financing will stop immediately. The states will not continue
putting their taxpayers’ money on the line when their loans have
just been cleaned out, when they’re taking losses on the money
they’re lending. So that’s the end of support from other
European states.”

“And for the central banks, what happens? Greek debt will
become debt that is no longer worth anything. It’s no longer
debt that can be considered as sufficiently safe for operations
in the Euro System. That means by definition that to restructure
is to become ineligible as collateral. If it’s ineligible, then
it means a large part of what the Greek banks bring as
collateral for refinancing can no longer be used. That means the
Greek banking system can no longer be financed.”

“The next day what happens? Greece needs to find investors
because the Greek state won’t move from deficit to surplus
overnight. As long as it doesn’t have a primary surplus, the
Greek state needs to borrow. International investors, that small
group that remains, have just been restructured. It’s not the
next day they’ll come back with financing.”

“The Euro System won’t refinance. The European states
won’t finance. The IMF won’t go there alone. No one will finance
the Greek state in coming years. That means the meltdown of the
Greek economy. This is a horror story. That’s why we’re against
a restructuring.”

On rescheduling of debt:

“The lengthening of maturities brings very difficult legal
questions. There’s a strong chance it will be the equivalent of
a default.”

On austerity, asset sales:

“There is another possibility, which is to apply the
program. To reduce the stock of debt, the only solution is
ambitious privatization. There is no other solution.”

“When we’re in a monetary union and you need to restore
your competitiveness, it is necessary to have the equivalent of
an internal devaluation. Cut production costs. There is no other
solution.”

“The budget adjustment that is being asked for -- they’re
difficult measures but they’re doable. The IMF has been doing
these programs for years. It knows what is doable.”

“Restructuring is not a solution, it’s a horror story. You
have to make decisions that are in the interest of the country
and its citizens. The best option is the program.”

“Time isn’t a way of lightening the program. A bit more
time may be necessary. The program might be longer. The measures
are necessary in any case. It’s the same effort over more
time.”

“We won’t convince other European countries or the IMF to
provide support unless there is a strict application of the
program.”

On the ECB refusing Greek debt as collateral:

“What is the fundamental principle that we have to
observe? We must, in monetary policy operations, refinancing,
take sufficient guarantees. All the central banks of the world
do this. You need good-quality collateral. You set the bar at a
certain level. We took a simple rule. You need single-A debt as
a minimum.”

“During the crisis, given pressure on assets, we accepted
temporarily to reduce our minimum level of collateral to BBB.
Then the sovereign-debt crisis arrived, the Greek crisis,
ratings cuts for Greece.”

“We decided at that moment that when there is a European
Union-IMF program that we support, we considered” the assets
“were the equivalent of BBB. If the program is no longer
respected, if a country is found off track, immediately our
assumption of BBB disappears. If it goes out of the EU program,
the collateral is ineligible.”

“If the debt is restructured, you can’t say it’s debt of
good quality. We need collateral of very good quality [quick someone, what is Greece rated now by S&P/Moody's?]. It’s a
simple application of reasoning. Ipso-facto, the collateral can
no longer be accepted.”

And the absolutely For The Win:

“Don’t think for a minute that we’re against
restructuring because French and German banks have Greek bonds.
The problem is for Greece itself.”

The ECB would like to thank the academy... and the children. Now, for that Geodon...

h/t Gwilym

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apberusdisvet's picture

The Germans need to invade; on humanitarian grounds, of course.

He_Who Carried The Sun's picture

The Germans shouldn't have left in the first place. ;-) :-))

Now "The knights of St. John" will get Rhodos back and keep it forever.

Rodent Freikorps's picture

The Germans will keep the lights on.

The genius, this time, is the Greeks will eventually beg them to invade.

Beats hell out of the Turks taking the territory.

BobPaulson's picture

More likely it will just return to its equillibrium state of the good old drachma days. The geniuses who think Europe can accommodate its inherent disparity under one roof missed the class on "arbitrage". In my first visit there in 1990 it was fun, cheap and somewhat backward. Nothin' wrong with that. Helicoptering in money to try to make it a suburb of Munich hasn't exactly worked out.

BigJim's picture

I suspect the Greek government will sell most of its assets to pay its debt. The austerity will go on, or even deepen. The standard of living there will plummet. The Greeks will finally revolt. Embarrassed by Greece's developing-nation status, the EU will 'regretfully' let them out of the EMU, maybe even out of the EU. They'll set up their own currency, and then nationalise all the industries they privatised a few years earlier. Meanwhile, all the management of the banks that were bailed out will have retired on multi-billion dollar bonuses. The new management of all the banks that will lose a fortune when Greece re-nationalises will take their begging bowl/RPG to the ECB and get bailed out (again).

The Greeks should revolt NOW.

agent default's picture

"Be quiet you will wake up the Greeks" Actual poster from the Spanish protests.

That bunch of dead meat? Revolting? Forget it.

Michael's picture

The Greeks could always reclassify their debt as tier 3 capitol and move it off the books for an undetermined period of time. No need to mark it to market either. 

There, problem solved.

Thank me.

BobPaulson's picture

If they could be reclassified as an investment broker these numbers wouldn't be bad at all, and they could get their lips on that Fed bailout teat. 

silberblick's picture

Click below to see a visual graph of Bankster's dirty needs arranged according to Abraham Maslow's hierarchy of needs:

http://thesilvergoldhedge.blogspot.com/2011/05/banksters-dirty-hierarchy...

Cheesy Bastard's picture

My big fat Greek bloodletting

IdioTsincracY's picture

Of course ... the only remedy to a debt problem is more debt, but quality debt!

WTF?!?!

Milestones's picture

Well we have oddles and oddles of prime debt. Why not let them have some of ours?   Milestones

Restcase's picture

>>That means the Greek state will gain nothing. It will invest in the banking sector everything that it has gained in the restructuring.<<

Or it could let the loser banks fail while clearing the way for new winner banks to replace them. These newly chartered winner banks could be stocked top-to-bottom with friends of the current government.

It's a win-win!

j0nx's picture

I'm ok with this as long as the current crop of banksters are fired and forbidden from EVER working in any field that involves ANYTHING to do with finance again. The only jobs they will be allowed to work are McJobs. Then I can drive through and order a cheeseburger and then come into the restaurant a few minutes later and say, "oh boy, I asked for no onions!" and then I throw the open faced burger at him ketchup side up right into his McSmock. How long will it take before they all off themselves after a few days of that kind of treatment. One can only hope...

Things that go bump's picture

I'm afraid many will fall on their swords, so to speak, rather then serve cheeseburgers wearing a paper hat.

Miles Kendig's picture

“Time isn’t a way of lightening the program. A bit more time may be necessary. The program might be longer. The measures are necessary in any case. It’s the same effort over more time.”

When it's "with more time & effort there may yet be success" in such auspicious circumstances you know the situation is FUBAR.

NewThor's picture

Speaking of Bloomberg:

When I save society and create a better system that gives a

better quality of life for all creatures on the planet,

I'm taking Caroline Hyde, Betty Liu and Linzie Janis 

as my wives.

I ain't playing, YAR!

macholatte's picture

You have to make decisions that are in the interest of the country and its citizens.

 

I didn't see that language in anyone's oath of office. Did I miss something?

tom a taxpayer's picture

It is a real horse race as to who is the biggest EuroLiar - ECB's Christian Noyer or Jean-Claude Jun(c)ker

http://www.zerohedge.com/article/jean-claude-juncker-europe-doing-gods-w...

oogs66's picture

Who is responsible for more rape - dsk or trichet?

LivermoreJim's picture

Reminds me of the song in the musical MAN FROM LA MANCHA: "I'm only thinking of him."

Pepe's picture

All I can say is: Sit back and watch

MiguelitoRaton's picture

That's like a teachers union rap saying outrageous pensions are "all about the children" do the sheeple really look that stupid?

MiguelitoRaton's picture

You have difficulty with analogies in general or just this one? The teacher's union regularly says it is "all about the children", while they refuse to fire failing teachers, promote solely on seniority, and weild power, all of which harm the children.

 

At least one union rep admitted as much:  "One union rep explains, 'it is not because we care about children. And is it not because we have a vision of a great public school for every child. NEA and it's affiliates are effective advocates because we have power.'"

 

See: http://www.myfoxtampabay.com/dpp/news/state/anti-union-ad-precedes-teacher-pay-vote-03152011

 

The analogy, since you seem to have missed it is this dipshit claiming that bailouts are all about helping the Greek people.

 

BTW, JUNK YOU!

IdioTsincracY's picture

You should not be judging the teaching profession based on the lack of reasoning that you demonstrate ... I am sorry that bad teachers turned you into an idiot ... just remember you do not represent the product of our educational system as a whole ...

just look at all the people on ZH ... all products of our current educational system ... not bad right?!

 

Not sure if can read ... but if you can, try this, just some simple facts:

http://daytonos.com/pdf/collective%20bargaining.pdf

 

 

MiguelitoRaton's picture

Ah, a collective bargaining apologist. No doubt a teacher or retired teacher. Your strawman attack on me personally is NOT a response to my points:

1. Teachers unions promote by seniority not results

2. Teachers unions have made PUBLIC schools 2X-3X more than private school costs in the US, while delivering inferior results

3. Teacher's unions are no more about helping the children than this ECB apologist is about helping the Greeks.

 

So go ahead and demonstrate your inability to address issues, and go ad hominem on me. That is always the last resort of someone losing an argument. BTW, while you're at it, please explain why the teacher's unions are against vouchers and school choice. Or just attack me personally, that's much easier...

IdioTsincracY's picture

Teacher? ... nope dude! :-)

Just someone who actually values facts over IdioTic opinions.

Anyway, did you actually read the document? Any thoughts beyond those that a mindless and uninformed being would provide?

 

downwiththebanks's picture

Keep sucking off the banker-gangsters, disinfo boy.

BigJim's picture

You're confused.

Socialism demands enormous state intervention, and destroys the price mechanism. Central planning is expensive (ie, wasteful of resources) and as a consequence, governments require more money than they can feasibly tax without being thrown out of office by irate taxpayers. They therefore require the banks to buy their debt and to run a fiat-currency regime to inflate the money supply to pay for all the goodies they hand out to all the voters, who think they're getting something for nothing... whereas it's all being paid for by their currency's destruction.

So your support for 'socialism' is actually a vote for the banksters.

You're the one sucking off our bankster class. And you don't even understand it.

knukles's picture

Right. 
True.
Absolutely.
I agree wholeheartedly.

Ya'll left my kids so fucking dumbed down you don't deserve one.
QED 

downwiththebanks's picture

Don't blame a teacher for your inability to parent, banker-gangster.  Perhaps rape and pillage shouldn't be among the cardinal virtues you pass along to them.

It makes them greedy, selfish, narrow-minded little fuckers.

zhandax's picture

I will admit that i do not blame the individual teachers but rather the federal dept of education (absolutely unconstitutional) but the net result is we have an entire generation of idiot kids and they are almost at the age of reproducing.

bigkahuna's picture

They are not all idiots, but they have absolutely no idea what they are getting into. Over the last 4 years I believe that monetary systems across the globe have become trivial. These kids think that money grows on trees-and for them, it has. That is all coming to a nasty end. I just hope they don't go nuts.

downwiththebanks's picture

To type and perform fellatio upon a banker-gangster:  what a skill.

BigJim's picture

You're confused.

Socialism demands enormous state intervention, and destroys the price mechanism. Central planning is expensive (ie, wasteful of resources) and as a consequence, governments require more money than they can feasibly tax without being thrown out of office by irate taxpayers. They therefore require the banks to buy their debt and to run a fiat-currency regime to inflate the money supply to pay for all the goodies they hand out to all the voters, who think they're getting something for nothing... whereas it's all being paid for by their currency's destruction.

So your support for 'socialism' is actually a vote for the banksters.

You're the one fellating our bankster class.

Carl Spackler's picture

+1million,  MiguelitoRaton

Perfect analogy

IdioTsincracY's picture

After the analogy, how about a syllogism:

School systems produce idiots

MiguelitoRaton is the product of a school system

therefore MiguelitoRaton is an idiot!

Just sayin'!

 

MiguelitoRaton's picture

You are calling everyone who is a product of "the school system" an idiot? Interesting. And yet you know nothing of me. I could have attended public, prive or homeschooling for all you know, but you call everyone who goes to school an idiot. I assume therefore that you did not go to school...so WHO is the idiot?

IdioTsincracY's picture

What you see is your reflection in the mirror.

tarsubil's picture

Did your teacher teach you that, little Johnny?

Rodent Freikorps's picture

It was in the Federal approved teaching plan.

All hail the State.