It is becoming increasingly clear that the Syriza show will ultimately have to be canceled in Greece (or at least recast) if the country intends to find a long-term solution that allows for stable relations with European creditors, but as we noted on Wednesday, it may be time for Greeks to ask themselves if binding their fate to Europe is in their best interests. Indeed, it's time to take a hard look at the political ramifications of the June 5 IMF deadline and ask if the troika will, in the final analysis, be successful in using financial leverage to undermine the democratic process.
"Europe faces the risk of a second revolt by Left-wing forces in the South after Portugal’s Socialist Party vowed to defy austerity demands from the country’s creditors and block any further sackings of public officials", The Telegraph reports. In sum, the reason why concessions (any concessions) to the Greeks are a non-starter in Athens' negotiations with creditors is that the IMF, the European Commission, and most especially Germany, want to send a clear message to any other 'leftist radicals' who may be thinking about using the "one move and the idea of EMU indissolubility gets it" routine as a way to negotiate for breathing room on austerity pledges, will get exactly nowhere and will have a very unpleasant time on the way.
Asked whether he would repeat an assurance he gave in late 2012 that Greece wouldn't default, Wolfgang Schäuble told The Wall Street Journal and French daily Les Echos that “I would have to think very hard before repeating this in the current situation.” To which Moody's had just one thing to add: "there is a high likelihood of an imposition of capital controls and a deposit freeze."
Futures Flat With Greece In Spotlight; UBS Reveals Rigging Settlement; Inventory Surge Grows Japan GDPSubmitted by Tyler Durden on 05/20/2015 07:00 -0400
The only remarkable macroeconomic news overnight was out of Japan where we got the Q1 GDP print of 2.4% coming in well above consensus of 1.6%, and higher than the 1.1% in Q4. Did it not snow in Japan this winter? Does Japan already used double, and maybe triple, "seasonally-adjusted" data? We don't know, but we do know that both Japan and Europe have grown far faster than the US in the first quarter.
As Greek empty their bank accounts at a record pace, waiting for the capital-controlling, bank-holiday-based 'other shoe' to drop on Grexit, devaluation, and drachmatization; they are not stashing their cash in the proverbial mattress. Instead, as The Telegraph reports, there is a slightly surprising sign that Greece is in the classic throes of a bank run (as we saw in Russia last year): car sales jumped by 47% in April.
Members of Angela Merkel's Christian Democratic bloc are pushing the Chancellor to let Greece leave the euro, with some lawmakers saying the EU would be better off without the Greeks. Meanwhile, German FinMin Schaeuble warns of "accidental" insolvency.
The biggest slow motion trainwreck in history, one that everyone knows how it ends just not when (especially since the "when" is about 5 years overdue), that of the Greek sovereign default may just got a bit more exciting earlier today when the WSJ reported that the IMF can no longer lie - like Mario Draghi did to Zero Hedge in 2013 - that there are preparation for a Plan B. To wit: "the International Monetary Fund is working with national authorities in southeastern Europe on contingency plans for a Greek default, a senior fund official said—a rare public admission that regulators are preparing for the potential failure to agree on continued aid for Athens."
Capital controls are in place...
"If banknotes are outlawed you will be forced to hold money that is a liability of a commercial bank (deposits) and refused access to money that is the liability of the central bank (bank notes)... In such a world, zero-yielding gold would be a high-yielding instrument. If the authorities ever sought to restrict access to banknotes, then gold would suddenly find itself enfranchised as money for the first time in many decades. So, given the scale of these competing forces, it is just too early to say what might happen to the gold price, but the allure of gold will grow the more it becomes clear that central bank fiat has failed and the age of government fiat is dawning."
Fiat Money May Be Junk ... But a Cashless Society Controlled by the TBTFs Is Dictatorship
Goldman Gets Cold Feet:"It Is Difficult To Predict How Negative The Market Reaction To Grexit Would Be"Submitted by Tyler Durden on 04/26/2015 14:18 -0400
"We think that, at the 10-year tenor, the spread between Spanish and Italian bonds yield versus Bunds yield could still widen to around 350-400bp before a policy response is enacted. We stress that the departure of a country from the ‘irrevocable’ monetary arrangements of the EMU would take us into unchartered waters and it is difficult to predict how negative the market reaction could be."
Germany Prepares For "Plan B", Says Greece Would "Need Not Only A Third Bailout, But Fourth, Fifth Or Even More"Submitted by Tyler Durden on 04/25/2015 16:24 -0400
It has been a very disturbing 24 hours for Greece.
Instead of merely plugging the hole left from declining liabilities (deposits), what the ECB's ELA funding appears to also be doing is compensating for a rapid write down in bank assets (loans) as well, in the form of charged off Non-Performing Loans. According to Reuters, one of the leading Greek financial institutions, Piraeus Bank will write off credit cards and retail loans up to 20,000 euros ($21,484) for Greeks who qualify for help under a law the leftist government passed to provide relief to poverty-stricken borrowers, it said on Thursday.
In what seems like a coincidental retaliation for Greece's pivot to Russia (and following Greece's initiation of capital controls), the supposedly independent European Central Bank has decided suddenly that - after dishing out €74 billion of emergency liquidity to the Greek National Bank to fund its banks - as The NY Times reports, the value of the collateral that Greek banks post at their own central bank to secure these loans be reduced by as much as 50%, and the haircut scould increase if negotiations with Europe remain at an impasse. As we detailed earlier, this is about as worst-case-scenario for Greece as is 'diplomatically' possible currently, and highlights an increasingly hard line by The ECB toward The Greeks as the move will leave banks hard-pressed to survive.
On one hand, Bill Gross says that "German 10yr Bunds = The short of a lifetime." On the other, the ECB is about to run out of bonds to monetize at current prices as the Bund yield slides every lower to the ECB's hard floor of -0.20%. End result: someone will be very hurt...