Bank Run

While the Greek government believes it may have won the battle, if not the war with Europe, the reality is that every additional day in which Athens does not have a funding backstop, be it the ECB (or the BRIC bank), is a day which brings the local banking system to total collapse. And another day, or two, like today, and it may all be over:  According to banking sources, the Greek bank outflows on Friday soared to 700 million Euros from 272 million Euros on Thursday.

"Under severe capital controls, redenomination and nationalisation risk rises. The Greek banks would be most at risk, while the two largest non-financial issuers could potentially continue to service their external debt even after a redenomination of domestic liquidity and revenues. Such a scenario also poses major risks to GGBs and other EGB markets"...

"On the Wednesday and Thursday it was reported that Greeks withdrew 800 million Euro from checking accounts. Friday's number will dwarf that. Whe you go to a Greek bank you pull off a ticket and wait for your number to be called. The hall in my bank contains about 60 seats all of which were filled. There were folks standing behind the seats and in fact throughout the hall, all wanting to get their cash out before the bank closed at 2 PM."

On Sunday, PM Alexis Tsipras penned a lengthy statement expressing his frustration at creditors’ insistence on presenting what he calls “absurd proposals” even as the Greek delegation has gone most of the way towards meeting the troika’s demands. "Judging from the present circumstances, it appears that this new European power is being constructed, with Greece being the first victim. To some, this represents a golden opportunity to make an example out of Greece. If some, however, think or want to believe that this decision concerns only Greece, they are making a grave mistake. I would suggest that they re-read Hemingway’s masterpiece, 'For Whom the Bell Tolls.'"

€5 billion in deposits flowed out of the fragile Greek banking system in April, underscoring the urgency of discussions between Athens and creditors. Meanwhile, data out of Eurostat officially confirms that the country is back in a recession.

Amid accelerating deposit outflows and an hourly flow of conflicting headlines, Deutsche Bank is out with a fresh take on the Greek endgame including an analysis of both the political wrangling that would need to take place in order for parliamentary approval of concessions to creditors and the mechanics of a default to the IMF.

Fearing an acceleration in deposit outflows from Greek banks, PM Alexis Tsipras suggested on Wednesday that a deal between Athens and creditors was imminent when in fact he had no evidence to support the contention. Greek officials now promise their optimism "is not just words."

Courtesy of central planning, virtually every single capital market has become an illiquid penny stock, with wild swings from one extreme to the other, the latest example of this being the Shanghai Composite, which after soaring 10% in the past ten days, crashed 6.5% overnight tumbling 321 points to 4620 after it briefly rose just shy of 5000. This was the biggest drop since January 19 when the Composite dropped 7.7% only to blast higher ever since. Putting the "plunge" in perspective, now the SHCOMP is back to levels not seen in... one week.

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."

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."