Creditors

"If we have a sustainable solution, regardless of how difficult the compromise is, we will bear the burden because the only criteria are exiting the crisis and the bailouts."

Is Deustche Bank the next Lehman is likely the wrong question to be asking. Is Lehman the template for European banking may be more to the point. Take it from the guy that called the Lehman debacle 5 months before the fact.

You know it's bad when on an illiquid Friday, a Greek Deal Rumor headline only manages a measly 5pt ramp in the S&P 500... Wolf cried just one too many times? Wednesday saw 25 point vertical ramp on the same headline...

"Senior EU officials have formally discussed for the first time a possible Greek debt default as negotiations between Athens and its creditors have stalled ahead of an end-month repayment deadline," Reuters reports. Or, translated from political correctness into the truth: "EU officials have stopped pretending that no one has discussed a Greek default." 

The question is whether this is due to quite poor sentiment in the gold market or are banks that have been found rigging most markets, manipulating the gold market?   

Headline hockey remains all that matters if one is "trading" European stocks, bonds, or FX. Today, so far,  no deal... and so Athens Stock Exchange and Greek bank bonds are plunging (for now)...

On the heels of what appeared to be an ultimatum from EU creditors, Greece remains defiant on pension cuts and a VAT hike, testing the troika's resolve as the countdown to the next maybe-deadline continues. Meanwhile, Germany warns that Grexit could embolden EU "separatist" movements and Dijsselbloem reminds Tsipras that noncompliance isn't an option.

• Razor-edge U.S. Congress vote to decide fate of Obama Pacific trade pact (Reuters)
• EU Readies for Default as Tsipras Drives Greek Finances to Brink (BBG)
• Greece Can’t Plan a Barbecue, Let Alone a Currency, Nielsen Says (BBG)
• IMF quits Greece talks amid ‘air of unreality’ as deal unravels (FT)
• Greece Counts Cost of One Man's Gamble (BBG)
• Merkel urges Greece and creditors to keep pushing for deal (Reuters)
• Fearful ECB starts countdown on Greek funding lifeline (Reuters)
• Greek stocks suffer further pummelling (FT)

For a sense of what is driving sentiment this morning look no further than the Athens stock market which exploded higher yesterday on a Bloomberg story based on "two sources" that Germany was willing to compromise, only to close just as the IMF pulled a classis bad cop and announced it was halting work on Greece, and before further news from Bild that Germany was preparing for a Greek default while Europe had given Greece 24 hours to submit a final, workable proposal. As a result, it tumbled promptly at the open even as optimism persists and since the opening plunge, Greek stocks have continued to climb and are now back to yesterday's euphoric opening levels.

"Greece was warned by a group of European Union officials in Brussels it had less than 24 hours to come up with a serious counter-proposal," Bloomberg says. Meanwhile, Reuters reports that Germany is "holding 'concrete consultations' on what to do in the case of a bankruptcy of the Greek state."

In the last 3 days, Ukraine's short-term bond prices have crashed 9%. Specifically the 2017s are down 3.5 points today alone following Ukraine's (American) finance minister threats yesterday in Washington that it will default on its debt unless creditors (which include both Russia and the US taxpayer) acquiesce to their demands for more aid (more debt). As Bloomberg reports, the country will stop making payments on its debt if talks don’t make progress, Finance Minister Natalie Jaresko told reporters in Washington Wednesday. Bondholders are “deeply concerned” about Jaresko’s stance, a creditor group led by Franklin Templeton said in a statement today.

“There’s no more space for gambling, there’s no more time for gambling. The day is coming, I’m afraid, where someone says the game is over."

As unemployment rises to near 27%, a new poll shows more than half of Greeks support giving in to creditors "if they insist on it." Meanwhile, anti-austerity protests are back, with communist-affiliated union members demonstrating at the finance ministry in Athens. 

It has been a mostly quiet overnight session with Europe solidly green on another bout of Greek hope even as Bundesbank's Weidmann warned that Greek insolvency risks are rising and Greece reporting that its unemployment rose once more from 26.1% to 26.6% in Q1, in which we got two more rate cuts by New Zealand (which sent the Kiwi crashing the most since 2011) and South Korea (the Won initially dipped only to rebound) but China stole the stage with its latest report on retail sales, industrial production, and fixed investment all of which showed a modest bounce from multi-year lows suggesting the PBOC's attempts to shock the economy into growth may be starting to work (which is bad news for the market).

Greece should get out as fast as it can, all member countries should, especially the poorer ones. There is no benign or even economically viable future for any of them in the Union. A future inside the union is infinitely more frightening than one outside. What is evident by now is that the troika creditors don’t come to the table to negotiate, they come to impose their will. And those countries that carry the most debt are most vulnerable to the threats flung across the table. If you don’t get out, in time Germany will decide what you can eat, what your children learn in school, and how you are to behave. You will no longer live in sovereign nations.