Today, Greeks sent a resounding message to Brussels, Frankfurt, and Berlin that they are not willing to acquiesce to further humiliation at the hands of creditors. Now, a stunned sell-side — which had, over the past three months, very carefully tweaked their base cases to reflect the growing risk of Grexit — is scrambling to explain to nervous clients what happens next.
- N1 – Soft deal: The most unlikely scenario is that the euro-area partners offer a much softer programme to Greece.
- N2 – Default-and-stay: Moderately less unlikely is a scenario where Greece defaults but stays in the euro thanks to a direct recapitalisation of Greek banks by the euro-area partners, with the Greek government using only domestic resources for the country’s fiscal needs.
- N3 – New deal: The third scenario is one in which the rising economic and political cost of a closed banking system results in the Syriza government being replaced by a new government of national unity and a new deal with creditors being reached.
- N4 – Grexit: In our view, Grexit and Scenario N3 are the most likely – with about equal probabilities.
"Could deposits below €100k be protected as it happened in Cyprus? The answer depends on the total amount of deposits above €100k. If there are enough of these large deposits above €100k, then most likely any required deposit haircut will be inflicted on these depositors only. There are no recent data on how big this universe of large deposits is. The most recent data from the European Commission suggest that at the end of 2012, covered (i.e. those below €100k) represented 75% of eligible Greek deposits. We suspect this number is now significantly higher leaving little room for depositors with less than €100k to be spared."
... Greeks should be united in their fight for the rule of law and against the cleptocracy, and not divided over a referendum on an absurd question. That division, however, serves the cleptocrats well—they can go about their usual ways unnoticed. Whoever said “divide and rule” knew what they were talking about.
- Tsipras backs down on many Greece bailout demands (FT)
- Creditors skeptical of Tsipras' offer (Reuters)
- Greek Pension Rationing Begins; Poll Shows Tsipras Backed (BBG)
- Greek referendum poll shows lead for 'No' vote, but narrowing (Reuters)
- Greek Bank Controls Heap More Pain on Crisis-Weary Citizens (BBG)
- Greek Crisis Ripples Across European Companies as Markets Swing (BBG)
- China Stocks Fall: Shanghai Composite Index Drops 5.2% (BBG)
- China June factory, services surveys fuel hopes economy leveling out (Reuters)
- Some Chinese Are Taking 22% Margin Loans to Finance Stock Purchases (BBG)
- EU in last-ditch bid to Greece, urges "yes" vote to bailout (Reuters)
- In? Out? In between? A Greek legal riddle for EU (Reuters)
- Tsipras Says EU Won’t Eject Greece as Cost ‘Immense’ (BBG)
- Empty Greek ATMs Force Tourists to Stiff Santorini Cabbies (BBG)
- Anti-austerity protests in Greece as bank shutdown bites (Reuters)
- Puerto Rico governor calls for bankruptcy; adviser says island 'insolvent' (Reuters)
- Puerto Rico Urges Concessions From Creditors (WSJ)
- Hilsenrath - For Fed to Delay Rate Hikes, Global Tumult Would Need to Infect U.S. (WSJ)
It’s all so very 1914-ish. Draghi’s cap on bank-supporting Emergency Liquidity Assistance (ELA) is the modern day equivalent of Czar Nicholas II’s troop mobilization. Good luck walking that back.
Spin revolving door, spin...
In the natural course of things, structural reform can occur, but that natural course entails some degree of disorder and loss.
All banks and the Greek stock exchange are closed today. Greek citizens cued in long lines at ATMs or cash machines over the weekend and a run on the banks left most ATMs empty. There is a €60 limit on withdrawals from cash machines under strict capital controls.
As we previously noted, liquidity is there when you don't need it, and it promptly disappears once it is in demand. Consider it "cocktease capitalism." If liquidity lasts longer than 4 hours, call the CFTC because you may be experiencing a spoof. Right now, the ultimate spoof is setting up as the credit default swap market collapses, and a global bond market margin call is just around the corner.
"A possible Greek default on debt due to the International Monetary Fund next week would trigger cross- default clauses on 130.9 billion euros that Greece owes the euro area’s temporary rescue facility, a European Union official says."
Germany’s financial regulator says departing Deutsche Bank co-CEO Anshu Jain may have lied to the Bundesbank about LIBOR manipulation when he apparently denied having any knowledge of rumors that the fixes may have been fixed (so to speak) even as his inbox told a different story.