European Union

"We want to avoid further deterioration in relations between Russia and Europe," explained Cyprus' President Nicos Anastasiades upon reportedly signing an agreement to offer Russia military facilities on its soil (that we noted previously). The air force base at which Russian planes will use is about 40 kilometers from Britain's sovereign Air Force base at Akrotiri, on the south shores of Cyprus, which provides support to NATO operations in the Middle and Near East regions. As fault lines within the EU widen, Anastasiades said in his interview that Cyprus opposes additional sanctions against Russia by the European Union over Ukraine, "Cyprus and Russia enjoy traditionally good relations and that is not going to change."

In the absence of any notable developments overnight, the market remains focused on the rapidly moving situation in Greece, which as detailed over the weekend, responded to Europe's Friday ultimatum very vocally and belligerently, crushing any speculation that Syriza would back down or compromise, and with just days left until the emergency Eurogroup meeting in three days, whispers that a Grexit is imminent grow louder. The only outstanding item is what happens to the EUR and to risk assets: do they rise when the Eurozone kicks out its weakest member, or will they tumble as UBS suggested this morning when it said that "the escalation of tensions between the Greek government and its creditors is so far being shrugged off by investors, an attitude which is overly simplistic and ignores the risk of market dislocations" while Morgan Stanley adds that a Grexit would likely lead to the EURUSD sliding near its all time lows of about 0.90.

“In effect, there is nothing inherently wrong with fiat money, provided we get perfect authority and god-like intelligence for kings.” Aristotle (?2,400 years ago)

“Remember what we’re looking at. Gold is a currency. It is still, by all evidence, a premier currency. No fiat currency, including the dollar, can match it.” Alan Greenspan (2014)

Summarizing the key points of Tsipras Sunday speech to parliament:

Greece cannot back down (mandate is clear)
Greece rejects bailout extension (implicit GREXIT unless EU backs down)
Europe cannot afford repeat mistakes - will not humiliate one nation.
Greece's first priority: humanitarian disaster

The cracks in the foundation, walls, and ceiling of the European Union are beginning to widen. During an interview with Italian State TV RAI3, Greek Finance Minister Yanis Varoufakis hinted at Greece's "New Deal for Europe" strategy (to be financed by the EIB) but it was the glimpse behind the curtain of EU solidarity that was most shocking as he explained, "Greeks don't have a monopoly on the truth. What we can do, for the rest of Europe, and for Italy in particular, is to open a small door to the truth," adding rather stunningly, that Italy "stands in solidarity with [Greece] but cannot tell the truth as they fear of possible consequences on behalf of Germany."

"Greece will leave the Eurozone. I don't see that it helps Greece to be in the Euro, and I certainly don't see that it helps the rest of the Eurozone. It's just a matter of time before everyone recognizes that parting is the best strategy.... The problem is that there there is no way that I can conceive of the euro of continuing."

Update: And now this: "Moody's places Greece's Caa1 government bond rating on review for downgrade"

Europe has an unpleasant habit of dropping tape bombs at the most inopportune of times, like at 3pm or later a Friday. And while on Wednesday it was the ECB yanking repoable Greek collateral for local banks, today it was first S&P, which downgraded Greece 5 months after upgrading it, and moments ago it was none other than the Cyprus bail-in man himself, the Eurogroup's Dijsselbloem  who just have Greece a 10 day ultimatum to fall into place or risk a terminal bank run and capital controls (both hinted at earlier by the post-DOJ settlement political "rating agency')

• GREECE MUST APPLY FOR BAILOUT EXTENSION ON FEB 16 AT THE LATEST TO KEEP EURO ZONE FINANCIAL BACKING -EUROGROUP CHAIRMAN DIJSSELBLOEM

This means that Greece now has 10 days, or until the Monday after next to decide whether it will stay in the Eurozone or Grexit.

Deflation remains the enemy thanks to debt, deleveraging, demographics, tech disruption & default risks. US aggregate debt is today a staggering $58.0 trillion (327% of GDP); the number of people unemployed in the European Union is 23.6 million; Greece has spent 90 of the past 192 years in default or debt restructuring. 7 years on from the GFC... The massive policy response continues. Central bank victory means that lower rates, currencies, oil successfully boosts global GDP & PMI’s in Q2/Q3, allowing Fed hikes in Q4. Bond yields would soar in H1 on this outcome. Defeat, no recovery, and currency wars, debt default and deficit financing become macro realities.

When the illusion that the Status Quo can fulfill all its promises to everybody dies, the Status Quo starts the terminal slide to effective collapse.

That didn't take long: just hours after Greece entered the ECB countdown mode, with now just 23 days until midnight on February 28, when the ECB is set to yank the final pillar of liquidity support, the ELA - as it has warned before - it is time to start contemplating Plan B, or rather plan Z. A plan, which as described by Nordea's analyst Jan von Gerich, would be quite unpleasant for that nearly extinct class of Greeks, bank depositors, because the "plan", or rather blueprint, is a well-known one: capital controls.

With an increasingly vitriolic tone, the new Greek government has come out swinging today with leader Alexis Tsipras making it clear that he will implement the election pledges the people of Greece voted for:

A NEW GREEK GOVT WILL BARGAIN TOUGH, AND PUT A FINAL END TO THE TROIKA AND ITS POLICIES, WE MANAGED TO DECONSTRUCT THE EUROPEAN STATUS QUO THAT WANTS MORE AUSTERITY AND LESS DEMOCRACY

"We will make the impossible, possible to turn things around in Greece" It took one week, Tsipras chides, to get European leaders to talk about the real problems and Greece will negotiate hard to "put an end to Troika," and "rebuild the country from the beginning."

And so another central bank admits defeat to the forces of market supply and demand.

It becomes easier and easier to translate the propaganda of the One Bank (delivered by its messengers in the Corporate media) because the patterns of behavior of this crime syndicate continue to become more blatant/obvious.

The One Bank does not want to see any ‘defections’ amongst the member-states of the EU (i.e. any splintering of this totalitarian entity). The obvious reason for this is that the EU has morphed into a monetary straitjacket, as a single banking entity (the ECB) controls the printing presses of all EU states. To grasp the significance of this; we need merely refer back to the words of Mayer Amschel Rothschild (1744 – 1812), the original patriarch of the Rothschild clan, and architect of the One Bank.

The overnight session had been mostly quiet until minutes ago, when unexpectedly WTI, which had traded down as low as the mid $46 range following the weakest Chinese manufacturing data in two years, saw another bout of algo-driven buying momentum which pushed it sharply, if briefly, above $50, and was last trading about 2.6% higher on the day. In today's highly correlated market, this was likely catalyzed by a brief period of dollar weakness as well as the jump of EURCHF above 1.05, within the rumored corridor implemented by the Swiss National Bank, which apparently has not learned its lesson and is a glutton for a second punishment, after its hard Swissy cap was so dramatically breached, it hopes to repeat the experience with a softer one around 1.05. Expect to see even more FX brokers blowing up once the EURCHF 1.05 floor fails to hold next.