In her euro-hegemonic role Germany failed to properly handle the Greek Crisis. What economics have been whispering among themselves after the scandalous Brussels Agreement of July 13th is now on the public discussion. One of IMF’s former European bailouts official, Ashoka Mody made it very clear in his article on Bloomberg on Friday morning: It’s Germany not Greece that has to leave the eurozone.
The dollar has been a stalwart of international trade over the majority of the last century. Around the time of the formation of the Eurozone, it reached its recent peak at 71.0% of official foreign exchange reserves. Since then, its composition of global reserves has more recently dropped to a more modest 62.9% in 2014. However, the dollar is slowly losing its status as the world’s undisputed reserve currency.
In the final act of what has become a modern Greek tragedy, lawmakers will now be forced to choose between "approving" what is effectively a German overthrow of the Greek government, or face the collapse of the banking system and an economic depression of unimaginable propotions.
While Greek PM Alexis Tsipras is busy figuring out how best to go about pushing the "deal" he reached on Monday morning in Brussels through parliament, EU finance ministers are scrambling to put together billions in bridge financing that will hold Athens over until the activation of the ESM program which is likely at least four months away. Although it's as yet unclear which "least bad" option is preferable for Greece's external debt, Wolfgang Schaeuble has an idea for how the country might pay public sector employees.
Despite the euphoria in global equity markets, The FT's Wolfgang Munchau - once one of the keenest euro enthusiasts - warns regime change is coming in Europe. The actions of the creditors has "destroyed the eurozone as we know it and demolished the idea of a monetary union as a step towards a democratic political union," Munchau exclaims, fearing they have "demoted the eurozone into a toxic fixed exchange-rate system, with a shared single currency, run in the interests of Germany, held together by the threat of absolute destitution for those who challenge the prevailing order." He concludes rather ominously, "we will soon be asking ourselves whether this new eurozone, in which the strong push around the weak, can be sustainable."
Now that Greece has capitulated and offered up its sovereignty in what can only be described as an unconditional surrender to Berlin and Brussels, here's what's next for the country, the government, and the Greek people.
Deal Struck Following Total Capitulation By Tsipras: Market Awaits Greek Reaction To Draconian Deal TermsSubmitted by Tyler Durden on 07/13/2015 06:16 -0400
Just around 9am CET, after a 17-hour mammoth all-night session, Greece did manage to cobble together a "deal" if one may call this latest embarrassing can-kicking that, which was nothing short of total capitulation by Tsipras. As part of the deal, Greece "surrendered to European demands for immediate action to qualify for up to 86 billion euros ($95 billion) of aid Greece needs to stay in the euro" in the words of Bloomberg.
The one undeniable truth about the debt drama in Greece is that each of the conventional narratives - financial, political and historical - has some claim of legitimacy. These facts matter not only because contagion from Greek debt defaults may ripple in dangerous ways through the financial system, but because they are also true for many other members of the Eurozone. The Euro is a fatally-flawed monetary concept and what we now seeing playing out was eminently predictable from the start.
Initially it was just an unconfirmed rumor circulating in the German FAS media that the local FinMin had proposed a "temporary Grexit" option. It now appears that this was not only not a rumor, but Schauble's sentiment is contagious: moments ago Finnish broadcaster MTV reported that first Finland, and then the Eurozone's smaller, if somewhat more solvent nations, Estonia, Lithuania, Slovakia, Slovenia and even the Netherlands, support the German position on temporarily suspending Greece' Euro membership.
Tsipras betrayed the public trust last night when we rammed through a draft proposal for a Third Greek bailout, one which would push total Greek Debt/GDP over 200%, which the Greek population overwhelming rejected in a democratic vote last weekend. And now, it is up to Europe to decide if it will trust the Greek government, which clearly has no problem lying to anyone, to implement reforms which Greece has been unable to effect for over 5 years.
Since 1982, the entire market has been nothing but one massive slow-motion leveraged buyout. This places the SEC right up there with the Federal Reserve in market manipulation credentials.
Despite endless assurances that the Greek debt crisis is contained, the reality is that the ragin' contagion of debt crises will spread not just to other deeply indebted nations but to the mercantilist economies that depend on selling goods to borrowers. Strip out the borrowing, and you strip out most of the customers for German, Dutch and Chinese goods.
The Greek D-(efault) day has arrived, and with it so has quarter-end window dressing for many underwater hedge funds (recall the S&P is now red for the 2015) which means the rumor mill today will be off the charts. And sure enough, less than an hour ago, futures exploded higher as did the EURUSD, following another "report/rumor" of a last minute detente between Greece and the Troika when Greek Ekahtimerini said that "Tsipras is reconsidering the last-ditch offer made by European Commission President Jean-Claude Juncker, sources have told Kathimerini."
ECB Strikes Back: Threatens With Greek Deposit Haircut If And When ELA Found To Be "Illegal" On WednesdaySubmitted by Tyler Durden on 06/29/2015 13:34 -0400
The threats are flying fast and furious now. Moments after the WSJ quoted a Greek official as saying that Greece will not make its IMF bond payment, the ECB struck back when Bloomberg reported that the ECB would review the legality of Greek aid should there not be a deal, i.e., on July 1 post an IMF default. According to Austrian central bank Governor and ECB member, Ewald Nowotny, on Wednesday’s governing council meeting the central bank will decide whether it can continue to provide emergency support for Greece once current bailout program expires June 30, as the Wiener Zeitung originally reported.