Happy New Year Germany: Greece Needs A New Bailout

Tyler Durden's picture

When it comes to the main sovereign story of 2011 and 2012, namely the endless bailout of Greece, now in its third iteration, the conventional wisdom is that courtesy of the near elimination of the country's private sovereign debt and the fact that its official foreign debt held by benevolent taxpayer funded globalist powers (IMF, ECB, EFSF) has been mostly converted into a zero-coupon, perpetual piece of paper, the country is fine. After all it has no debt interest expense to finance, and the only shortfall it has to plug is that created by its primary budget deficit (which as we showed earlier is "improving" on a year over year basis not because the economy is improving, but because the Greek government is simply refusing to pay its bills). So there is nothing more to do but sit back and wait while the economy slowly recovers, the unprecedented internal imbalance with Germany is gradually aligned, are the unemployment rate drops, (while hoping that the population does not die out first) right? Wrong.

What everyone is forgetting is that the heart of the Greek problem is not the Greek sovereign debt, and certainly not the rate of interest, but the fact that Greece's financial system, i.e. its banks, are utterly insolvent: and with the private banking system no longer creating money by handing out loans to a just as insolvent broader population (and the ECB certainly no longer injecting direct liquidity into the Greek economy) there is little that supports any form of economic growth (the Austrians out there will immediately recognize the problem: if money is not being created, the economy is not "growing", period). After all there is a reason why of the countless billions in Greek bailouts, of which the majority was used primarily to fund interest and maturity payments to other banks such as Deutsche Bank, the biggest portion that remained on the ground in Greece never made it to the actual people, but served to prop up the Greek banks, some €50 billion.

What was this money used for? Simply said, to plug capitalization shortfalls arising from one of two things: i) a gigantic outflow of deposits from the local banking system, as Greek lost all confidence their money was safe in the local banks, which meant Greek banks had to promptly find the money to pay their depositors lest a countrywide bank run developed which would then result in a Europe-wide financial panic, and ii) the soaring notional amount of non-performing "bad" loans, which remained as placeholders on the bank balance sheets, market at whatever mythical number the local accounts let the banks mark them at, but which generated zero inbound cash flows. Which, incidentally, would mean that deposits were undercollaterialized, and the realization that NPL levels are stratospheric and going higher, would lead to i) and the appropriate dire consequences.

Which brings us to the topic of today's post.

Moments ago Kathimerini reported that in 2012, the amount of non-performing loans has exploded by a laughable amount, rising some 50% from December 2011, when it was "only" 16% and stood at a gargantuan 24% last month (indicatively, in the US this would mean that some $1.7 trillion in loans was nonperforming). And therein lies the rub, because as Kathiermini prudently notes, the "bad loans come to a considerable 55 billion euros. This means that the sum of NPLs already exceeds the total funds set aside for the recapitalization of the local credit system, which amounts to €50 billion."


This means that not only every single euro allotted for the bailout of the Greek banking sector has been used up to plug a gaping NPL shortfall, but already Greece is €5 billion short.

Sure enough, the last thing Kathimerini would want to do is give people the impression that, once again, their deposits are effectively impaired with the soothing proclamation that "there has been a notable improvement in economic conditions that is reflected in the significant slowdown in the rate of creation of new bad loans."

So 16% to 24% is a slow down? Maybe the fact that Greek unemployment is rising at "just" 1% of total each month is also a "notable improvement."

No, we doubt Kathimerini would be so audacious to proclaim the above chart of Greek unemployment as "notably improving". But that's a problem, because the level of NPL, the level of unemployment, and the general state of the economy (whose Q3 GDP imploded by 7.2%, the worst quarterly drop following a 6.7% GDP decline in Q1, and 6.3% in Q2) are closely linked, and one can't improve without the other. And usually the catalyst the drives an overall bounce in the economy is some endo- or exogenous source of money demand and creation (usually for nations in depression it involves war).

Absent that, there can be no improvement.

Which, following the preceding optimism, is precisely what the Kathimerini author admits: "However, unless the growth of new NPLs is contained, banks may need yet another recapitalization process at the end of 2013, the same sources say."

In other words, dear Germans, the country that you, and everyone else, though is now saved and needs no more bailouts, at least according to the current Finance Minister, not the previous one who now it appears was avoiding paying his taxes like the plague (ah yes, the Greek tax collections "issue" - a fun topic for another day), is already down €5 billion and in need of bailout Number 4.

Expect this news to be sprung on a witless Germany in the coming months, but most likely not before the Merkel reelection. After all the last thing Germany needs to understand is that the hundreds of billions "invested" to preserve the Eurozone have achieved precisely nothing, and the gaping black hole is bigger and blacker than ever before.

But at least the hedge funds who bought worthless Greek bonds at 15 cents on the euro and made three times their money in three month, are happy.

Everyone else, i.e. the Greek people, good luck. For the fourth time.

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Meatballs's picture

YAWN. Pull it already.

Zer0head's picture

+1 balls

and please someone lose the buddah spam poster


GetZeeGold's picture



This time please make it a really BIG2 bailout.

AldousHuxley's picture



Illegal Immigration Emerges as New Crisis for Greece


funny how illegal immigration and broke governments go together....it is because private economy demands less taxes via cash under the table


dlmaniac's picture

2013 is the year that France undeniably joins the PIIGS land. 

Spawn of Cagliostro's picture

So does that make the "P" silent in PFIIGS? 

Super Broccoli's picture

nah that will just make French PIIGS :-)

zorba THE GREEK's picture

We Greeks are getting thirsty again. 

We wish to drink your milkshake, Germany, so please pass the straw.

Matt's picture

Did anyone else hear the voice of Mr. Panos reading out the article title in their head?

Stuntgirl's picture

I'm glad I wasn't the only one. That felt weird for a bit.

From Germany With Love's picture

Do as you're told and shut up. ;)

jekyll island's picture

Damn, Greece needs a bailout?  Didn't see that coming.  

AldousHuxley's picture

they've managed to drag this out for a whole year.


europe finally getting a taste of euro UNION and socialism.

ZerOhead's picture

Wait... wait...

Silverstein needs to pick up some more Greek default swaps first...

Meatballs's picture

I'm glad somebody got it....

Tsar Pointless's picture

Pull what? My finger?

Sure. Go right ahead, be my guest.

ball-and-chain's picture

Greece is occupied by banksters.

My heart goes out to those poor folks.

The bloodsuckers are draining them dry.


GetZeeGold's picture



If marxism is the road to hell.....we're all for it.

ZerOhead's picture

He had better be careful... with all those veins popping he might suffer an aneurysm.

OT... May I wish Hillary's sadly dissolving bloodclot a speedy recovery...

kliguy38's picture

Bill's taking time off from humping at his Harlem office to stay home now and change her diapers and feed her strained bananas.......he thinks she will be ready for a run for the Whitehouse in two years.

AldousHuxley's picture

hillary is already 65. too old.


democrats getting rising star elizabeth warren ready to take over obama as 1st women president.



1000924014093's picture

Too bad Warren's an idiot--she's already reached the peak of her career as a junior Reid flunky.

BlueCheeseBandit's picture

She would also be our first Cherokee president :-P

hairball48's picture

democrats getting rising star elizabeth warren ready to take over obama as 1st women president.

Please tell us you left off the /sarc!!!

Muppet Pimp's picture

Nice rant, but really like 6 mos ago thinking.  Schiff knows whats up, berating the goofballs in DC has no bearing on anything.  If you don't get it by now, go back to msm.  Get real stuff is the message.  Depending on your level, that means different things.  Tyler has laid it all out ad nauseum infinitum.  He is not telling you lies.  If you think he is, and you have been here for more than 6 mos. then just forget it.  Go buy some earplugs, and go to the yahoo FB message boards.


That said, if it is your first day of venturing out beyond American Idol, you need to pay attention to what he is saying.  And if you are marginal and in a death spiral state, go somewhere better is my advice, you will be glad.

Dr. Engali's picture

I like Schiff. I wonder if he is in as big of a state of disbelief as I am in their ability to keep this ponzi going this long.

fonzannoon's picture

I have no doubt he is in disbelief at how painfully long this has gone on. 

fonzannoon's picture

kito we ard clearly bored and rigamortis is settling in. u gotta spice it up with a turkey sandwich offer or something.

kito's picture

Ok fonz, I bet you a sandwich that no country leaves the euro this year, the Dow breaks its all time high this year, gold doesn't break 2000 this year, the u.s doesn't get downgraded, the dollar finishes above 80, and that housing jumps at least 3 percent yoy.......

Just Ice's picture

Oh, just buy him the sandwich...

fonzannoon's picture

i would not touch any of those. I think they are all solid calls. bah nevermind with the sandwich. i think central planning is in firm control this year. 

you seem solid on 2015 being the year shit happens. why is that?

kito's picture

I read the Harbinger. 2015 is the year. Read it. You will understand..........

Water Is Wet's picture

"may need yet another recapitalization process at the end of 2013"

Yawn.  They don't even have to attempt to kick the can for about 10 months.  This is a non-story.

A Lunatic's picture

This is a lot like watching paint dry, only without the inebriating fumes.............

Hulk's picture

Paint dries about a million times faster than this shit is coming off...

Water Is Wet's picture

I believe you measure the decay of this shit in half-lifes, with scientific notation.

WmMcK's picture

How many 10th thicknesses do we need to attenuated this?

markar's picture

mehr EUR bitte Mutte

Cursive's picture

A recap at the end of 2013?  That's like, light years away.  BernanQE and DrahQE will invent some new maths and all will be well.

mrks's picture

Total unexpected. Really... Nobody could've seen that one one coming. Nobody!

Well, at least we can be sure the next bailout will work just as expected. After all, the next time it will certainly be different.

dirtyfiles's picture


Dr. Engali's picture

Like I said earlier.. It's Europe's turn for a couple of months. At least until Groundhog Day.

centerline's picture

Central Bank hot potato game.  Professionals only.

espirit's picture

Let them print Euros to cover.  After all it's just paper and ink.

Debts are never going to be re-paid in Ponzi World.

Jack Burton's picture

No amount of bailouts can save Greece. The bailouts are simply money given to Greece to pay to european banks to service rescue loans already made.

Greece as an economic entity is dead. It will stay dead as long as it must service debts it can not repay. Iceland would be a basket case if it had to service the debts it's banks wanted to force onto the soverign taxpayers. They refused and the economy recovered in a few years.

Greece is dead. Spain is dead. Italy is on the way to die. The money printing UK is still alive and kicking and printing the pound like bloody mad. The day the printing stops, the UK implodes into collapse and street riots. The Midlands burn in one night. London holds out as government troops are called in to shoot looters, but in the end a million rioters win out and burn Chelsea   to the ground taking mass casualties in to process. Finished there they take the dock lands transit trains to Canary Warf and start burning financial insitutions to the ground.