Goldman Warns Greeks Of "Cyprus-Style Prolonged Bank Holiday" If They "Vote Wrong"

Tyler Durden's picture

Funny what a difference two months make. Back on October 4, we wrote "Here We Go Again: Greece Will Be In Default Within 15 Months, S&P Warns" and... nobody cared as the Greek stock market meltup continued. Now, after the biggest three-day rout in Greek stock market history (or about 30% lower), and with the overhyped, oversold, oversusbcribed recent Greek 5 Year bond issue available in the open market some 16 points lower, and suddenly everyone cares. Including Goldman Sachs.

Overnight the bank with the $58 trillion in derivative exposure issued a note "From GRecovery to GRelapse" which is quite absent on the usual optimism, cheerfulness and happy-ending we have grown to expect from the bank whose former employee is in charge of the European printing press. Here is the punchline: "In the event of a severe Greek government clash with international lenders, interruption of liquidity provision to Greek banks by the ECB could potentially even lead to a Cyprus-style prolonged “bank holiday”. And market fears for potential Euro-exit risks could rise at that point."

Dear Greeks, "don't vote wrong" as EU's Juncker urges you - you have been warned.

Here is the full note.

Why Have Greek Assets Tumbled?

Over the last three months, Greek assets have come under intense selling pressure. The 10y Greek government bond trades at a yield of 9.1% compared to 5.5% in September and the Athens stock exchange is trading 32% lower over the same time-frame (and 40% below the post-crisis peak). As we have written extensively, this deterioration in market conditions has taken place despite an ongoing improvement in macroeconomic indicators. Markets have sold off on the back of election uncertainty ahead of a key year for Greece’s recovery process.

Greece needs official sector funding to pass the 2015 funding hump and ensure financial stability.

Indeed 2015 is a pivotal year for Greece. The most recent growth data prints suggest that the recovery may be gaining momentum. But financial risks still lurk, which could destabilize the Greek economy back into recession. More specifically, 2015 is the last year the government faces large financing needs, nearing €24bn (net of the established primary surplus). Part of those needs may be covered with domestic resources (see Box 1). However, additional funds will likely be required to ensure the government is able to meet its liabilities. As discussed in Box 1, the additional funds required may range between €6bn and €15bn depending on different economic assumptions.

It is important to note that from 2016 onwards, overall financing needs become a lot more manageable (compared to €24bn in 2015) - at or below €10bn until 2022 (lower primary surpluses or higher bond yields than the ones provisioned in the program could push these calculations up somewhat).

With government bond yields at prohibitively high levels, the Greek government will require official sector financing to provide the additional funds for 2015. €7.1bn of IMF funds are currently available as part of the Greek assistance program under relevant conditionality. In addition, the Eurogroup decided on Monday to grant Greece a precautionary credit line (ECCL) provided Greece completes the ongoing review by end of February. There are three main items to be agreed on for the current review to reach a conclusion: a) further reform in labor markets and in union legislation, b) further pension system reform, and c) further budget cuts. Greece is also likely stay under close economic supervision thereafter.

Political complications arise with the presidential vote.

According to the Greek constitution, the parliament needs to elect a President of the Hellenic Republic every five years. The presidential vote requires an extended majority. The term of the incumbent, President Karolos Papoulias, ends in early March 2015. The parliament would need to start the process of electing a new president at least one month in advance – by early February the latest. Should the parliament fail to elect a president, general elections would need to be held.

Due to a tight timeframe between the new deadline for completion of the program review and the deadline for the presidential election, the government decided to speed up the voting process. Three votes will take place – first two on the 17th and the 23rd of December respectively. The first two votes require a majority of 200 votes, which is unlikely to be achieved given the current parliamentary balances. The one that essentially matters is the third and final one on the 29th of December, where the Greek government would need to find 180 votes in the current parliament (of 300 members) to back their presidential candidate. As things stand, the government majority does not suffice to elect a president and avoid elections. 25 independent MPs and MPs from small parties would need to consent to meet the tally.

In the event that the parliament elects a president, the government and the troika will likely resume negotiations and an agreement is likely to be found. Financial risks would decline and Greek assets would likely rally.

In the event that the parliament fails to elect a president, general elections would be held and market uncertainty/pressures would extend. At this stage it is important to understand that market pressures are not linked to the democratic process of elections nor to a potential government change, whatever the ensuing government formation may be. They are linked to the risk of policy discontinuity and a severe clash between Greece and international lenders. More specifically, we think the room for Greece to meaningfully backtrack from the reforms that have already been implemented is very limited. Any such attempt would lead to an interruption of official financing to Greece.

Examining the downside scenario.

To be sure, even in the event of a government change, there is room for a cooperative solution between Greece and Europe. Greece has made significant reform progress between 2012 and the gap between what has already been implemented and what remains to be done is not insurmountable.

Also, the incentives for a clash are not there. For instance any Greek government would likely want to capitalize on the momentum that the economy is building on the activity front, rather than trigger a disruptive capital flight that would lead Greece to a double–dip recession. In addition, given that more than 80% of Greek debt is held by the official sector and given that any OSI would be feasible only as part of an agreement with the Euro-area, there is an incentive for a Greek government to pursue cooperative solutions.

However, the history of the Euro-area crisis has shown that the probability of an “accident” can never be dismissed, when it comes to intra-EMU politics. And it is important for markets to be able to understand and quantify the aspects of a potential downside scenario, where official financing to Greece is interrupted.
The Biggest Risk is an Interruption of the Funding of Greek Banks by The ECB.

Pressing as the government refinancing schedule may look on the surface, it is unlikely to become a real issue as long as the ECB stands behind the Greek banking system. In fact, refinancing became a lot more pressing between 2011 and 2012. But financing needs were met despite the impasse in negotiations between Greece and international lenders – partly via the issuance of T-bills repoable at the ECB by Greek banks. Such methods can always be revisited at times of extreme need.

But herein lies the main risk for Greece. The economy needs the only lender of last resort to the banking system to maintain ample provision of liquidity. And this is not just because banks may require resources to help reduce future refinancing risks for the sovereign. But also because banks are already reliant on government issued or government guaranteed securities to maintain the current levels of liquidity constant.

And this risk can become more pressing from a timing perspective. At the heat of the Greek crisis, there was evident deposit and broader capital flight, which Greek banks helped accommodate with ECB’s help via the ELA facility. In the event of a severe Greek government clash with international lenders, interruption of liquidity provision to Greek banks by the ECB could potentially even lead to a Cyprus-style prolonged “bank holiday”. And market fears for potential Euro-exit risks could rise at that point.

Will European assets be affected?

Outside the spectrum of Greek assets, the main question becomes whether Euro-area assets (such as peripheral bonds, the EUR etc) as well as global assets (equities) are likely to be affected by the Greek crisis. We think this is unlikely. Should financial pressures from a Greece related shock hit the peripheral countries formerly in a program (Ireland & Portugal), there may be special arrangements to avert the transmission of the shock locally. Moreover, in our view, the ECB is likely to engage in outright market purchases of sovereign debt securities as part of their monetary policy operations in H12015. We do not think that the volatility from Greece is likely to derail the QE decision.

There is of course the risk of broader contagion, should the participation of Greece in EMU once again be put in doubt. But we think this is a low probability event as the majority of the Greek population is still in favor of EMU participation and as all major political parties in Greece currently deem Euro-exit as undesirable.

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Haus-Targaryen's picture

Fuck Goldman Sachs. 

Arius's picture

Believe in GOD and leave this world to the goldmans ...

Stackers's picture

Anyone moves and the nigger gets it

strannick's picture

Night of the living loansharks.

"Imagine there's no bankers, it's easy if you try,

No corrupt crony-tocracy, no helicopter money from the sky"

spastic_colon's picture

now everyone knows why it was so important to ram the derivatives bailout into the won't be a US bank that triggers it....we all will also be funding the IMF even more.....TPTB knows something is up

NotApplicable's picture

This threat reminds me of the first TARP vote.

"Give us $700B or the market gets it!"


yellowsub's picture

If it was really just $700 billion was all that demanded at that time...

wallstreetaposteriori's picture

prolonged bank holiday.... the hellenic's don't have any money in the banks.... like anyone really trust Alpha bank...pff shut them down and watch the cheers!

mjcOH1's picture

"Dear Greeks, "don't vote wrong" as EU's Juncker urges you - you have been warned."

They'll vote to ditch their debt.   They're 'entitled'.   Their creditors will shut off the taps.

Not so tough choices ensue (as previously) ..... spend within our means or STFU and borrow more money.
Apologies follow.   'Borrow more money' guy wins next election by overwhelming majority.    'Entitled' gauge how long they have to STFU to borrow another year of operating cash.

Rinse.   Repeat.

Ozy_mandias's picture

If you are an average Greek how can you keep any significant money in the bank knowing this? Would you not want some insurance? Does anyone know of any numbers of physical sales in Greece? I sure as shit would have cashed it all in by now... Just sayin

Ghordius's picture

and this reminds me how much pressure was on europe to "do the same". and then of course the same on "printing"

anyway, back to the Squid and Greece (that they have the corporate courage of talking about Greece after what they have done there never ceases to amaze me):

"It is important to note that from 2016 onwards, overall financing needs become a lot more manageable (compared to €24bn in 2015) - at or below €10bn until 2022 (lower primary surpluses or higher bond yields than the ones provisioned in the program could push these calculations up somewhat)."

I have to admit The Vampire Squid Firmly Attached To The Face Of Humanity has a point there. But it's a difficult point to sell, politically. Compared to "balanced budgets", for example

a political discussion that should be on debt restructuring or not constantly shifts to the easier mantras of "spend more then you make" or "spend less then you make"

starring, on the left, the "spend more" and on the right "spend less". which one do you prefer, at home?

GetZeeGold's picture



They're just crazy enough to listen to Blankfein.......will someone help those poor people?

Jaspergers's picture

Nobody in Greece keeps more money in the bank than they are willing to lose. Anyone with cash has either bought land or made it disappear. That said, a freeze will suck for businesses.

Payne's picture

Greece the Dawn of a New Golden Age, a place where every sentence is ended with the Phrase "Screw the Bankers "

XqWretch's picture

sort of like a "Golden Dawn" ?

asteroids's picture

Greece fell into the black hole with the second bailout. It became mathematically impossible to pay off the debt. A real default is inevitable. Do they leave the Euro and print Drachmas? I hope so. Do they do an Iceland and say fuck you to various banks? I hope so too.

TeamDepends's picture

Do what he say, do what he say!!!!!

luckylongshot's picture

The problem is that threats only work on people who have something to lose. 

Harrison's picture

Beware of Goldmanites bearing gifts.

SpanishInquisition's picture

Dear Serfs,

You can vote for anyone you want, so long as you vote for my selected candidates.

Lord Goldman


"Fuck Goldman Sachs" and the bus they rolled in on.

there, fixed it.

Dre4dwolf's picture

Lets just put it this way, no matter what way they vote, they are voting wrong and will be robbed.

The false presented choice is just laying the groundwork for the inevitable robbery.

localizer's picture

Actually the robbery has already occurred... soon there will be nothing else to "rob"... some nice islands to be sold off yet...

skistroni's picture

The islands and all the rest will be sold off sooner or later. We will soon be voting only to decide who will manage the sales.

AccreditedEYE's picture

Will the Cradle of Democracy show these fuckers who's in charge? Stand up, Greece, and start pulling yourself out of the Abyss.

NoDebt's picture

I gave up on that after the first bailout.  The Squid's tentacles have completely enveloped them.  The illusion they have any choice in this is just that- an illusion.

Arius's picture

"We may have democracy, or we may have wealth concentrated in the hands of a few, but we cannot have both."

Supreme Court Justice Louis Brandeis


there you have it ... we do not have democracy .... the system we live in now is anything but democracy .... dont let the mirrors foul you... i know is hard being told the opposite daily.



They have to kill even the history .... thats what makes Greece the target unfortunately

edotabin's picture

"They have to kill even the history .... thats what makes Greece the target unfortunately"

Very interesting as there is a bit of a disconnect there.  Today's Greeks have these fantasies about somehow being similar to Plato, Aristotle etc. They go on incessantly about their forefathers without ever stopping to look at their present day situation and how much they have devolved since those days. I know Squidman is trying very hard to kill all ties with history but they will have to try a lot harder simply because the link is no longer reality. It is a fantasy, a fetish if you will. 400 years of Turkish occupation couldn't kill it, world wars couldn't kill it, a civil war couldn't kill it  etc. 

So, ironically,  it may be this fantasy/fetish that eventually saves them from the tentacles of Squidman. In order for that to happen, however, the Greeks will have to eventually  re-establish some true links to their forefathers instead of constantly speaking of their greatness but not having any substance themselves. Talk is cheap and things are always easier said than done. You wanna kill Squidman? Stop talking about about the past and instead strive to once again create the greatness.

skistroni's picture

I have a feeling that Democracy was never meant for nations of today's size and for social formations of more than a few hundred thousand. Ancient Athens was contained geographically and had at max 200K-300K people according to the historians. Whatever we have now is very hard to call Democracy. That's why I've given up on all high hopes of Greek people writing history again. We could however provide the rest of the workd a glimpse of what is coming their way too, Cyprus was the beginning. 

JustObserving's picture

Obey your Goldman Sachs masters,, Greeks, or poverty and war beckons.  After all, it was chicanery engineered by Goldman that allowed you to join the European Union.

One deal created by Goldman Sachs helped obscure billions in debt from the budget overseers in Brussels.

Kaiser Sousa's picture

u know i would love to get together a bunch of crackheads and pay them $20 each to hang out in front of Goldmans headquarters and punch in the face as many employees as possible...

death to the MoneyChangers.

RaceToTheBottom's picture

20$ per.  Goldman already has the police in pocket.  Gonna need a lot of them punchers....

I'm in, whose gathering the dough?

LawsofPhysics's picture

When they cut the pensions of those police, your "problem" is solved.  They are fighting the laws of Nature and physics now...

You know who I am betting on.

gold-is-not-dead's picture

Crackheads for Justice, punch your favourite thief and recieve $20. Kreatin free of charge.

papaswamp's picture

Vote the way we say or no more free vacations provided by the German worker!!

CaptainObvious's picture

Like Cyprus is going to work in Greece.  They took all their fiat out of the bank ages ago and are now actively engaged in the barter system.  Go ahead, Goldman.  You can't get blood from a stone.

SmallerGovNow2's picture

If it ain't out then this "threat" will ensure that there's a run on whatever is left...

NotApplicable's picture

Any idea how much foreign trade they're reliant upon? I see that as the only real threat from the banksters, at this point.

Brazen Heist's picture

We want certain outcomes, and if we don't get them, we will throw a tantrum and make them vote the way we want to. Because freedom.

Yours truly, the Bilderbergs

jmcadg's picture

Scotland scared, Switzerland Scared, now Greece.


I salute the Catalonians, true people.

Fix-ItSilly's picture

Study President Jackson's success vs. US Bank II.  Short term pain, a century of gain.

unplugged's picture


“Whoever controls the volume of money in our country is absolute master of all industry and commerce…and when you realize that the entire system is very easily controlled, one way or another, by few powerful men at the top, you will not have to be told how periods of inflation and depression originate.

 – President James Garfield, 2 weeks before his assassination.