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Greek Default Risk Soars As "Independent" ECB Dictates Greek Policy... Or Else
Despite stressing time and again that the ECB cannot dictate policy within individual nation states in Europe, Reuters reports Draghi's henchmen are playing 'bad cop' to Germany's 'good cop' for now as they threaten the withdrawal of Greek financial system funding if reforms are not carried out post election. Greek stocks are falling once again (led by the banks) and default risk has soared, with 5Y CDS +250bps at 1555bps.
Greek banks' access to European Central Bank funding beyond February will depend on Athens successfully completing a final bailout review and reaching a deal on a follow-up plan with its EU/IMF lenders, the ECB said on Thursday.
The statement was the clearest warning yet that Athens cannot expect to rely on ECB funding if it reneges on its obligations under the 240 billion euro bailout program, the prospect of which has grown as Greece prepares for snap polls.
Opinion polls show leftist party Syriza poised to win the Jan. 25 election. The party has promised to cancel the austerity terms of the bailout and demand a renegotiation of debt.
Hammered by the country's prolonged economic crisis, Greek banks have reduced their exposure to ECB funding in recent months but still depend on the central bank for liquidity.
The ECB has helped out Greek banks by exempting them from requirements on the collateral it accepts for access to funding.
"The continuation of the waiver is based on the technical extension of the European Financial Stability Facility program until the end of February 2015 and the existence of an International Monetary Fund program," an ECB spokesperson said in a statement.
"It is also based on the assumption of a successful conclusion of the current review and an agreement on a follow-up arrangement between the Greek authorities and the European Commission, in liaison with the ECB, and the IMF."
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Greece is Hell(enic) on Earth!
XGDFTW!
http://img846.imageshack.us/img846/8647/tsirpasxgdftw0hedge.jpg
Would be interesting to know exactly how much of the monthly ECB welfare stipend to Greece actually lands on main street vs. goes right back out the door to pay bondholders...obscene. Bet it is 90% with only 10% going to keep official offices open and to pay legislators while unemployment and the economy degrades.
Those cats need to dye their hair blonde....and walk like Icelanders.
It's called "Greek-Style!".
This is what happens when morons* build a currency union, and hand it over to imbeciles* to maintain it.
*Don't mean to offend morons and imbeciles, respectivly.
Just go over there, face to face, and yell "Are you trying to be a moron you idiot? Works for me every time.
An Idiot is dumber than a Moron. Lower IQ.
nobody can beat a neo-con in dumbness.
If they do lose Greece the ECB must find another playground where they can go for their Sex parties.
It should be nothing for them to do this to another Country.
I hear Italy has alot of Prostitutes already so that may be their next slave country, it is almost there now.
And it will surely help the unemployment problem.
USisCorrupt, please provide for some links about those sex parties. never heard about ECB sex parties, before. or is this another case of projection?
The problem with currency unions is that their core concept is not that different from that of a soviet collective farm.
nice theory. care to expand? perhaps with some... connection to reality? many people here often moan about the FED being private. are you suggesting the ECB is too much "in the hands of the state"? or are you just playing the game of connecting symbols without meaning?
Currency unions dont work because each state tries to extract value from other states in the union. No one is willing to add value to that currency. Which state should reduce their power base for the good of the union? Or its like tieing a bunch of cats by the tail and seeing what direction they will go.
I still don't see any connection to reality. how about a clear example? like the ECB? if your discourse on value is valid, where is the price inflation?
How about France refusing to limit its budget deficit to 3 percent ? Absence of price inflation does not invalidate what he says. What would the EUR/USD exchange rate be if all countries performed like Germany ?
naughty, naughty France, staying at 4% of budget deficit instead of 3%. that's a (1%) difference of something like 28 or 29 billion, isn't it? isn't that small fry, in the grand scheme of things?
no, but what does validate what he is saying? the fact that in the last two years the ECB "reverse-printed" what it actually lent, not printed, by one cool trillion?
EURUSD? it's supposed to be the greatest, most liquid and deep market of the whole world. the hardest to tamper with. and yet, I have to ask you if you believe in the "market correctness" of the EURUSD. or of the gold price
in theory, your question about performance is very good. now have a look at the US, and tell me: What is performance? Currency valuations don't seem to be connected neither with balanced budgets nor with a positive balance of trade, nor with any other thing connected with the real economy, or fundamentals. which is a current theme of ZH, isn't it?
in fact, leveraging, de-leveraging and carry trade move currencies more then anything else, including FX manipulation and speculation. makes sense, doesn't it?
currency is more used as building blocks for debt pyramids then for anything related to production and trade. (thank you, megabanks)
so what would the EURUSD do if all eurozone countries would be like Germany? perhaps... nothing differently?
(perhaps Urban Redneck is right, and if I try to draw his thought to conclusion we need two currencies in each country: one for production and trade, and one for credit/debt)
not sure whether you are dazzling me with brilliance or baffling me with bullshit now, Ghordius :-)
I need my brain watts for something else right now, but will certainly try to understand your post better later.
thanks
"... that in the last two years the ECB "reverse-printed" what it actually lent, not printed, by one cool trillion? ..."
Surely you realize that 'lending' in a fractional reserve fiat system is effectively the very same thing as 'printing'? In both cases you invent digits without having the cash to lend out, you created a liability measured in units of Euros. So how is ECB lending a trillion 'reverse-printing'? You've inflated the paper.
of course I realize that a CB lending to banks is not that much different from "printing", and damned all that "sterilized" talk
but there it is. the ECB had a balance sheet that was one trillion higher, two years ago. what is the word for that? "de-printing"? "un-printing"?
we talk a lot about the theory that if you print, your currency is worth less. inversely, if you shrink your CB's balance sheet, what is supposed to happen? compared to what has happened?
the whole thing is so damn preposterous that it has not even surfaced the collective understanding of ZH. and yet there it is. google "shrinking ECB balance sheet"
I technicolor yawn and vomit up a 20 minute old toffee apple from the carnival, but you immediately eat it all to clean up the mess (hey, yer a neat-freak), and we're both 'OK' with this?
Question 1: What if said toffee apple gave me severe food poisoning, and I go into toxic-shock, and am not able to help you if you subsequently get sick, as well?
Question 2: Has the toffee apple really unprinted, and are there no unintended consequences?
excellent reply, Element. I think you missed my point, but yes, I agree
I did get your main point also. ;)
"(perhaps Urban Redneck is right, and if I try to draw his thought to conclusion we need twocurrencies in each country: one for production and trade, and one for credit/debt) "
Excellent discussion!
Considering an assault on the Triffin Dilemma? I would posit that there is an association between 'government debt' -which I continue to vociferously maintain is NOT debt at all- and speculative banking activity concentrated at the largest commercial institutions, including such non-banks as General Electric and General Motors and Apple which all act in some respects as Investment Banks/Hedge Funds whether openly as with Ally Financial in the case of GM, or as does Apple with it's shadowy Nevada mega-fund Braeburn Capital and high-interest rate vendor financing.
In an industrial age there might be a need for industrial money.
This industrial money would not be comensurate with human capital/labor money as it functions at an entirely different order of magnitude just as industrial capacity functions at an entirely different order of magnitude to human labor capacity.
I've often assaulted the Triffin Dilemma. as a side remark, the Babylonian, Hebrew and Greek debt jubilees were on non-commercial debt only
real trade and production had seldom a problem with debt. consumption and households, often, as well as... "financials"
not that I completely agree with him either. There is certainly some truth in what he says, but he puts it in too absolute terms. ( "don' t work", "no one" )
from a Neo-Keynesian point of view, absolutely moronic and imbecilic, I fully agree. Dr. Krugman agrees, too. (damn those balanced budgets which only starve honest banksters. damn this trickle of net issuances/s)
meanwhile, re: the article: since only one quarter of the Greek debt is on the market (and three quarter is not, and does not pay interest until 2023), how relevant are those damn CDSs?
From back in 2012, "No payout on Greek CDS insurance, rules ISDA".
Why would it be any different this time? The big banks get to decide whether it's worth it to them, before deciding to pay out anyway. Heads, I win. Tails, I win.
http://www.telegraph.co.uk/finance/financialcrisis/9115598/No-payout-on-...
Leonard Cohen's never been this relevant:
Everybody knows that the dice are loaded
Everybody rolls with their fingers crossed
Everybody knows that the war is over
Everybody knows the good guys lost
Everybody knows the fight was fixed
The poor stay poor, the rich get rich
That's how it goes
Everybody knows
outdated and pre PSI but I'm sure not much has changed. your 90% number is about right
http://www.zerohedge.com/news/where-does-greek-bailout-money-go
http://www.attac.at/news/detailansicht/datum/2013/06/17/greek-bail-out-7...
http://www.nytimes.com/2012/05/30/business/global/athens-no-longer-sees-...
and much more
From 2 year old posts, it was 94% towards interest, can't find the reference now. Bailing out Greece = subsidy to French and German banks. Bet you didn't know that? /sarc
dup
End it Already !
Time for Germany to go their own way, and send Merkel packing. The IMF needs her.
Our problem: Hardly anyone better will replace her. All those leading politicians seem to be in the pocket of the Anglo-American empire somehow. So we´ll keep her for the time being.
This. The crisis of confidence which centrist parties of both right and left face is that they've been found to be too beholden to powerful (typically corporate) interests. As a result, their credibility now lies in shambles in the eyes of large swaths of the electorate, and former fringe groups are entering the mainstream in response. Germany has so far been an exception, but here too the AfD is starting to surge in polls.
*kaboom*
don't worry about the cds sellers, they will NEVER UNDER NO CIRCUMSTANCES HAVE TO PONY UP.
Now you tell me....I've got a whole backroom full of that crap.
would you like to buy some mortgage insurance with that cds? YOU NEED MOAR INSURANCE BITCHEZ. heads i win, tails the taxpayers lose.
Heads they privatize the profits, and tails they socialize the losses.
Of course not. Pocket the profit, "socialize" the losses. It's a no brainer.
Just sticking to one single fucking rule would fix all of the problems in the financial sector: NO BAIL OUT!!!!
Oops!
Meanwhile in Ireland national debt increases by 1000 Euros per second, 185 Billion Euros total, that's a lot for a small country and will probably never be repaid. All this to satisfy a central bank philosophy which has been proven to kill economies. World economy is doomed until it can get rid of the death grip of US, Goldman, IMF stranglehold.
funny, I remember waking up in an universe where Ireland had a Debt-to-GDP of comfortable 60%... and then it went on and bailed out a bank called Anglo-Irish
which led to 120%. in my universe... the whole thing had nothing to do with "central bank philosophy". actually, it even had nothing to do with central banks, period
It has EVERYTHING to do with the central bank non regulation of our chums no risk fiasco keep us happy incompetence.
ah, ok, now I get your argument. the regulator at that time was the Irish Central Bank. if you put it in those terms, yes, it could have done something
Carrot and baton strategy; one day Mutti blows cold the next day ECB blows hot.
Its gonna be a roller coaster upto January 25.
Look at it this way falak, party claims will exit, wins vote, discovers/realizes it can not and must not leave or else, so must now somehow tell electorate that leaving is a non-option ... thoughts?
Reminds me of Hollande when he got elected and said : My main opponent during my mandate will be the international banks and finance. He said that and then...did nothing ! Let his finance minister align France to Mutti.
I don't see Styrzia doing anything different if they win. There is always the army in Greece, if the left goes bonkers...
Sad, but true. ECB/Mutti will continue to kick can until it disappears.
Yup, I think that's it, no real change, some writedown maybe.
. . . and so it's a final final bailout review you say? Well let me consult my financial advisers. Get Lloyd on the phone sweetheart.
If you BTFD on this one, then you are a ________________________.
fucking moron.
This is threat #5?
Spineless threats.
Just fork over the bailout to Greece and be quiet again until they need another bailout.
Threat #5 is beginning to resemble Mambo #5
Another fine ECB example.
"That said, we expect a modest program of 500-600 bln euros, and for the national central banks to bear the risk buy keeping the purchased bonds on their balance sheets, unlike the SMP bond buying program under Trichet. We suspect that the national central banks will not buy instruments with negative yields. This will force the core countries to buy longer maturities than the periphery, which also has implications for the relative risks and yield curves."
Who is the ECB forcing(?) the NCBs to buy gouverment debt ?
Who is the ECB that they can force the risk onto the taxpayer ?
What if a gouverment or NCB says "no thank you" ?
What has this to do with a united Europe ?
Fuck the ECB.
@ SpanisGoop
Don't you just find it amazing all this imposition being signed into law ( zero consultation ) in the time it takes to get fitted for a new suit?
I'm not sure why you think that the ECB could "force" one or more of the NCBs to do anything
The ECB must think it.
Just a suggestion made by the ECB to NCBs doesn't sound like a solid "save the euro" plan to me.
But what is new...
who votes in ECB meetings? the NCB governors. for all purposes, the NCB governors are the ECB. the whole thing is an alliance of NCBs
things are different across the pond, because the NY-FED can yank the chain of the other FEDs, and has the US Treasury to help to yank that chain
You're right, Ghordius. One doesn't need to force a willing whore to spread her legs.
now this is perhaps a more realistic point of view
Lever up club med countries and threaten your sugar daddy, the ECB, your going to leave the EU.
It always works. They get scared, make noise and then hand over the bailout.
Sounds like ye olde "no cop routine" to me.
Glad everyone finally got up this morning and forwarded the mail.
First thing they should do is to put a warrent out for the arrest of Draghi and Blankfein.
Emerging markets are sitting on 12 year support...danger ahead!
http://www.goldsqueeze.com/analysis/emerging-markets-dangerously-close-t...
I heared the rumor that from now on all the Greek (and not only those) votes from the next elections are going to be counted at the ECB headquarters in Frankfurt.
/euro emergency measures/sarc
Greek papers report Germans are infiltrating the country and registering to vote...
That's really a beautiful 5 year CDS chart. Looks like a fucking Rembrandt actually.
http://www.brookings.edu/blogs/up-front/posts/2015/01/05-greece-assessme...
Interesting article on Syriza. Seems to think Tsipras will be outmaneuvered or has few options and could be out of power inside of a year.
The Hellenes are occupied. The Deutschen Volk are occupied. Euro-America is....
A Greek exit from the EU is inevitable
http://www.globaldeflationnews.com/grexit-looms-possible-as-snap-electio...
So,why hasn't the EU put anybody from Goldman Sachs in jail for setting up the scam that allowed Greece into the Eurozone?Instead they let the Goldman Sachs economic con artists to continue to run it!It has to be a stupid plan to destroy the economic union because only morons could believe the BS coming out of Brussels.