This page has been archived and commenting is disabled.
Greece: The Big Picture Update, And Why Deutsche Bank Thinks Europe Will Fold
The Greek situation summaries Greece by Deutsche Bank's George Saravelos have consistently been among the best in the entire sellside. His latest Greek update, which is a must read for anyone who hasn't been following the fluid developments out of southeast Europe, which fluctuate not on an hourly but on a minute basis, does not disappoint.
But while his summary of events is great, what is of far greater significance is his conclusion, namely that ultimately Europe will fold: "we consider the most likely outcome to be a Eurogroup offer of a new Third program" and "given that the current program expires this February the offer to negotiate a new Third program may provide political room for the government to sit on the negotiating table. At the same time such an offer is very likely to be attached to strict conditions, with the willingness to accommodate t-bill issuance an open question. Developments overnight suggest that this has become less likely, imposing maximum pressure on the government to reach agreement within a matter of weeks."
If DB is right, and if Europe folds, the question then is what concessions will the ECB and the Eurozone be prepared to give to Italy, Spain and all the other nations where anti-European sentiment has been on a tear in recent months, and especially in the aftermath of Syriza's stunning victory.
From Deutsche Bank
Greek Update
Over the last couple of weeks we have framed developments in Greece around three questions:
First, under what conditions would the Troika be willing to continue negotiating with Greece?
Second, does the Greek government accept these conditions?
Third, how does the ECB link Greek bank financing to program negotiation?
Yesterday evening we got an answer to the last question sooner than expected. The ECB no longer considers Greece to be under a program, and the rating waivers on Greek government-based collateral are being removed. We estimate that Greek bank funding at the ECB financing windows currently runs between 70-80bn EUR, of which approximately 30bn relies on AAA EFSF-based collateral. As a result the remaining funding (or about 50bn) will now have to shift to ELA from next week. Even if this decision is likely to have materialized when the program expired at the end of February, there are two broader implications.
First, the decision shows that the ECB is feeling increasingly uncomfortable providing financing to Greek banks while negotiations are under way. This in turn raises the more important question of how long and how large any ELA provision is going to last. ELA usage is subject to a cap that is under bi-weekly review and requires a 2/3 majority of Governing Council votes to be blocked. The government said that the cap was raised by 10bn this week to be reviewed after developments in the European Council and Eurogroup meetings in the next two weeks.
Second, the ECB decision shows that the ECB is very unlikely to accommodate increased t-bill issuance from the Greek government. There are currently two caps on t-bill usage. The first applies to total issuance and is currently set by the Troika at 15bn. The second applies to the t-bills that can be directly submitted to the ECB windows by Greek banks and currently stands at 3.5bn. The ECB kept this unchanged in yesterday's meeting. The 11.5bn of t-bills not submitted to the ECB are currently financed by other types of collateral.
Big picture, the above two developments are likely to further accelerate timelines and pressure on Greece. The government's strategy has been to secure a window between March (when the current program expires) and July (when a large GGB ECB redemption is due) over which to negotiate a new program. Time for this negotiating window would have been bought by both Troika and ECB willingness to accommodate increased t-bill issuance to pay for ongoing cash needs over the course of Q2. We have yet to hear from the Eurogroup on its willingness to raise the overall t-bill cap, but even if this materializes today's ECB decision signals rising discomfort for the central bank to accommodate this, even indirectly via other types of collateral.
This then leaves the remaining two questions above that need to be answered over the next two weeks: the conditions under which the Troika/Eurogroup would be willing to negotiate with the Greek side and the Greek government's response. The most confrontational outcome would be a Troika requirement that the current program review is completed, requiring a request from the Greek government to extend it before February 28th. A more conciliatory outcome would be an offer for negotiations on a new third program,** but accompanied by a pre-commitment (most probably written) by the Greek government to respect certain conditions. Irrespectively, the t-bill decision will be key: assuming the Troika and ECB are unwilling to approve higher issuance, the negotiations would have to be completed by the earliest of any potential ELA cap being hit due to deposit outflows or the Greek government running out of cash to pay ongoing budget needs. The exact timing of the latter remains unclear, but with Greek budget execution under very significant pressure due to the change in government and weakening economy this is unlikely to last beyond April.
The situation remains very fluid but as things stand we consider the most likely outcome to be a Eurogroup offer of a new Third program. Greece in any case has lost market access making ECCL eligibility unlikely, and given that the current program expires this February the offer to negotiate a new Third program may provide political room for the government to sit on the negotiating table. At the same time such an offer is very likely to be attached to strict conditions, with the willingness to accommodate t-bill issuance an open question. Developments overnight suggest that this has become less likely, imposing maximum pressure on the government to reach agreement within a matter of weeks.
* * *
Thursday February 5th - Eurogroup working group (EWG, the institution responsible for preparing Eurogroup meetings)
Thursday February 5th — Greek parliament opens, elects new speaker of the House
Saturday February 7-9th — Government presents legislative agenda to parliament, vote of confidence midnight Monday 9th
Wednesday February 11th – Likely t-bill auction to cover EUR 1.4bn maturity on 13th
Wednesday February 11th - potential emergency Eurogroup
Thursday February 12th – European Council of EU Leaders, Tsipras likely to meet Merkel on sidelines
Friday February 13th – Voting for new Greek President begins, EC Commissioner Avramopoulos most likely candidate, originating from New Democracy. Likely completed by second round on the following day requiring 151 MP majority
Monday February 16th – Eurogroup where Greece likely to be top of agenda, conditions for extension of program to be made explicit by now
Wednesday February 18th-19th- - Bi-weekly ELA review Saturday
February 28th – Current EFSF program expires
»
- 126348 reads
- Printer-friendly version
- Send to friend
- advertisements -
nuclear will never happen again, just fear mongering. greece is leaving the euro, spain, italy and portugal will follow, the EU is gone, just in the process of falling down, kind of like the dollar and the DC gang of thieves, falling down.
in case anyone hasen't noticed, people "the global population" is approaching "i don't give a fuck anymore" top speed and nothing is capable of stopping 7 billion people with nothing left to loose.
talk about it all you wish it won't change the shit stain of a society we have built worlwide and thats just the begining....
They're bringing back castles and moats. I and mine will scrape by on scraps of hard crust and popcorn as we watch the Lords wage their battles.
If the EU crashes, that would push the dollar way up. Might be some opportunities there.
Nuclear will happen again, 10.000 fold worse.
In the world of the future there will be no states, but a thousand tribal ISIS with nukes. You will be born a soldier from soldier parents and 99% of your life will be underground. Like an ant. The NWO will fail, we will get the exact opposite.
dupe, see below
Thanks, that view could save us a lot of money but...
from "No longer Unthinkable"
"Outside the US, both established and emerging nuclear powers increasingly see nuclear weapons as weapons that can be used in a controlled, limited, and strategically useful fashion, said Barry Watts, an analyst with the Center for Strategic and Budgetary Assessments, arguably the Pentagon’s favorite thinktank."
http://breakingdefense.com/2013/05/no-longer-unthinkable-should-us-ready...
Schauble's like a drug dealer telling Greece to either take another shot of smack or give him back all the heroin he fronted you in the past.
Only on ZH can I read an entire article, twice, and still have no idea what they are talking about. PLAIN ENGLISH!!
This is all gonna go Greek Style.
This is all gonna go Greek Style.
Right off topic, but fits into the whole picture, and if you aint English this might be a bit hard on the eyes, so sorry for the interruption but this what we should really all be about, listen.
The police officer who accompanied the bailiff today when Inthemix intervened not only understood 'Common Law', but his 'Oath'. He more than knew we are policed by 'Consent', and he understood very well what happens when you remove your 'Consent'. To you mate, well played. And thank you for being a fucking human being for a change.
Now onto you 'Northumbrian Water', a private company that charges for shit that falls owt of the fucking sky, once again provide the written contract that gives 'Implied Consent', signed by both parties, the user and the fucking supplier, prove you have 'Implied Consent'. You cant, your bailiff and copper knew this, its fucking time you did. And the courts are a private company listed on the 'Company Exchange' and who trade in the private financial markets.
And this is where it ties in, like the Greeks, like me, and yes this was me today, I couldnt give two fucks about the money, the money means fuck all, its the 'Principal', where the fuck you heard that word? The Principal? Go fuck yourselves and 'Stand Under' Inthemix just like you did today.
All it takes my friends is to remove your 'Consent' and tell the wankers to fuck off and prove the cunt under 'Common Law', they cant.
Fight the fuck back, in every way that is humanly possible, remove the one thing these cunts need to survive on your back, your name, your consent. make them prove 'Contract', get the two signatures of consent because not one of the private fucking shit headed parties can, they never could. Get rid of the fear, fuck the courts, fuck the law, fuck the lot. Be what you should be, a mother fucking human, equal under common law, and dont forget to tell them to go after the cunts who have bankrupted us and fuck kids.
Rant off, and sorry for the interruption.
Lets fucking give these cunts war
;-)
It happens when you are angry and typing at the same time, but I should just add, this year in April i believe, is the 800 year anniversary of the 'Magna Carta'. What did folk know that long ago that folk today have forgotten? Just how fucking clever were they to know they needed 'Common Law'?
Its a 800 year birthday party coming right up, and this cunt typing this will celebrate for the genius of people long gone past, giving a protection in law that cannot be refuted. You hear that Mr Peace Officer?
The English? We aint all bad, and we aint all limey cunts, and some of us are remembering the past. For us all.
:-)
Watch this to appreciate the full hoodwink: http://www.britishconstitutiongroup.com/
And the restoration of the monarchy was unlawful too.
They're just bandits in posh frocks with a strong dislike for constitutions or republics.
Their selling it...............go long
What is most interesting to me is why the ECB didn't just fix the polls and prevent Syriza from ever coming to power, like the power brokers in the United States do?
Surely the Banksters saw Greece's power play coming?
Something is very wrong in the EU if they can't even fix a simple election in some tiny uneccessary country like Greece.
Or, if you can't fix itin advance , then just say it didn't count, ignore it and install what you wanted anyway, like Egypt, Palestine, Mynmar,Algeria etc..
Grand new bargaian coming up in 321....
or will they get a divorce and go their separate ways.. as they are no longer good for each other. when the relationship turns into just shouting then its about over.
It has been SOP for the predatory class in emerging countries (Indonesia, Pakistan, Thailand etc) to move out and let the currencies fall along with devastated plantations and mines and move in after a regime change. They reconfigure under different guises to re-negotiate new leases sponsoring a new breed of bureaucrats when the collapse falls to opportunistic levels for another raid.
Looks like EC's analysts/economists have refused to promote these lessons/experiences that have been going on for decades. They believe that EC economic structure or culture is different. Really ?
DB is probably correct. At this phase the Troikas are ordered to fold so that exits (capital flights) can take place under guises and contagions more tightly contained. Euro will probably fall much to the glee of US as a recipient of flight funds. (This trajectory is however bumpy).
Whether EC will stay as a Union is just a curiosity. It does not matter when PIIGS are contained in stys to be fend for themselves and as crumbs to the remaining/staying second tier domestic Predators.
EC little People really think that their counterparts have through mental deficiencies, etc allowed their slavery to cross generations. They are just helpless against the mighty force of capital. So it is up to the little people wherever to be pissed to the extent that they rebel. Only then, real change takes place. (nothing new under the Sun for these cycles).
Euro-revolt?
http://rt.com/shows/crosstalk/229023-euro-greece-spain-comback/
I Wouldn't take the bet THAT THE TAXPAYING PEOPLE OF THE EU WILL BE ON THE HOOK FOR THIS LOSS, And that the Legal Paper Work holds (moneies or Gold) in the contract.
German gotta learn that making loads of money by selling on credit to deadbeats is not a solid business model.
IMHO, greeks ought to start selling vacations and ships with a large price tag but on credit. Always on credit. Sell it to some bank or sumething.
Very good analysis by DB. Any EU solution and timeline seems very tight and complex. Seems to be a highly fragile situation now that Greek's economy is worse and debt higher than when this entire process begun. Not sure why all EU politician seem so relax? EU continuing lack of a sense of urgency is troubling and might play into the hands of Putin who shall most probably take advantage of this serious EU distraction to cause a lot more issues in Ukraine in order to get what he wants. Next 15 days should be highly volatile but cannot see any rabbits out of the hat quite yet...
You have this gal who is cute but I could care less.
Offering Greece a third program? Just call it another hunk of cash with associated debt to be paid back later. If they have not got the income today how they going to pay this increased debt? They don't just makes matters worse. The immediate problem for Greece is that it cannot sustain its current level of debt and under the Troika austerity program WAS NEVER VIABLE TO BEGIN WITH.
Greece needs to default but needs a trading partner and reckon Russia (implies China also ) would be the way to go. Can't see it getting any worse for Greece but the dumb Greek sheep keep wanting to stay in the EU with all the european wolves who have shown over the last 5 years THERY DO NOT HAVE YOUR BEST INTERESTS AT HEART if anything you are the free meal.
ONLY ONE THOUGHT:- IF GREECE IS STILL IN THE EZ / EU IN 3 MONTHS TIME THEN GREECE GETS ALL IT DESERVES AND I WILL HOLD NO SYMPATHY / PITY FOR ANY GREEK BECAUSE YOU CHOSE IT.
If anyone thinks this is harsh, you owe a milllion dollars and are broke what do you do? Think bankruptcy would be on the cards get used to it and as soon as the debt is crystallised (this is the bit the EU is trying to prevent) you can move on with your life and not before. You would not lend me another dollar neither because it would only increase the debt.
The FRBNY are broke as well.
It amazes me in my travels the length people (cabio) will go through to buy my dollars.
It is astounding.......while it last.....Argentina's official exchange rate is 8.5 peso: 1 us dollar.
I was getting 9.8 peso: 1 USD over the holiday.
I would advise everyone to travel now while USD is still in demand. Take cash because you will get screwed using a credit card.
I'll bet Greece is nice this time of year!
I heard Prague is a good deal also.
It befuddles me that those chumps buy my dollars and I get fine dining w/ Greg Goose martinis for $40 USD!
I
This from my notes dated February 23, 2012:
the bailout doesn’t even fix the problem. The Greek economy will continue to decelerate while the nation’s debt-to-GDP ratio will continue to rise. So, once again, why agree to a deal that’s only going to make matters worse?
Here’s a clip from an article in Der Speigel that draws the same conclusion:
“Of course, the 130 billion would not solve the problem. It is only intended to buy time. Time until the financial markets have stabilized to the extent that they can handle the actual bankruptcy of Greece without a chain reaction. Without bank failures, no knock-on effects through the loss of credit insurance and no interest for the remaining problem of explosion of the Euro-zone countries.” (“Stop the 130-billion bank transfer!”, Der Speigel)
So, Greece is being sacrificed to prevent another Lehman Brothers; is that it? It’s being stripped of its sovereignty and its people are being reduced to a decade of grinding poverty because undercapitalized, over-extended and under-regulated financial institutions are lashed together in counterparty conga-line that could blow up at any minute and take down the entire financial system along with it. Is that it? Is the system really that fragile or is Lehman being invoked (much like 9-11) to achieve a different objective altogether; to replace elected representatives with agents of the bank Mafia who plan strip-mine the country of its national treasures while crushing organized labor beneath its bootheel.
But isn’t Greece at least partially responsible for the present crisis?
Sure. Corruption, cronyism and tax evasion are rampant, but the real problems didn’t surface until 2009 as composer Mikis Theodorakis explains in this post on his web site:
“Until 2009, there was no serious economic problem. The major wounds of our economy were the enormous expenses related to the purchase of war material and the corruption of a part of the political and economic-journalistic sector. For both of these wounds, foreigners are jointly responsible. Germans, for instance, as well as French, English and Americans, earned billions of Euros from annual sales of war material, to the detriment of our national wealth. That continuous hemorrhage brought us to our knees and did not permit us to move forward, while at the same time it made foreign nations prosperous. The same was true of the problem of corruption. The German company S, for instance, maintained a special department for buying off Greek stakeholders in order to place its products in the Greek market. Hence, the Greek people have been victims of that predatory duo of Greeks and Germans, growing richer at their expense.
It is obvious that these two big wounds could have been avoided if the leaders of the two pro-American parties in power hadn’t been eroded by corrupt elements who resorted to excessive loans in order to cover the leakage of wealth (the product of the Greek people’s labor) into the hands of foreign countries, resulting in the public debt reaching 300 billion Euros, i.e. 130% of GDI (Gross Domestic Income).”
Sound familiar? The banks lend gobs of money to crooked contractors and venal politicians who line their pockets while buying a bunch of useless military equipment in one big feeding frenzy. Everybody gorges at the public trough; everybody gets fat and happy. How many times have we heard that story before? And–Oh yeah–some of the Wall Street heavyweights also helped the Greek government hide the amount of red ink that was on its books so they could keep this larcenous sharkfest going as long as possible. Now that the bills have come due, the cockroaches have scattered, and working people are left to pick up the tab.
Is it any wonder why the victims of this baldfaced ripoff have taken to the streets and set Athens ablaze rather than accept their fate lying down?
No one thinks that this latest Greek bailout is anything more than a can-kicking exercise designed to prolong the inevitable. Eventually, Greece will default, and the reason it will default, is because the policies that have been implemented have made failure unavoidable. The vicious belt-tightening regime imposed by Brussels and Frankfort wasn’t intended to lift the economy back to productivity and growth; it was intended to punish, humiliate and create a “permanent state of colonial dependency”. It’s just “shock therapy” in different wrapping.
Nearly two years of SOS with different wrapping... How's that for perspective?
Serious economics came to surface in 2009 because the funnel of free or cheap funds stopped flowing which revealed real GDP as apposed to the phony debt induced 'feedback' charade!
you forgot the 4th option...military coup to overtrhow the commies...Tsipras will be found not with a nail in his head but a real bullet.
He'd just be replaced with another in a long line of Marxist visionaries!