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Whispers Of Greek Capital Controls Begin
That didn't take long: just hours after Greece entered the ECB countdown mode, with now just 23 days until midnight on February 28, when the ECB is set to yank the final pillar of liquidity support, the ELA - as it has warned before - it is time to start contemplating Plan B, or rather plan Z. A plan, which as described by Nordea's analyst Jan von Gerich, would be quite unpleasant for that nearly extinct class of Greeks, bank depositors, because the "plan", or rather blueprint, is a well-known one: capital controls.
As Nordea points out, ECB’s decision to restrict Greek bank access to direct liquidity lines risks increasing uncertainty among depositors. As a result depositors may decide to withdraw more money from Greek banks. Most of these outflows would likely be replaced by ELA funding, increasing risks for Eurosystem.
However, if ECB becomes more uncomfortable with situation or Greek banks risk running out of collateral, Greece may need to impose Cyprus-style withdrawal limitations and capital controls.
Gerich notes that while there’s been some progress in talks, Greece needs to back down further for deal to be reached, although as he also observed, the news flow needs to become worse for Greece to drive broader markets to more notable extent.
Why is this important? Because as we have said from day one, what is going on now between Greece and Europe is a game of leverage, leverage which can now be quantified: For the ECB, it is measured by how long the lines are in front of Greek ATMs; for Greece, it is inversely proportional to the level of the Stoxx 50 (and to an extent the S&P500).
And just in case some think that capital controls is a fringe plan, one that will never see broad acceptance, here are the key highlights from Bloomberg's "One Way Greece Can Keep Its Banks Alive."
An outflow of deposits from Greek banks will put pressure on the government to limit how much money people can withdraw or transfer outside the country as European Union nations lose patience with providing a lifeline.
Imposing capital controls, as Cyprus did two years ago when its banks faced a crisis, would buy time for Prime Minister Alexis Tsipras’s government to negotiate debt relief, according to economists including Daniel Gros, director of the Centre for European Policy Studies in Brussels.
“Capital controls may be the only option to stop the bleeding in the banking system,” Gros said in an interview.
Greek banks probably lost about 21 billion euros ($24 billion) of deposits in the past two months, or 11 percent of the total as of the end of November, according to the ECB and estimates last week by JPMorgan Chase & Co.
Depositors are withdrawing money now because they’re worried a refusal by the government to extend the bailout when it expires at the end of the month could lead to an exit from the euro area. That would mean waking up one morning and finding their savings converted to drachma, which would face a steep devaluation. Putting the money in another European bank or keeping it as cash at home would protect them from losses.
... Customers withdrew 6 billion euros in December, central bank data show. They pulled out an additional 11 billion euros in the first three weeks of January, and the total for the month may have reached 15 billion euros, JPMorgan analysts estimated. That would be more than was withdrawn in May 2011, the month with the biggest drop in the earlier crisis.
But bank run aside, what happens if/when D-Day comes and Greece still has no funding options?
If the central bank refuses to extend this type of lending, Greek banks would run out of cash quickly, as they already rely on ECB funding for about 70 billion euros they can’t replace because they have been shut out of capital markets since November.
That would force Greek banks to cut lending to companies, consumers and the government. They’d be unable to roll over treasury bills and might recall loans. Greece would have to abandon the euro and print its own currency to fund its banks.
“Given how extreme this option is, the ECB might instead impose a Cyprus-like solution of withdrawal and capital-transfers controls,” said Nicholas Economides, an economics professor at New York University.
While only national governments have the power to impose capital controls, and doing so is in violation of the European Union treaty, the ECB gave tacit approval when Cyprus did just that in 2013. The central bank had threatened to cut off all liquidity to Cypriot lenders if the government didn’t reach a deal with its European partners.
What Europe Plan B, or rather Plan Z, would look like:
“If the deposit flight is continuing while things drag on, the euro zone wouldn’t want to increase its exposure to Greece through rising ECB financing,” said Ruparel. “Then they’d push for capital controls as a way of limiting further exposure in case things don’t work out and Greece ends up exiting. It’s an option nobody wants, but it will become likelier the longer the type of brinkmanship we’ve seen recently continues.”
Even though they’ve been loosened, capital controls remain in place in Cyprus. While they have been successful at stemming deposit outflows and stabilizing the banking system, the country is stuck in a three-year-long recession.
In the case of Greece, controls probably would only work for a few months as Tsipras’s government negotiates a new debt deal with its European creditors, according to Benn Steil, director of international economics at the Council on Foreign Relations in New York. Without an agreement, restrictions on withdrawals wouldn’t be enough to keep Greece in the euro zone.
“The Grexit could happen slowly, not in a big bang as we always imagine,” Steil said. “It could come after capital controls and other ways of scrambling to continue.”
The sad conclusion, if only for innocent Greek bystanders in this epic middle-class plunder designed to make trillionaires out of billionaires:
“The experience of Cyprus suggests that you cannot completely rule out capital controls any more as a policy option,” said Jens Bastian, a former member of the European Commission’s Greek task force who’s now an independent analyst based in Athens. “The situation isn’t so dire yet, but it could get there.”
Capital controls would be painful and unpopular with the Greek public, putting even more pressure on Tsipras to reach an agreement sooner rather than later, according to Gros of the Centre for European Policy Studies.
“The popularity of the government will plummet, and the economy would be hurt too,” Gros said.
Of course, the ECB knows very well that should a bank run commence then the days of the Tsipras government - capital controls or not - are numbered. Which is preicsely why yesterday it tried to precipitate one. And since, as we noted earlier, the only marker of Greek leverage is the response of the global capital markets, today's pre-determined market ramp, which started with the SNB's intervention in the EUR and has since transformed into a wholesale central bank binge fest across all assets (except gold of course), the corresponding reaction in risk is precisely meant to smash any trace of leverage the new Greek finmin may have hoped he had.
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Greeks- Get your money the hell out of the bank. Or transfer it to an out-of-country bank. You don't want to be standing on the tracks like those poor bastards in Cyprus.
Greeks have money?
There is no such thing as "whispers" in bank runs.......its called a run for a reason
"Slip, sliding away"
https://www.youtube.com/watch?v=qSx2HIi4dFg
If, after everything that has transpired over the past 5 years including the rape of nearby Cyprus, you still have your money in a Greek bank, you deserve to lose it all.
[a fool and his money...]
I know a little bit about capital controls...
Greeks with a bit of money in their bank account should wire to a friend or family who resides in other parts of Europe - YESTERDAY - because the Euros in Greek bank accounts will not be valued as German Euros for example on DAY X.
The bank notes have markings showing their origin. ECB controls are tight.
So in other words, even though we don't have deutschmarks or drachmas or francs, we still have deutschmarks, drachmas and francs etc....
If I lived in a Greek border town, I'd take all of my money out of the bank, run across the border and trade it for "different" euros, run home and stuff them all in my matress.
Cyprus Template.
Will both Greece and Cyprus now tag-team, self Med-icate, and Medexit ?
That's the deal.
Hah! So you think Euro fiat paper is safe??? It's scrip that will soon be worthless.
I didn't say that I think its safe. Nothing is safe.
Yes, the new Greek Euros will be called "Gyros".
Yes, the new Greek Euros will be called "Gyros".
You seem to know very little about the Euro. "markings" state the printing press. Germany prints most 50 euro notes in the euro zone, Greece prints mostly 10 euro notes. Would that mean that a tenner in Germany bearing Greek markings would be worthless too?
Lurk a bit more.
Yep, thinking it will be painful for the Greeks in the near term but they will come out of this in very good shape. If the come back to a non socialist form of gubberment. That is the big question.
So never....
Anyone who still has money in a bank ANYWHERE is at risk, take that fiat out and go buy gold and silver!
https://www.youtube.com/watch?v=yloaBw80fV4
Interesting article, written 9 January [emphasis added]:
Time for a Bank Run in Greece If you have money in a Greek bank, now would seem like a very good time to get it out. Run, don’t walk. According to Open Europe, a sizeable majority of Germans have made up their minds to boot the Greeks from the eurozone if worst comes to worst after the upcoming elections.
With 61 percent of Germans supporting a “Grexit” if Greece doesn’t meet its existing (and very onerous) commitments under the various bailouts, IMF programs and other agreements pertaining to its debts, a Syriza-led government will quickly find itself in a tough place. There is less chance than many Greeks hope and believe that they can get significant relief, and it will be easy for a new government to overplay its hand.
That by itself may not be enough to trigger a Grexit or a bank collapse, but why run an unnecessary 25 percent chance of losing 50 percent of your money? Greeks can look next door at Cyprus and see how much better things went for those smart enough to move their money out of Cypriot banks before the crisis. Under existing EU rules it is very easy to open foreign bank accounts; having your money in a nice safe German bank, even if only for a few months, could be the smartest thing you ever did.
Rule One of Bank Panics is don’t panic: if nobody panics the banks won’t crash and everyone will be better off. Rule Two, however, is Panic First. If you are among the lucky ones who get their money out before the crash, you will be protected. The government and the establishment media in Greece will be harping on the importance of Rule One; canny private savers and investors will more and more start thinking about Rule Two.
Source: http://www.the-american-interest.com/2015/01/09/time-for-a-bank-run-in-g...
History became Legend, Legend became myth, and for barely a generation, the ring of central bank created deflation-crashes passed out of all knowledge... Until, when chance came, it ensnared a new batch of elites....
Post of the day.
Well played sir.
[golf clap]
they should let the Greeks run the banks. The banks then fail, the bonds then default and the Greek open a central bank to issue Drachma. The Greeks then buy dirt cheep Drachmas with their Euros while the EU try to hold thier shit together during it's own (extended) collapse. Then as the Euro exchange rate collapses in value to the 'new' viable Drachma the Greeks buy back thier soveriegn wealth (land, industry etc) that was pillaged by the Troika and it's banker scum.
Maybe they should hire you as their new FinMin?
How's that strategy workin' out in Venezuela?
How the current strategy working out for Greece!
"When you got nothin you got nothin to lose."
At this point your best financial advisor is a fisherman.
At least he's a Greek.
Gyro backed Drachmas is good financial advice. Remember. You heard that 1st on ZH.
Just had the same thought: the Gyro.
At least it would give the impression that it's worth more than the paper it's printed on.
I'm not the FinMin of Venezuela! :)
FOSter -
please tweet that to the finance minister and the Prime Minister....
Will do ;)
Exactly. Once the euro-flow is stopped, it's irrelevant whether the remaining euros reside in the banks or are stuffed in the mattresses. The point is to restart the central bank to issue Drachma and to fix the conversion ratio.
Furthermore, the government can impose temporary withdrawal limits if necessary.
Drachulama ( moar blood sucking fiat ) will only hold its value if the Greek gubmint balances its budget. That is one of the new goals for the finmin and prime min, but socialism ALWAYS needs more money than it can take from the citizens....
Venezuela....Argintina....Zimbabwe....Greece....its the same circus with different clowns.
By their behavior, political leaders the world over make clear that the outcome they most fear is not war, famine, or depression, but the prospect that a bank might go tits up.
I would add that war, famine and depression are simply some of the tools for said objective.
Suicide, subjugation..."fringe benefits."
Just don't be an idiot to yourself...
Maybe at this point, if the banks go tits up, all the other outcomes will arrive; war, depression, and famine. That's not a thumbs up for the central banks/treasuries, just a recognition of how intertwined the web be.
Remember your Clausewitz. war is an extension of politics (thus economics) by other means. In this invisible war, banks are like army divisions.
"Get a real gun. Do some real killing."
Von Clausewitz.
He was on the side of the Russians I might add.
After years of capital punishment by GS and the troika, it's time for Greece to take capital control.
The EU wastes all this time and opportunity yapping about the importance of the free movement of people, and yet is happy to prohibit the free movement of money (not just capital).
The fact is that peoples' free movement is effectively constrained when they cannot move their money with themselves.
And in terms of economic damage the Eurozone, institutional money fleeing Germany for the USSA is actually a much larger problem then the feta crumbs trying escape Greece.
Free movement my ass...just try to negotiate a cheaper price for say, drugs, by taking your shopping across those "open borders"...
Open borders are for THEM, not for YOU. They want the freedom to 'shop' for the cheapest labor, the most advantageous tax rules. But when YOU want the same freedoms, forget it! You'll pay the prices WE set, on the wages WE set, all WITHIN these borders...because that global marketplace belongs to US, not YOU!
If the borders in your country are 'open', it is because TPTB want cheaper labor to come IN...Not because they want YOU to send anything out.
I mean, what good does it do to have open borders for cheap labor if those consumers can just go across them to buy the stuff where it's cheaper? That would remove all the benefit of relocating our businesses...
good. next thing is parallel currency. dear greece, please stick to the z plan, you'll need it in either case, and you'll need it credible.
He who panics first, panics best..
Same old, same old. He who controls the banks controls the game and makes the rules.
Like the Nights Who Say Ni, who can not hear: "IT", the banks can not hear the word: RUN. Loss of any control of the situation very, very quickly.
how ironic. the bailouts saved the bankers but the bankers have no intention of returning the favor. git unda da bus bitchez.
Where's the Ron Burgundy video link?
lumpy mattress syndrome has gotten outta control..troika takes a dim view, how can they do neg interest rates on cash kept home?
Same old socialist playbook! Ya 'think they'd try a different angle from time-to-time!
I was just about to say the same to you...
Same old left/right playbook...try a different angle next time.
Okay, let's be honest now. How does one institute real capital controls in a market space where there is no fucking capital to begin with? LOL!! Come on, the real power brokers and criminals have long since taken their loot and hid it.
There's nothin' Socialists love more than somebody else's $$$ money $$$ !!!!!!!!!!!!!
Propaganda. Unfortunately, it may be effective propaganda.
Only Greeks know what is best for them. Thankfully, their fresh water, housing, chickens, goats, cattle, sheep, crops, etc... really do not care what "currency" is in use.
Im pretty sure the smart money or those with money are already out...If they can avoid taxes they certainly can hide money very well.
So, let's see if I understand this ...
The thing the Europeans theoretically fear most is a swift unilateral exit by the Greeks, so they *assume* Syriza will drag out their negotiations, make Greece suffer even more, and completely lose face with the electorate so they will fail in the next election??
That's what happened to New Democracy. They're assuming Syriza will opt to do the exact same thing?
So the way you bring this ideal state of extend and pretend about is by accelerating the arrival of thing you fear most?
I don't get it, it's like they're daring the Greeks to leave. Either that's what they truly want or the Krauts are seriously f'ed in the head.
Syriza’s position can be summarized as follows:
- Greece has no intention of leaving the Euro or the EU. (But others might force it out)
- Greece has no intention of defaulting on its debts to primary official creditors. (But others might force it to)
- Greece is committed to pursuing policies that promote the economic stability and recovery of Europe. (But others might not be)
Frances Coppola, Media Misinformation On Greece Misleads European Leaders, 2/01/2015
Z plan is about making the threat of grexit alive and kicking. it's the only way to negotiate here. but if negotiations eventually fail, they'll really need that plan to stay in control of the situation at home, things will go armageddon then.
That's the part I don't get. They're acting as if causing the bank runs will get rid of Syriza and put someone in power that will be more agreeable to their demands. New Democracy swung and missed. Let's say you depose Syriza. Who's gonna take their place? The Greek Nazi party? It's a losing hand for the Germans. They're assuming that Syriza, if given a choice between leaving Europe or handing the country over to the Nazis of the Golden Dawn, will pick the Nazis. Are the Germans nuts?
/sarc
On the flip side, maybe the Germans are trying to build the Fourth Reich from the periphery in this time. Go long on companies that make brown uniforms. Hail Hydra.
/sarc
not sure how the syriza vs greek nazis issue could develop in case of syriza losing the control in greece, but at the moment it seems distant, too many other priorities now. last elections, golden dawn: 6.3%, 17/300 seats. = not such a big threat for syriza at the moment. plus varoufakis mentioned it today bcs of the germans not bcs of the greeks, the reference was just a part of psychological warfare (and in the middle of germany, kaboom).
bankruns, now that's the funny part. it's complicated, but don't forget that syriza's manifesto aims for "Nationalization of banks" + "Prohibition of speculative financial derivatives" + "Combat the banks’ secret [measures] and the flight of capital abroad". figure it out :)
The bankers will never lose, period. A small country like Greece can never overrun the money/credit masters. If it's ever going to happen the whole world needs to revolt simultaneously.
They are going to bleed out the greek people and their elected government slowly if they have to. We think that most people would agree with Syriza, even Germans, the sad thing is that when peoples money and jobs are threatened they will throw away their principles on the spot (for a short term status quo).
Not even the subprime crisis opened peoples eyes, it even got way worse afterwards.
not so sure about that. It might be a domino that starts the chain. Also, sovereign debt may have zero reserves and with swaps, CDS and other deriviatives, the ultimate amount could be alot higher than the face amount of the debt.
I was one of those who thought both Greece and the european banking system was fucked the last time this happened. I was wrong, they make up new rules as they go to fit their needs. If it really breaks this time, all the debt are going to be paid by the european taxpayer, the banks have already exited their trades. It's going to be exactly the same as the subprime crisis - more power and money to the banks in the end.
"The sad conclusion, if only for innocent Greek bystanders in this epic middle-class plunder designed to make trillionaires out of billionaires:"
Without the myriad of socialist gimmidats...not so unlike here, there'd be no middle class in Greece.
Pretty soon the only working market in Greece will be the black market. Based on organic Greek products. Regular Greeks will be going barter. Not by choice but because its the only way to earn an honest living.
Been going on for years ... Especially with things like meats and olive oils between the villages and the cities
What is wrong with going barter?
This article is looking at the world through a straw. Any meaningful bank run in Greece involving the level of atm's is long over; moreover, you can bet that Russia and China are already preparing to make their own deposits such as, say, those in preparation for another yuan-swap facility. Announcements will precede the Feb. 28 deadline.
Greece will be laughing --if you'll pardon the expression-- all the way to the bank.
Syriza may claim victory with such a senario, but average Greeks will be no better off and will have no path to chart their individual futures.
Wrong again. The Greek economy will recover even faster than Iceland's once the burden ot the banking cabal is removed and trade is normalized through the BRICS conduit.
Yeah right! Think Stone Age!
You take too much for granite.
Just like the hysterical Venezuelans!
The people vote - "Won't get fooled again." The PTB reply - "Meet the new Boss, same as the old Boss".
Euros from Greek banks are marked with a "G". Persons holding bank notes marked "G" are also required to wear a yellow Omega symbol on their shirts to identify their nationality.
The Euros are marked with the country of origin...
Then what's the POINT of the "common currency"?...Wtf?
What's the DIFFERENCE between a Greek 'Euro", and the Greek drachma if no one wants either one? At least with the drachma, they get to control it's printing/minting, and can adjust the value...
If the Euro truly IS a common currency, it should be the same Euro in Germany as it is in Athens. Otherwise, go back to your OWN currencies, you dimwits!
The deposits risk being converted to Drachmas as well as bail-ins. Time to get some euros marked other than G. Watch for other countries refusing to accept Greek Euros.
Capital controls followed by depositor haircuts. Greeks, get your cash out now, whilst you still have some cash to liberate.
Think idealist billiard balls!
Time for another run on sovereigns...
http://www.zerohedge.com/article/greek-scramble-physical-brings-gold-pri...
hee hee hee
http://www.zerohedge.com/news/2015-02-09/fearing-grexit-greeks-turn-gold...
Essentially, Greece is Fucked either way. At least by leaving the Euro, they can watch the EU crumble apart as well. Why should Greece be the only one to suffer??? Just don't fly any planes for awhile and have someone else start your car in the morning.
Camp-in at work is the best defense...and a few very-trusted friends or close family.
negative interest rate on savings looks really good to greeks now. the swiss should be willing to help.
Time for these dangerous 'visionaries' & their delusional citizenry to come to terms with the very real & serious predicament they are in! Heated & threatening rhetoric makes their bleak situation much worse!
Yes it behooves all to bear in mind that when a nation carries debt to private interests its gov'ts must be of the mammon by the mammon for the mammon, or else!
Moooooo!
The case for owning gold gets stronger for every day and for any interest rate cut.
Gold is the only thing the cenral banksters cannot make more of, and they hate it for that particular reason, it cramps their style.
US$2,500/oz by Xmas!
Anyone dumb enough to have any money in a Greek bank deserves the loss.
Next they will be knocking on the doors of people who made substantial withdrawals for full on house searches.
BAIL-IN is the next card that will be played.
It would be kinda hard to have a good bank run if the citizens haven't been keeping their money in the banks.
Are they keeping their money in banks? If not, the lines are going to be pretty short.
What would happen if they called for a bank run, and it never came?