"In The End Capital Controls Will Probably Have To Be Imposed" - Eurogroup Official

Tyler Durden's picture

With less than 24 hours until the ECB's meeting at which Mario Draghi and company are set to decide if i) they will increase the current Greek emergency liquidity allotment from €65 billion as a result of the ongoing bank deposit run or ii) reduce - or even outright cancel it - to send Tsipras a message that the time for negotiations is over, Europe is no longer playing Mr. nice guy. In fact, judging by the latest report in Reuters, which may well be nothing but another planted trial balloon (in the aftermath of today's latest Telegraph revelations one should read everything presented in the media, here certainly included, with a cape-size ship full of salt) Greece can kiss goodbye not only any a loan extension without a bailout "programme" resumption, but also any hope that tomorrow's its ELA will be increased. 

The reason: ze Germans.

The European Central Bank faces resistance from Germany to allowing any extra emergency lending for Greek banks, people familiar with the matter said, increasing pressure on Athens to sign up to an extended aid-for-reform programme.... the ECB's policymaking governing council will review on Wednesday how far the country may support its weak banks, which face rising deposit outflows.  While the ECB is unlikely to lower the ceiling on emergency lending assistance (ELA) by the Greek central bank, a refusal to increase it would nonetheless be bad news for Greek banks, which are close to using up the full 65 billion euros granted so far.

 

Bundesbank chief Jens Weidmann, who has warned against the misuse of the emergency funding to indirectly finance the Greek state, is set to stick to this stance at the ECB meeting, the sources said. Some other governors have similar reservations.

Which means that the standoff will may well continue past midnight tomorrow. Now, in the worst case scenario, should the ECB yank all Greek ELA, then all bets are off, and on Wednesday it is unlikely that any banks will reopen in Greece, which incidentally would likely lead to an immediate compromise by the new PM and FinMin, unless of course they are prepared for this contingency and reveal a new €100 billion or so loan from the BRIC bank, compliments of Vladimir Putin.

But even in the less Draconian case, one in which the ECB decides to remain merciful for 10 more days, the outcome is not much better: "Unless Athens agrees an extended aid programme soon, keeping ELA capped would put lenders in a funding squeeze that could require the introduction of capital controls to limit savers taking out more of their money, the sources said."

As noted earlier, the bank runs may (or may not: depending on one's agenda), have accelerated in the past few days:

A senior Greek banker told Reuters up to 500 million euros ($571 million) had been withdrawn from Greek bank accounts on both Thursday and Friday last week.

 

There was a lull on Monday but deposit outflows picked up again on Tuesday after talks collapsed, the banker said.

One thing is clear however: Greece will almost certainly not last until the proverbial D-Day on February 28 before it either i) runs out of money, ii) is forced to sign a "bailout extension" deal with the Eurogroup thus crushing its credibility with the people, or iii) exits the Eurozone. Needless to say, two of the three above options are very unpleasant for Greek savers, assuming any are left. And it is those savers that the Eurozone is directly targeting when it does everything in its power to provoke a bank run with statement such as these:

"The situation of the banks is getting more and more difficult every day," said a European official. "In the end, in order to safeguard the banking system, capital controls will probably have to be imposed."

And to think a comparable statement about any other peripheral Eurozone country, all of which are as insolvent as Greece, would be met with howls of murderour rage and demands for a death penalty on account of provoking a bank run panic.

Not Greece though: for the small country that dared to provoke Goliath, anything and everything is fair game.

The ECB's chief economist Peter Praet has cautioned that the funding is for the short term only, although Austria's central bank chief Ewald Nowotny recently signalled that the ECB would resume direct funding if Athens struck a deal to extend its EU/IMF bailout.

 

Frustration with Greece is growing. Euro zone finance ministers have given Athens until the end of the week to request an extension or lose financial assistance when the bailout expires at the end of February.

 

Were the ECB to cancel all emergency funding for Greek banks, as it threatened to with Cyprus in 2013, it would leave Athens with no choice but to strike a new deal with its international backers or face bankruptcy.

 

But the ECB would be very reluctant to take such a step.

In short: Europe suggests Greek panic.

But here lies the rub, because despite the market's complete lack of willingness to react, pardon "market", since every risk asset is now exclusively controlled by the world's "developed" central banks, kicking Greece out would - without doubt - lead to the worst possible of Mutual Assured Destruction outcomes.

"Pulling the plug on Greece would have potentially catastrophic consequences," said Ashoka Mody, a former IMF official who helped design Ireland's bailout.

 

"The ECB's threats are completely empty. Despite all the bluster, it has no choice. The ECB has to ask itself how it can stabilize the financial system, not undermine it."

And that particular game theory outcome is precisely what the non-game theory playing finance minister is betting the farm, and the nation on. The one where it ultimately costs Europe far, far less in current certain costs, than the "unknown unknowns" of the worst case scenario that will be revealed once the Eurozone is effectively no more. This is how Goldman described a world in which Greece is kicked out:

... ‘Grexit’ would constitute a non-diversifiable event, affecting all financial assets. This is because, upon the departure of one of its members, EMU would likely be seen as a fixed exchange rate arrangement between countries which can elect to adhere or leave. Convertibility risk would resurface, exposing the possibility of a collapse of the entire project.

 

To be sure, the ECB would not stand idle in the face of such a course of events. But the severity and persistence of the ‘shock’ from Grexit would depend on several factors, which include:

  • What has led to the departure of Greece (metaphorically, was the country pushed or did it jump?).
  • What institutional arrangements the remaining countries put in place to signal their commitment to stay together (presumably in the form of greater sovereignty sharing).
  • How does Greece perform outside of the single currency?

So even as Europe is throwing the kitchen sink at Greece in hopes of sparking a bank run, it should be very careful what it wishes for. Because a nation with nothing left, with no hope, is far more dangerous than the servile debt-slave Europe expects Greece to be. And if as Goldman suggests, a Grexit has far greater and far more negative consequences for Brussles than Athens, then Varoufakis' gambit will be spot on, and Europe will be begging Greece to stay, or return, before all all is said and done and the European project is cast away on the every larger trash heap of failed neo-liberal ideas.

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NoDebt's picture

Like I've been saying for weeks now:  GREEKS, GET YOUR MONEY OUT OF GREEK BANKS.  You are about to be Cyprused.  Don't let it happen to you.  This is not the line you want to be standing at the end of.

Get your fucking money out NOW.  You reading me?  NOW.  You've got a couple days maybe.  Then it's too late.

 

Millivanilli's picture

Man, bankers are goddamn rocket scientists.  Create money via QE in order to hold together your system of debt slavery, all the while telling a nation you fucked in the ass to take it or else.  

If I were Greece I'd do 3 things.

 

1.  Lease  one of your Deep water ports- preferably near Italy to Russia in exchange for food and energy deals- OPA!

 

2.  REturn to the Drachma

 

3.  Join the BRICS

 

As a bonus I'd get on teevee and address the Greek people and in very blunt language tell my compatriots that Greece is not a slave to pigshit bankers.  I'd then pull out the debt agreements signed by previous traitors, crumble it up and toss it in the trash.  

 

 

 

Newsboy's picture

"Capital controls, in the end"?

So, Friday at the latest?

JohnnyBriefcase's picture

in order to safeguard the banking system

 

All that matters anyway.

Nussi34's picture

hehe bya bye Greek cheaters!

Dollarmedes's picture

Banksters aren't even waiting for the Grexit. They're going to bring the pain now.

boogerbently's picture

I wonder if 95% of the Greeks are watching American Idol on TV and couldn't come within $500 of the price of gold, like Americans ?

Spitzer's picture

Some good ideas there but its all on the US.

The last thing the US wants is Greece to turn to Russia. So maybe the Fed will just extend temporary money to Greece. Or they will just tell Draghi to extend money or else.

BTW there is no real way to return to the Dracma. They would just have to adopt another currency. Maybe the US dollar. They  could just dollarize.

Escrava Isaura's picture

 

 

Exactly.

 

Euro is a US project.

 

Renewable Life's picture

Bankers and in particular the Kenyesian ilk, are so fucking delusional at this point, they actually use sentences like, " capital controls may be needed, to protect the system from those who are trying to get THEIR money out!!!

Are you fucking serious?? You have the audacity to use the term "their money"???!? You POS bastards, know damn well you don't see it as "our money", at this point!!!!

indygo55's picture

They have have had weeks if not months to get their money out. If it were you wouldnt you have taken your money out? Anyone who still has significant money in the banks by, hummm, tomorrow is a complete idiot.

Yancey Ward's picture

As a Greek, it will require more than just withdrawing your account into Greek Euros, or transferring the account to a non-Greek bank.  You can be sure all such Greek accounts are well-known to the Eurosystem and will be controlled if necessary.  All Greek Euros can simply be designated non-Euros by the system, too.

NoDebt's picture

Then you better use them to buy some gold, would be my advice.  If you're totally insane, buy the fucken S&P500 through a non-Greek brokerage account.  You're a smart guy, figure it the fuck out.  ANYTHING that isn't denominated in a currency that can go poof or be confiscated.  I'm tell you that you're in the blast radius of this shitstorm.  Get as far from it as you can.  Or don't.  Your choice.  

You wanna be fatalistic and take it square on the chin, that's your choice.  But if it was me, I'd be fighting like hell to save what I got for myself and my family.

This is not the time to be a hero.  This is the time to get the hell out of the way of the approaching hurricane.

DavidC's picture

On the other hand, if Greece exits the Euro it can print.

DavidC

NoDebt's picture

Yes, you get to keep the nominal amount in your account if they do that, but revalued into Drachma that will devalue 75% in a matter of days.  

I don't get why anyone is even arguing against me on this.  GET THE FUCK AWAY FROM THIS.  It's the only option if you don't want your hard-earned wealth to take a dramatic hit.

AND WHAT IF I'M WRONG?  What if everything turns out just peachy?  You can always put your money back, no harm, no foul.  How could what I'm saying possibly be considered bad advice?

 

kowalli's picture

propaganda is still working... hard to think error

DavidC's picture

NoDebt,
I'm not disagreeing with you. But given all the various CBs want to do is print, at least if Greece is out of the Euro it has the facility available to it. But yes, I'm with you.

DavidC

Jstanley011's picture

Just don't let your mother-in-law know what you're doing. Or anybody else for that matter.

Ploutos74's picture

Your pleas are heart-warming but irrelevant. The Cypriots had money in their accounts. The Greeks do not. 92% has less than a 1000. That's why you don't see bank runs. The danger is that firms will send their capital overseas. But that's what will come back to bite the ECB. Why send it elsewhere in the Eurozone and not in friendly Singapore or Switzerland? And the next firms inline will be Italian and Spanish ones. If capital ontrols are enforced in Greece you may expect a huge outflow to those said tax heavens and mass Euro devaluation. Go ahead ECB. Make our day

Johnbrown's picture

I honestly don't know why they just don't print Euros. The bastards in Brussels can bitch and whine, but unless they are prepared to send tanks, a la Soviet style... who cares?? If Greece is going to be an international pariah of the global banking syndicate anyway, why not? The Euro belongs as much to Greece as it does Spain, Italy, Germany, or France.

I say, run the presses. Greece should tell the rest of the Eurozone, that THEY are kicking THEM out, not vice versa.

Am I right people???

kowalli's picture

They can't print euro because they don't have printing press but Russia can give them dollar printing press-)

Johnbrown's picture

If the North Koreans can make passable dollars, the Greeks can make passable Euros.

smlbizman's picture

a few yrs ago when all this shit started i think it was ireland or iceland just not that sure now that just made an electronc deposit in their account for like 25 bil. u know when bil was alot...they screamed you cant just do that..i wish i had a link...i will try to find..or if anyone else can remeber this move...

Johnbrown's picture

Oh yeah, they won't like it. But then again, without the tanks...

Bemused Observer's picture

It's easy to print Euros...just throw some useless ugly on a big sheet of rag paper and cut out rectangles.

angel_of_joy's picture

Ever heard of cash ? Or gold (silver for change...) ?

Newsboy's picture

As of last week, over half of the withdrawals from Greek banks were CASH withdrawals.

Which is worse - bankers or terrorists's picture

Since all of this will devolve into a lengthy legal morass now, two questions bear asking (a) can Greece pirint its own Euros....current answer to this is yes, and (b) can the system designate Greek Euros as "non-euros"....current legal answer to this is no. I believe these are both correct statements, right? 

franzpick's picture

It's the new capital punishment.

cowdiddly's picture

Light years ahead of you Mario, the unelected Douchwater. Cheers

will ling's picture
will ling (not verified) Feb 17, 2015 10:03 PM

how can anyone at this point realistically view/comment on "markets" and "soverign"/private debt matters when the whole realm is just plain unreal?

nmewn's picture

What is this thing called "bank" you speak of?

Savyindallas's picture

Greeks need to get rid of their banks and fund new ones  -just like we should have done in 2009. 

DavidC's picture

Given that 90% of the previous bailout money went to the German and French banks, Greece should tell the troika (I will NOT use a capital letter for that) where to get off.

DavidC

essence's picture

 

 

" Give me control of a nation's money and I care not who makes her laws"

Mayer Rothschild  

Goldilocks's picture

How about some "arseICONS?"

(_!_) a regular arse

(__!__) a fat arse

(!) a tight arse

(_*_) a sore arse

{_!_} a swishy arse

(_o_) an arse that's been around

(_x_) kiss my arse

(_X_) leave my arse alone

(_zzz_) a tired arse

(_E=mc2_) a smart arse

(_$_) Money coming out of his arse

(_?_) Dumb arse

rlouis's picture

 ~ "the problem with socialism is that ultimately you run out of other people's money."

basho's picture

and with so-called capitalism?  lmao

Not Goldman Sachs's picture

Finmin Var will kick the can bitches.

Bangin7GramRocks's picture

It's all over but the signatures. Greece will fall in line and the world will be saved once again. Hooray!

Savyindallas's picture

I'm hoping its different this time. I like the new cast of characters running Greece. But I suppose they could extort more money on favorable terms from the EU  -and then fuck them by leaving the EU, defaulting on even more larger loans, lease out a warm water port to Putin for a naval base, and being saved by and joining the BRICs . 

andrewp111's picture

If they do as you suggest, the CIA will arrange a coup and have the whole Syriza government lined up and shot.

sun tzu's picture

Tsipiras better find a new country, because the Greek who voted for him will hang him from the Acropolis

brooklynlou's picture

There used to be a Greek comedian in the 80's called Harry Klynn. He had this bit where the punchline was "?? ??? ???? ?? ???????" (as long as the sheep are healthy"). It's getting to the point where this may be an actual piece of a real conversation.

zuuuueri's picture

oh wow, harry klyn, that's a name i havent heard in a while.. HILARIOUS guy, i still remember a lot of quotes from some of the skits.. yeah, comedians telling more truth than the news or the politicians, yet again.. 

VWAndy's picture

Capitol controls=theft  So how many names can theft have? must be like 50 names for the same thing. Its no wonder most people dont understand economics. Nobody uses the same flippin words to discribe the same flippin things.