This page has been archived and commenting is disabled.

Greek Bank Will Write Off Up To €20,000 In Debt For "Poverty-Stricken" Borrowers

Tyler Durden's picture




 

Over the past several months, as a result of their lockout from capital markets, Greek banks' reliance on the ECB's Emergency Liquidity Assistance has soared, and at last check was somewhere in the mid-€70 billion range.

The conventional wisdom was that the ECB was merely plugging the hole created weekly (and often, daily) as a result of the chronic Greek bank run which has seen tens of billions in deposits withdrawn from Greek banks since Syriza officially took power earlier this year.

However instead of merely plugging the hole left from declining liabilities (deposits), what the ECB's ELA funding appears to also be doing is compensating for a rapid write down in bank assets (loans) as well, in the form of charged off Non-Performing Loans.

According to Reuters, one of the leading Greek financial institutions, Piraeus Bank will write off credit cards and retail loans up to 20,000 euros ($21,484) for Greeks who qualify for help under a law the leftist government passed to provide relief to poverty-stricken borrowers, it said on Thursday.

As a reminder, the tension over the Syriza's treatment of "austerity" is precisely the reason why the government, which is now insolvent and demanding another European bailout without calling it a bailout, is being generous with one hand - such as writing off unrepayable debts - while confiscating pension funds and municipal cash reserves with the other.

Greece has also been engaging in other, less savory check kiting schemes. Several days ago the NYT reported that "Greek banks have even begun to issue bonds to themselves and, after securing a government guarantee, have used the securities to secure short-term financing — a practice that was excoriated by Yanis Varoufakis before he became the Greek finance minister."

On April 8, for example, the National Bank of Greece self-issued €4.1 billion of six-month bonds that carried state backing. But with Greece on the verge of default — Mr. Varoufakis has frequently said his country is bankrupt — those guarantees are no longer worth much.

Subsequently the ECB, which had previously encouraged precisely this scheme to keep insolvent Italian and Spanish banks operating in 2012 and 2013, made it quite clear that it frowns upon such a circular creation of money out of thin air, especially when the only "guarantee" is that of a bankrupt state.

In any event, the big question now is: how will Greece, which every day is engaged in constant negotiations with the Troika, come up with an extension to the unpopular bailout/austerity program that is the hated legacy of the previous regime without calling it precisely that, while on the other hand, how will Europe cover up the fact that Greeks are now openly receiving a gift in the form of a debt charge, and how will Germans react when the German press covers the front pages with more news of German-funded bailouts of Greeks (even though the underlying motive, of course, is to keep the Euro and avoid a return to the hated Deutsche Mark).

And just to hammer that point in once again, earlier today Greek FinMin Yanis Varoufakis told a French magazine that the risk that Greece would have to leave the euro if it has to accept more austerity is no bluff, saying that no one could predict what the consequences of such an exit would be.

Or, back to square one, which as we explained in February, is a battle of leverage: is the threat to Europe from a Grexit higher than the threat to Greece from ending up without funds.

 

In a conversation with philosopher Jon Elster conducted at the end of March and published in France's Philosophie Magazine, Varoufakis, a specialist in game theory, said this was not the time to bluff over Greece's debt talks.

 

"We cannot bluff anymore. When I say that we'll end up leaving the euro, if we have to accept more unsustainable austerity, this is no bluff," Varoufakis is quoted as saying.

 

Greek Prime Minister Alexis Tsipras called for a speeding up of work to conclude a reform-for-cash deal with euro zone creditors to keep his country afloat after talks with German Chancellor Angela Merkel on Thursday.

 

The leftist Greek premier met the conservative German leader a day before euro zone finance ministers meet in Riga to review progress - or the lack of it - in slow-moving negotiations between Athens and its international lenders.

Unfortunately for Greece, in contrast to the height of the debt crisis in 2012, when Grexit fears spurred panic selling of other weak euro zone sovereigns, investors now seem relaxed about the fate of Greece, which accounts for just 2 percent of the region's economy. "Asked what would happen if Greece was to leave the euro, Varoufakis mentioned comments made by European policymakers who say any contagion effect could be avoided and added that, on the contrary, he believed the consequences would be unpredictable. ‎ "Anyone who pretends they know what would happen the day we'll be pushed over the cliff is talking nonsense and is working against Europe," he said.

Still with the Eurostoxx rising to record highs with every passing day even as the Greek financial situation deteriorates, the market has effectively called the Greek bluff. As a result, Greece has been forced to pull its last remaining trump card. Russia.

The increasing pivot by Greece toward the Kremlin has also been extensively covered here, most recently in the form of a near-agreement between Athens and Gazprom to launch the Turkish Stream pipeline, a deal that would also see Russia giving Greece a €5 billion loan. It is precisely the threat that Russia will bypass Ukraine entirely and provide all of Europe's gas via the Turkish Stream, that has finally gotten Europe's, and America's, attention.

According to the Telegraph's Ambrose Evans-Pritchard, "the US is scrambling to head off a Greek pipeline deal with Russia, fearing a disastrous change in the strategic balance of the Eastern Mediterranean as Greece’s radical-Left government drifts into the Kremlin’s orbit.

Ernest Moniz, the US Energy Secretary, said his country is pushing for an alternative gas pipeline from Azerbaijan that would help break the stranglehold that Russian state-controlled firm Gazprom has on European markets.

 

“Diversified supplies are important and we strongly support the ‘Southern Corridor’ to bring Caspian gas to Europe,” he told a group of reporters on the margins of CERAWeek oil and gas forum in Houston. He insisted that it was vital to uphold “collective energy security” in Europe.

 

The concern is that Syriza’s flirtation with Moscow goes beyond normal diplomacy and may evolve over time into a strategic shift, causing Nato’s Eastern flank to unravel, and dooming any chance of maintaining a united EU stance against Mr Putin.

 

The Greeks know this. They seem determined to extract the maximum political leverage from the new Cold War.

...

The concern is that Syriza’s flirtation with Moscow goes beyond normal diplomacy and may evolve over time into a strategic shift, causing Nato’s Eastern flank to unravel, and dooming any chance of maintaining a united EU stance against Mr Putin.

 

The Greeks know this. They seem determined to extract the maximum political leverage from the new Cold War.

How this all plays out is still unclear with constantly moving pieces and negotiations in flux, although with Greece having run out of money and forced to impose soft capital controls, two things are certain: a conclusion will have to be reached soon and ii) should Greece complete its pivot toward Russia, everything in Europe will change, and in this case we wholeheartedly agree with the Greek finmin's assessment that "anyone who pretends they know what would happen the day we'll be pushed over the cliff is talking nonsense."

 

- advertisements -

Comment viewing options

Select your preferred way to display the comments and click "Save settings" to activate your changes.
Thu, 04/23/2015 - 20:50 | 6024461 Kirk2NCC1701
Kirk2NCC1701's picture

<-- Greek Comedy

<-- Greek Drama

Thu, 04/23/2015 - 20:52 | 6024470 junction
junction's picture

Greece: The Shape of Things To Come. 

Thu, 04/23/2015 - 20:57 | 6024486 Weaponized Innocense
Weaponized Innocense's picture

Or is it Venezuela the shape of things to come?
Perhaps Haiti the shape of things to come?

Thu, 04/23/2015 - 21:16 | 6024550 Manthong
Manthong's picture

"up to 20,000 euros ($21,484) 

under a law the leftist government passed"

 

Geez..  I might be starting to feel a bit more commie nowadays.

 

Thu, 04/23/2015 - 21:43 | 6024610 SumTing Wong
SumTing Wong's picture

Damn, I'm poverty stricken. My wife is too. And we have five kids. Maybe I could even be Greek. 

Hey family, let's go to the coin store and buy some gold...how much? About 20,000 euros' worth apiece!

Thu, 04/23/2015 - 22:04 | 6024667 max2205
max2205's picture

Fuck that go get a new car on credir...zero down.  Then go to MIT on the taxpayers.

Thu, 04/23/2015 - 20:53 | 6024472 kaiserhoff
kaiserhoff's picture

From each according to his ability.

To each according to her needs.

Thu, 04/23/2015 - 20:57 | 6024487 Harbanger
Harbanger's picture

If we can't all be rich, let's be equally poor.

Except for our rulers, they still get to be rich. -Socialism

Thu, 04/23/2015 - 21:03 | 6024509 nmewn
nmewn's picture

Works great till ya run out of other peoples money huh?...lol.

Fri, 04/24/2015 - 03:15 | 6025173 Flybyknight
Flybyknight's picture

The banks have had a field day with other peoples money why shouldn't joe bloggs have a bit of the same. When you just print money and give it away the only way to reignite the consumer spending economic  boom is to give it to consumers not banks.

Thu, 04/23/2015 - 22:58 | 6024796 tarabel
tarabel's picture

 

 

I saw that.

 

Time for an old pilot's joke:

 

You know the difference between your wife and a tornado?

There isn't any. Sooner or later, one of them is going to get your house.

 

Thu, 04/23/2015 - 21:02 | 6024505 nmewn
nmewn's picture

"Greece has also been engaging in other, less savory check kiting schemes. Several days ago the NYT reported that "Greek banks have even begun to issue bonds to themselves and, after securing a government guarantee, have used the securities to secure short-term financing..."

Here's the deal, I'm a little short this week so I'm gonna write a check on my overdrawn account, call it an asset if you like and I expect you to accept it at face value.

Now gimme my fucking case of Ouzo or I'll sic the guys in skirts on you! ;-)

Thu, 04/23/2015 - 21:27 | 6024574 Fukushima Fricassee
Fukushima Fricassee's picture

Nein Nein Nein Nein Nein

Thu, 04/23/2015 - 21:29 | 6024579 Seasmoke
Seasmoke's picture

Is that per household or person ??? Might have to "divorce" the wife. 

Thu, 04/23/2015 - 21:34 | 6024592 youngman
youngman's picture

just make it up as we go..and we are going..pretty fast now...I am sure there are bonuses in the works right now..

Thu, 04/23/2015 - 21:35 | 6024596 chunga
chunga's picture

I'm still waiting to hear "fraudulent cronies agree to give back 5 percent of the money they stole".

oh the moral hazard

Thu, 04/23/2015 - 21:45 | 6024615 Crtrvlt
Crtrvlt's picture

i honestly have no idea what tsipras or varoufakis are thinking, but i disagree with those that say they missed their opportunity and should have missed the Troika payments and defaulted immediately.

I think they are letting the depositors pull out their money, which they are in addition to debt forgiveness mentioned in this article, so those people can have dollars and euros.  when the banks are on the verge of collapse, maybe they will declare a bank holiday, institute capital controls, and re-introduce the drachma (hopefully).  whatever deposits are left will of course be crushed by the new exchange rate, but those who already have taken their money out are in a much much better position than had they been if tsipras defaulted and gone to the drachma immediately.  who knows maybe they are playing the slow game to protect the people as much as they can while the try to negotitate with the euro fascists, knowing full well that there is only one end game.  why would one even want to be part of this "union" who tries to destroy the country even moreso than they already have just because they don't agree with the people's choice of prime minister.  

as for a pivot to russia- this is overblown - Greece has always had good relations with everyone from the east to the west from israel to the arab countries and will continue to do so, as they should.  even before this crisis they and russia have been massive trading partners, possibly even Greece's biggest import wise I think, but the Greeks certainly don't like Russia as a whole and they have 250 years of history of getting burned by Russia - always paying with blood, from Russia faking on their promises to support Greek revolts vs the Turks, to WW1 and WW2 (despite initialy being common allies vs a same enemy the Nazis) to the Civil War to Cyprus and the "Macedonia" name issue.  Russia has nevever been a true ally of Greece.  i honestly don't care at all for Russia, a fascist tyranical country on their own, but this doesn't mean they can't explore all avenues including finacial relations with them as they have for years - nothing new.  Greece will play both sides. 

money in the mattresses! 

Thu, 04/23/2015 - 22:17 | 6024625 ThroxxOfVron
ThroxxOfVron's picture

Charge offs.

What of it?  

Actually: it's really long past time to do exactly this!

The TBTF banks and the bank management had their bad debts/insolvency covered via $12T+ in direct bailouts, instituted ZIRP/NIRP for themselves whiledenying millions Re-Financing at commensurate spread rates and jacked up CCards to what were previously punitive default rates, The FED bought up their non-performing loan portfolios, The FED -is still- paying 6% compounding interest on phantom/phony reserves, GAPP accounting rules suspended, .GOV/FED covering of busted derivatives contracts ( AIG ), deferred all prosecutions for fraud and money laundering and interest rate rigging ( LIBOR, EURIBOR, every-fucking-BOR ), etc., etc.

The economy would have greatly recovered if the money that has been used to bail out the banks had instead been filterd directly though the debtors on it's way to the banks.

The CITIZENRY could have been -and should have been, and should be- directly bailed out by thier govenments too for the exorcise to have resulted in a reset of the debt/fiat system.

The misguided oppression of the Citizenry, and theft from them purportedly undertaken in their interest, has been horrendously counterproductive and damaging and destabilizing -hardly defensible.

It's not even real money.  -It's phony fractional reserve phantom/vapor debt emission against value inflated collateral that is for the most part being expunged.

IMHO, this is exactly what should have been and should be done.

 

Let's get this bullshit over with: that which cannot be paid will not be paid.

Clear the fucking ledgers.  BOTH sides of the fucking ledgers.

Thu, 04/23/2015 - 22:25 | 6024712 Urban Redneck
Urban Redneck's picture

Charge offs? I smell a rat.

No Bank is that quick to "lose money" unless there is something in it for them. 

So what exactly was in this "law" that Greece passed?

Bankster reach-arounds?  Tax Payer funded "compensation" to Banksters for Banksters being "generous" with OPM?

Thu, 04/23/2015 - 22:43 | 6024742 ThroxxOfVron
ThroxxOfVron's picture

It might have been a law just like this one:

 

 

http://www.irs.gov/uac/Home-Foreclosure-and-Debt-Cancellation

"Update Jan. 5, 2015 — The Mortgage Forgiveness Debt Relief Act of 2007 generally allows taxpayers to exclude income from the discharge of debt on their principal residence. Debt reduced through mortgage restructuring, as well as mortgage debt forgiven in connection with a foreclosure, qualify for this relief.

This provision applies to debt forgiven in calendar years 2007 through 2014. Up to $2 million of forgiven debt is eligible for this exclusion ($1 million if married filing separately). The exclusion doesn’t apply if the discharge is due to services performed for the lender or any other reason not directly related to a decline in the home’s value or the taxpayer’s financial condition.

The amount excluded reduces the taxpayer’s cost basis in the home. More details. Further information, including detailed examples, can also be found in Publication 4681, Canceled Debts, Foreclosures, Repossessions, and Abandonments.

The questions and answers, below, are based on the law prior to the passage of the Mortgage Forgiveness Debt Relief Act of 2007. "

 

 

http://www.irs.gov/pub/irs-pdf/p4681.pdf

 

"You can exclude canceled debt from income if it is qualified principal residence indebtedness. Qualified principal residence indebtedness is any mortgage you took out to buy, build, or sub- stantially improve your main home. It also must be secured by your main home. Qualified princi- pal residence indebtedness also includes any debt secured by your main home that you used to refinance a mortgage you took out to buy, build, or substantially improve your main home, but only up to the amount of the old mortgage principal just before the refinancing.

 -

 Exclusion limit. The maximum amount you can treat as qualified principal residence indebt- edness is $2 million ($1 million if married filing separately). You cannot exclude canceled qualified principal residence indebtedness from income if the cancellation was for services per- formed for the lender or on account of any other factor not directly related to a decline in the value of your home or to your financial condi- tion. "

 

You know.  A law something very much like that.

Except in the US you could get up to $2M large instead of a measly 20,000 Euros.

 

"Bankster reach-arounds?  Tax Payer funded "compensation" to Banksters for Banksters being "generous" with OPM? "

 

WTF do you think has been going on for the last 7 or 8 fucking years?


Thu, 04/23/2015 - 23:35 | 6024876 Niall Of The Ni...
Niall Of The Nine Hostages's picture

The bank's going to be sold to DB for a euro and not one member of top management will still have his job by Christmas. On top of that, all their money is already in Switzerland. They may simply no longer give a fuck. 

Thu, 04/23/2015 - 21:52 | 6024640 indaknow
indaknow's picture

Great!

Thu, 04/23/2015 - 22:40 | 6024749 kiwimail
kiwimail's picture

"In a conversation with philosopher Jon Elster conducted at the end of March and published in France's Philosophie Magazine"

WTF?  Is there still a trade called PHILOSOPHER?  How much does it pay and where can I sign up my Uncle Joe from Arkansas?  Does it pay more than being a Poet?

Thu, 04/23/2015 - 23:11 | 6024826 TheAntiProgressive
TheAntiProgressive's picture

"to provide relief to poverty-stricken borrowers".

Great so the responsible low debters are tossed under the bus to bail out the spenders who have already spent it all.  Very Progressive.

Thu, 04/23/2015 - 23:24 | 6024845 Niall Of The Ni...
Niall Of The Nine Hostages's picture

"Write the debt off? Have you been smoking crack?"

"Why not? In  three months Piraeus will be sold to DB for a euro and our careers in banking will be over. And I dunno about you, but all my money's in Switzerland. Fuck them too."

Fri, 04/24/2015 - 01:25 | 6025049 Free_Spirit
Free_Spirit's picture

Tsipiras and Varoufakis really need to grow a pair and take this oil pipeline deal

Fri, 04/24/2015 - 04:43 | 6025223 GC
GC's picture

"How this all plays out is still unclear "

 

Actually, it is pretty easy to figure it out: Tsipras will be removed, one way or the other, as other European governments were when trying to march out of line with political or economic decisions taken in Brussels or Washington over the last 5 years.

Fri, 04/24/2015 - 06:21 | 6025251 Johnny_is_alrea...
Johnny_is_already_taken's picture

If I make a 19.999 debt in 10 banks does it mean I

get away with ~200.000 euro ?

DAMN I JUST FOUND A NEW RETIREMNT PLAN !

Let me go google on how many banks there are in my country

Fri, 04/24/2015 - 06:27 | 6025256 pashley1411
pashley1411's picture

dudes, don't think for a moment this isn't a slush fund for the government's supporters.    Your average Greek?   fcked again.

 

Fri, 04/24/2015 - 06:28 | 6025257 pashley1411
pashley1411's picture

dup

 

Fri, 04/24/2015 - 06:35 | 6025261 Midnight Hour
Midnight Hour's picture

One needs to remember that not that long ago the Army marched in and took over in Greece.  That could happen again, being in NATO with lots of those Toys that go with it, it would not surprise me if words are being passed on to the Generals there to sort things out.

Fri, 04/24/2015 - 07:54 | 6025374 GoldSilverBitcoinBug
GoldSilverBitcoinBug's picture

Wonder who will pay the 20.000 Euros write off...

Today better to be poor and full of debt than rich and having savings...

Where is that fucking comet when you need her ?

Do NOT follow this link or you will be banned from the site!