IMF Preparing Greek Default Contingency Plan

Tyler Durden's picture

The biggest slow motion trainwreck in history, one that everyone knows how it ends just not when (especially since the "when" is about 5 years overdue), that of the Greek sovereign default may just got a bit more exciting earlier today when the WSJ reported that the IMF can no longer lie - like Mario Draghi did to Zero Hedge in 2013 - that there are preparation for a Plan B. To wit: "the International Monetary Fund is working with national authorities in southeastern Europe on contingency plans for a Greek default, a senior fund official said—a rare public admission that regulators are preparing for the potential failure to agree on continued aid for Athens."

According to the WSJ, the IMF is focusing on nations neighboring Greece, asking their national banking supervisors to "ensure that subsidiaries of Greek banks have enough assets that they can exchange for emergency financing at their own central banksin case financing from their parent institutions is suddenly cut off—and that deposit-insurance funds are at sufficient levels, Mr. Decressin said."

In other words, have a Greek default Plan B ready, preferably right now.

"We are in a dialogue with all of these countries,” said Jörg Decressin, deputy director of the IMF’s Europe department. “We are talking with them about the contingency plans they have, what measures they can take.”

 

Greek banks are big players in some of its neighbors’ financial systems. In Bulgaria, subsidiaries of National Bank of Greece SA, Alpha Bank SA, Piraeus Bank SA and Eurobank Ergasias SA own around 22% of banking assets, roughly the same as Greek banks own in Macedonia. Greek banks are also active in Romania, Albania and Serbia.

Should anyone be worried that a day before the critical Eurozone meeting which was supposed to conclude the Greek bailout negotiations, not only is there not a deal but Greece is once again on the edge of collapse?

“It would be foolish for anyone in the policy world not to be worried at this stage,” Mr. Decressin said.

Thanks for the warning.

And while we have covered the background story in detail, here it is again: "European officials expect no breakthroughs at a meeting of the currency union’s finance ministers on Monday. That means Greek lenders will remain under pressure, dependent on relatively expensive liquidity from the Greek central bank and at risk of bank runs in case doubts emerge over their ability to pay out deposits."

As noted above it is not if, but when. Here's why.

 

Going back to the WSJ story, while there is nothing that has actually changed in the narrative, it is almost as if the IMF, having failed to spur a wholesale bank run in Greece, one that would have toppled the government, is now trying to spur bank runs in Greek bank subsidiaries in neighboring nations.

One scenario that the IMF is concerned about is what could happen if panic over Greece’s finances pushes savers in the region to pull their money out of Greek-owned banks. “These banks…may be totally fine, but there could still be in the population a perception, these are Greek banks and they are not fine, and people would turn up and try to withdraw their deposits. That is something you cannot model,” Mr. Decressin said.

 

National safety nets have in the past been vulnerable to rumor-fueled bank runs. In June last year, the Bulgarian government had to take over Corporate Commercial Bank, after depositors pulled out their savings amid negative news reports about the lender’s main shareholder. It took the government six months to compensate the bank’s depositors, far longer than the 25 days mandated under European Union law.

Of course, if there is a Greek default and suddenly it becomes clear to everyone that the unbreakable monetary union is quite, well, breakable, the IMF will have to worry not about bank runs in Bulgaria et al, but the countries in Europe's periphery, such as the one with the second largest amount of sovereign debt outstanding: Italy, as well as Spain, Portugal and so on. Because if the common people have learned one thing, it is that if a political party is elected that the ECB does not approve of, that country's days of financial mirth are over, and insolvent reality is just around the corner.

And just to make sure that the IMF's concerns are unwarraned, the NYT reports that "discussions in the Greek government have included assessing the pros and cons of not paying the central bank and the monetary fund, said two people who were briefed on the discussions but who spoke on the condition of anonymity. In such a case, which was described as a last-ditch option and not a plan for action, Greece would keep paying debts owed to private sector bondholders and other European governments."

What is most shocking is that it has taken the Greeks five years to realize there are no more pros to perpetuating the massive con that is it failed zombie nation status, one that has resulted in the biggest national depression in history.

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knukles's picture

And ...... We'll take what's behind door number 3.

kowalli's picture

we have 3 options - deal, expected default (IMF told us), surprisingly default

They can't make money if all guys in the room know the date of default.

macholatte's picture

 

Just ONE Question:

Should Greece finally default, is the play to go long or short EUR/USD, EUR/GBP?

kowalli's picture

Eur should go down, because of loses, but who knows, mb they will go with "strong euro because of week country is gone"

johngaltfla's picture

And the ECB got another punch in the nose as Poland shifted away from the pro-Euro/ECB President in the first round of voting...

Polish Election Shocker: Pro-Euro President Suffers Shocking Reverse in 1st Round

bigkahuna's picture

what about those credit default swaps?

 

or is this another "technical default" or whatever they called it last time...

hairball48's picture

Dunno about the currency trade but I've been long Greek donkey carts since 2012. I'm about to get paid off :)

Yen Cross's picture

  What about Greek IOU's?  "When it gets serious you have to ponzify."

 ~ Jean Claude Bullshitter~

Yen Cross's picture

 "The price is wrong bitch."

 

 ~ Happy Gilmore~

Achilles Heel's picture
Achilles Heel (not verified) Yen Cross May 10, 2015 7:14 PM

"We'll take what's behind door number 3." - Carol Merrill

new game's picture

door 3 = a case a beer, for the alcoholic(greece), so have your beer and save the 23 for the imf. suuuuuuuuuuure thing, all good for a day...

Yen Cross's picture

lol, That was creative. ;-)

wee-weed up's picture

Dammit... default already!

Freddie's picture

Mr. Panos message to the IMF and Germany:

https://www.youtube.com/watch?v=Zvl9N9GdraQ

F**k You Malaka!

https://www.youtube.com/watch?v=EyWU-0ppug0

Malaka means: #1 masturbator

Hulk's picture

Its Deja Vu all over again !!!

Joebloinvestor's picture

The only banks that will fail will be the privatly held ones.

davidalan1's picture

greek yogurt will save the day....that shit expensive

jldpc's picture

unleash the Schaeuble

gwar5's picture

Get to da Schaeuble!

Dragon HAwk's picture

the old drag it out drag it out threaten threaten what if's till people are so bored that when it happens it's a non story

  unless of course it's your money that disappears.

oncefired's picture

Fuck that Transvestite LaGarde!

CHC's picture
CHC (not verified) May 10, 2015 7:06 PM

I don't know what year that first calendar is in (May) but it's not 2015.  Anyways - Greece, go ahead a default, get all the craziness over with and withdraw from the EU while you're at it.  You have an entire country of manic depressives you need to concern yourself with - not those blood sucking banksters who just want to suck you dry. 

seek's picture

"Contingency" LOL. Like any alternative to that will happen.

walküre's picture

They don't want contingency. They could care less. They don't give a shit about anyone but themselves. As long as they can come out on top of the shit pile - again and rule another 70 years..

Too much underperforming, low yielding debt in the system. We need a purge. Retirement accounts and pension plans are all underfunded and not sustainable. Might as well have a cleanse to rewrite all the "contracts" and deals that we all know, can never be piad out.

I welcome it! It's for my children.

HolyfieldsOtherEar's picture

Default and adopt the Russian rouble as your pro tem currency.

Bossman1967's picture

Greek people retire at 50 wear speedos and hang out at beach all day in my book a recipe for disaster long over due. As bad as collecting welfare smoking pot and going to casino and strip clubs all day. Guess which country defaults next USA USA

HolyfieldsOtherEar's picture

USA defaulted in 1971, when Nixon closed the gold window.

falconflight's picture

Nixon officially (Dejure) closed the window, but LBJ's gov't defacto defaulted in circa 1967, when France was told its holdings of FRN's would not be exchanged for the gold France trusted to the US Gov't.

Freddie's picture

The only thing worse than Greeks in Speedos would be Wal Mart shoppers.

bunnyswanson's picture

Where is it carved in stone that a human being should follow this plan?  A couple hours a day to see the family, 2 days off to shake off the work week, 2 week vacation a year, retire at 65.  Spend your days golfing because your body is useless now and walking across a lawn is about all that you can handle).

This whole scheme needs revision to benefit the masses.  The cost of living should be readjusted and if one wonders how that can happen, replace CEOs and their circle jerks with board members who work for a reasonable rate (they could not do any worse).  Same as the nation.  What good is a political system if the people's vote is only allowed to be applied to those inside the circle-jerks' circle, regurgitating the same family name, same mediocre attempt at leadership, look the fuck around.

Young people should have the ability to spend time to raise their children, see the world, get an education and if gifted/talented (many are), practice to perfect it.  This is a rat race to the grave.  Consumption is taking us via advertisements to what we should do.  The subliminal messages are no longer subliminal.  BUY MY GODAM PRODUCT, over and over everywhere, flashing before us at every turn, assaulting us with their insistence that we SPEND the money. 

 

gwar5's picture

Er,... IMF is working on contingency plans to contain the default of Greece. 

They connot let Spain, Portugal, Italy, and perhaps France, follow Greece. When they let Greece go the Troika has to make sure they already have a gun to the heads of the other PIGS. 

 

Atomizer's picture

Two feminist cunts. Basel III is broken. Regarding boredom, it's the IMF fund liquidity. 

walküre's picture

Remember when Lehman went under, the consensus of the financial world in the aftermath was supposedly "they shouldn't have let Lehman go.."

When Greece defaults and the markets crash (just in time smt), the propaganda will say again ... "they shouldn't have let Greece go.."

Script is in play. We need to crash and we need to crash harder than 2008/2009 to restart the system and purge a bunch of stuff....

luna_man's picture

 

 

Just hoping and waiting for that miracle...

 

something has to give

bunnyswanson's picture

Vultures, scavengers is not miracle.  This is the plan - those who created the problem show up with the solution.  Means justifies the end because no one would agree to giving this body of assholes the position.