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The Pressure Just Shifted From Greece To The US & EU
Submitted by Raul Ilargi Meijer via The Automatic Earth blog,
With the 3rd US Q1 GDP print coming in at -0.7% (-3% if not for inventories), perhaps the media spotlights – and lively imagination – can move away from Greece for a few weeks. The US has enough problems of its own, it would seem. For one thing, its Q1 GDP is now worse than Greece’s. Of course its debt is also much higher, just not to the IMF and ECB. But let’s leave that one be for the moment. Though a bit of perspective works miracles at times.
Of course it’s not a technical recession yet for the US, which only recently presented a +4% quarter with a straight face, and there’s always the ‘multiple seasonal adjustment’ tool. But still. It’s ugly.
The IMF confirmed on Thursday that Athens has the right to ask for “bundled” repayments in June. “Countries do have the option of bundling when they have a series of payments in a given month … making a single payment at the end of that month,” as per an IMF spokesman. Who added that the last country to do so was Zambia three decades ago.
That leaves Athens, in theory, with a 30-day window, not a 7-day one. This of course takes the pressure cooker away from Athens, and the media attention as well. There is no immediate risk of a default, or a Grexit, or anything like that. The negotiations with the creditors will continue, but the conversation will change with time less of an issue.
One thing that’s changing is that the pressure on the other eurozone countries is rising fast. They might yet get to regret the way ‘their side’ conducts the debt talks with Syriza, in which they are a party through the eurogroup of finance ministers. Because it makes ever more deposits disappear from Greek banks, some €300 million in the past few days alone. That triggers a eurozone ‘program’ entitled Target2. For those who don’t know what it is, I’ll use an explanation by Mish from 2012:
If a Greek depositor sends money to a foreign bank (say a German bank), that bank now has additional deposits. To the extent it doesn’t want to recycle them (in the past, it may have used them to buy Greek government bonds), it deposits them with a national central bank – in this case the Bundesbank. Target claims are created because the Greek bank that loses deposits gets funding via the ECB’s ELA (Emergency Liquidity Assistance) program.
Simply put, the ECB sends money to the Bank of Greece in a kind of open credit line to make up for the cash that left the Greek bank. There are some restrictions, but not many. This is not a major problem unless Greece changes currencies, or defaults. If it does, Greece will repay the credit line with Drachmas, not euros.
There are quite a few other ways in which the rest to the eurozone is on the hook for Greek debts, but this is a major one. RIght now, so-called ‘Intra-Eurosystem Liabilities’ from the Greek national bank, the Bank of Greece, have risen to €115 billion and counting -fast-. Germany’s on the hook for 27% of that, or €31 billion. While that is not life threatening for Germany, other countries will not feel that comfortable.
Countries like Spain and Portugal may by now scratch their heads about taking a hard line on the Greek issue. They may not have fully realized to what extent the eurozone is indeed a shared commitment. All eurozone nations now have at least another 30 days to think that over. The main risk in that period is that Greece may decide to leave on its own.
The 30-day grace period will probably dampen the deposit outflows for a bit, depending on what both parties have to offer in the way of statements going forward. And the incumbent ‘leaders’ in various countries can use the time to try and tell the troika that they don’t want to explain the potential losses to their voters. There are elections coming up all over, starting with Italy this weekend.
There is another possibility: that the ECB makes good on its long running threat of limiting Greek banks’ access to the ELA program. But, given the 30-day ‘grace’, and given that it would be seen as a political move by at least some parties, that seems unlikely. And it’s not like the entire thing has now become predictable, just that there’s breathing space. In which clearer -and smarter- heads can prevail.
As for the US, it’s spring, the season to adjust. But -0.7% still stings, and things ain’t going well at all no matter what anybody tells you.
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Hey Greece, just go already! Unless you enjoy getting up your collective asses from the EU/USSA.
Hardly click these shit Greece articles. But I did this time, just to say:
So sick of these shit Greece articles!
Alexis the ECB has quite simply publicly bent you over.
Let's decide that the GDP number is whatever the guberment tells us.
It always has been.
If I'm the Greeks at this point, I announce that as of June 15th, Greece is officially leaving the Euro and will go back to the Drachma. For a period of 90 days, the exchange rate will be 1 Euro = 1 Drachma, after which on September 15th the exchange rate will freely float.
Then over the summer, I cut checks of about 400 billion drachmas to the ECB, IMF, bondholders and everyone who Greece is indebted to. Wipe the slate clean Iceland-style and deal with a devalued drachma later. If you're in debt, you're a slave.
It's too late. You have to do that before the bank deposits are pulled and you don't give a warning. If you do as you suggest now there will be zero deposits in Greek banks on June 15. The drachma will trade at 1000's to the Euro. Greece missed the window.
It makes much more sense for Italy. You do it over a weekend, you announce on a Sunday when the banks are closed that all Euro accounts in Italian banks are now Lira accounts, and all Euro debts from Italian banks and citizens are now Lira debts, say 1 for 1. That way you capture the deposits. On Monday the Lira drops to say 5 to 1, you've wiped out 80% of the debt - and all of your countrymen are committed to the new currency because they're in it; they have savings denominated in it.
To do it - you need to be in power, not coming into power and assembling your coalition, as Syrzia was. You need a quiet meeting with the bankers, the chief judges, and the head of the legislature. You'll have some very angry people, but you'll also have a lot of supporters and you wrap it up in the flag with a speech about Italy now, Italy forever. Tourism picks up, your county is cheap again. Employment picks up, your workers are cheap again. You've devalued - but Italy has gold and a sustainable economy with a devaluation. They could make it work.
There's a first-mover advantage. Italy, Spain, Finland - they're all thinking about it.
Anyone that still has any cash in a greek bank has been given a 30 day reprieve, get it out or get what you deserve
I hope it's sorte by the middle of September, I will be over the moon if I have to use Drachmas during my 6 week holiday.
What's going on in Greece, Spain, USA, Italy is that citizens were promised defined benefits when retired. SS, some sort of basic healthcare. Whatever, they worked to said age and now promises not being delivered.
We all should be upset if not outraged.
You worked for some politician's promises?
As long as I paid in I expect a return.
You expect a ROI on a Ponzi? Great logic, son.
It's either a disgruntled ex-employee that is going to put this in high gear or a total collapse of faith in the system that will bring us all down. Multiplied by 10-20 million people.
I think both. Remember when a handshake meant something? Trust, promise, good word, faith, honestly, morals, pay the consequences otherwise. What has really changed over the years? Nothing if you ask me.
SHTF, not my problem, I follow the mafia's rules. Live by the sword, die by the sword. Just pay me what you owe me.
I don't owe anyone!
Don't worry children, you'll get paid, only the dollars will be so inflated you still won't be able to buy a cheap can of dog food.
"Suffering comes from expectation."
But -0.7% still stings
Please note that -0.7% is based on fake inflation numbers of the US BLS. If you use the Chapwood index, US growth was -9.6%. If you use Shadowstats, US GDP growth was between -3.7% to -8.7%.
http://www.zerohedge.com/news/2015-05-29/inaccurate-statistics-and-threa...
http://www.shadowstats.com/alternate_data/inflation-charts
If you can't trust .gov, then who can you trust?
Can we really expect fair play from the US?
When Washington's economic and geopolitical interests are being threatened we have gotten used to a reaction from the US. We have witnessed disproportionate responses to low level threats. The cold-blooded murder of hundreds of thousands of civilians has never deterred the "bully".
The new government of Greece right now presents a major headache for the strategic planners in Washington.
This small but strategically placed country, member of both the EU and NATO, (with veto powers in both), threatens to upset the status quo for the "empire".
Greece, through its present government, has dared challenge the EU "bosses" and looks like it's winning that battle, it raised its voice against the unjust sanctions imposed on Russia, a US initiative, it is closing deals with Russia to build the gas pipeline to Europe that the US has fought tooth and nail to prevent, it looks like it will accept an invitation to become the 6th member of the BRICS bank, an institution that is anathema to the US as it threatens to challenge its control over the global economy; the idea of allowing Russian and Chinese naval forces access to its ports and therefore a safe base in the Mediterranean is not out of the realm of possibility.
Each of the above upsets US planning.
So what are the options for the US?
Winning Greece over, could have been an option some time back, but that ship seems to have sailed. The US chose intimidation over appeasement.
A military coup, one of those the US have become experts at, seems unlikely with the present composition of the Greek Military.
A colour revolution takes time and favourable conditions that are not available at this time.
An assassination. That cannot be ruled out. Passenger planes have been shot out of the sky for lesser benefits. For such high stakes, it would be foolhardy to expect the US to observe either international law or display any sense of fair play. "The US does not have friends, only interests."
Iceland and Cyprus seem to be surviving. Lets get this shit show over already..Like waiting for band to arrive..
The IMF/ECB ziogangbanksters will murder a lot of politicians before they release Greece from their current ZWO debt slavery serfdom.
This is all just a staged show..... all for the markets!
I reluctantly agree with you MS...And is it just me but they said "30 days to go" 30 days ago? June 5th, then June 15th etc? This stuff will go on til cows fly it seems. Anyway, my wish is as most everyones. Greece should just default. Take some pain now, instead of death later. And my gut tells me that this entire world economy system thing is going to fall apart sooner than later. They are just holding it together long enough to get the police state more in order. No, the military cant be everywhere, the U.S. is huge. But when they take out one town, the rest of the towns will be afraid.I may be wrong, but I see a big ISIS attack in the near future.
The HBO series "Jericho" is worth a watch. It gives some interesting aspects of what could happen.
Well, since they'll be making monthly payments until 2057 you might want to think about stocking up on popcorn and Depends so you won't have to make frequent trips to the bathroom while this Kabuki theater plays out.
"This stuff will go on til cows fly it seems."
With some geoengineering over Greece, it may be possible. Pi(i)gs might fly, too.
https://www.youtube.com/watch?v=2dQgjrrEeHA
The socialist governments of the world need to be charged with fraud for making promises to deliver (pensions etc) without the government planning how they would deliver that promise.So if the government puts a gun to citizens heads to complete the transaction it's further proof that government had no intention of delivering.
Spain and Portugal are discovering that the Eurozone is like the Hotel California...you can check in but you can never leave.
Hotel California always has June Gloom...never burns off all day.
This is what happens when people want something for nothing, and politicians make promises that can't be fulfilled. Greece is merely the first in line.
The EU is clearly on its last legs. The Japanese economy is a rotting corpse. The US economy? Well, its collapse will be one for the record books.
And then people will look back on it (while they're huddled in their cardboard box houses) as say, "We never saw it coming!"
A possible carpetbagger situation is before us. Does Greece protect foreign ownership?
Come & see the Show !
https://www.youtube.com/watch?v=oskj5LsgyzE
Scripted Kabuki Theatre, yawn when do the Nukes launch ?
Speak TRUTH to power..
OK, OK, we've run out of "extend," but at least we still have an infinite supply of "pretend."
"The main risk in that period is that Greece may decide to leave on its own."
LOL! Its even more likely I might win the super lotto, mega millions, and Powerball all in the same week with single $1 tickets.
As for being on the hook for Greek debts, that's a given, no matter if Greece stays in the EU or leaves it. In fact, there's a better chance the EU will lose LESS if Grece were to default and seek bankruptcy protection at the end of the month. There is no way around it, any more credit in any way is no different than taking a flame-thrower to wads of newly printed currency. Greece has done zero to the ends of selling off government enterprise back into private hands, and labor laws still make any investment in Greece about as sure a thing as is all that credit the EU is extending Greece now. The EU might as well bring Zimbabwe into the EU.
"The main risk in that period is that Greece may decide to leave on its own."
Actually, it is the _only_ risk.
If the Greeks just fail to pay on a debt on time, Merkel will arrange that her German taxpayers will pick up the bill...
I do not think people fully understand how deeply the United States of Europe dream is held by Merkel.
And the German economy is strong enough to keep Greece going...for years.
Watson
Time to grow a pair and just do it
Sounds like the Troika are gonna cave!
See my avatar, that's when Greece will pay back their loans.
Thanks Raúl Ilargi. This is the first straightforward explanation of TARGET2 I've seen and it makes the former article from Dr. Sinn ( http://www.zerohedge.com/news/2015-05-30/hans-werner-sinn-warns-europe-d... ) much cleared.
What fucking difference does it make whether more fiat is printed to keep Greece on board, or Spain and Portugal wanting the same deal if Greece gets a let off (it will in the end), the Germans hammering away at the Greeks to prevent loss of prestige, what fucking difference does it make?
This is about people losing their jobs and purchasing power due to EU monetary policies, hence the existence of an EU (unwillingly) created Frankenstein in virtually all EMU member states, like Podemos in Spain. Estimates are that e.g. in the latter nearly 30% of households live under the poverty line. But the irreversibility of the sacrosanct euro is the only thing that matters to the Brussels slavedrivers.
I don't give a fuck about who does the job of ridding us of the euro and EU, as long as the job is done. It would be great if it was a truly liberal party in some member state that did it, but the fact is that all the south of Europe is able to produce is extreme left protest parties. So be it.
Fuck the EU and all it stands for.
this is how ELA works:
ATHENS, April 15 (Reuters) - Greek banks made more use of so-called emergency liquidity assistance (ELA) in March, increasing their borrowing by 4.4 percent from the previous month as an outflow of deposits continued, Bank of Greece data showed on Wednesday.
Banks switched to using ELA, provided by the Greek central bank, in February after being cut off from the ECB's funding window after the new government stalled the country's bailout programme - a condition for access to direct ECB funding.
Emergency funding from the Greek central bank, which is more costly than borrowing from the European Central Bank,
rose to 68.51 billion euros ($72.6 billion) last month from 65.64 billion in February, the data showed.
The ECB, which has the ability to expand and restrict ELA operations, has raised the ELA borrowing cap in increments,
keeping pressure on Athens to strike an agreement with its creditors over its debt woes.
On Tuesday the ECB raised the ceiling by 800 million euros to 74 billion euros.
ECB lending to Greek banks against collateral was steady in March at 38.67 billion euros. The ECB stopped accepting Greek government paper as collateral for funding on Feb. 4.
Lenders can still use their European Financial Stability Facility (EFSF) bonds as collateral with the ECB, which explains their 38.67 billion euro borrowing balance.
In total, banks' funding from the ECB and the domestic central bank reached 107.2 billion euros in March - a sum equivalent to about 58 percent of the country's gross domestic product.
The extent to which additional emergency funding will be provided "is entirely in the hands of the Greek government", European Central Bank President Mario Draghi said on Wednesday.
http://www.reuters.com/article/2015/04/15/eurozone-greece-banks-idUSL5N0...