Greece Contemplates Nuclear Options: May Print Euros, Launch Parallel Currency, Nationalize Banks

Tyler Durden's picture

As we said earlier today, following today's dramatic referendum result the Greeks may have burned all symbolic bridges with the Eurozone. However, there still is one key link: the insolvent Greek banks' reliance on the ECB's goodwill via the ELA. While we have explained countless times that even a modest ELA collateral haircut would lead to prompt depositor bail-ins, here is DB's George Saravelos with a simplified version of the potential worst case for Greece in the coming days:

The ECB is scheduled to meet tomorrow morning to decide on ELA policy. An outright suspension would effectively put the banking system into immediate resolution and would be a step closer to Eurozone exit. All outstanding Greek bank ELA liquidity (and hence deposits) would become immediately due and payable to the Bank of Greece. The maintenance of ELA at the existing level is the most likely outcome, at least until the European political reaction has materialized. This will in any case materially increase the pressure on the economy in coming days.

All of which of course, is meant to suggest that there is no formal way to expel Greece from the Euro and only a slow (or not so slow) economic and financial collapse of Greece is what the Troika and ECB have left as a negotiating card.

However, this cuts both ways, because while Greece and the ECB may be on the verge of a terminal fall out, Greece still has something of great value: a Euro printing press.

It may not get to there: according to Telegraph's Ambrose Evans Pritchard who quotes what appears to be a direct quote to him from Yanis Varoufakis, Greece will, "If necessary... issue parallel liquidity and California-style IOU's, in an electronic form. We should have done it a week ago."

California issued temporary coupons to pay bills to contractors when liquidity seized up after the Lehman crisis in 2008. Mr Varoufakis insists that this is not be a prelude to Grexit but a legal action within the inviolable sanctity of monetary union.

In other words: part of the Eurozone... but not really using the Euro.

That's not all, because depending just how aggressively the ECB escalates events with Athens, Greece may take it two even more "nuclear" steps further, first in the form of nationalizing the banks and second, by engaging in the terminal taboo of "irreversibility" printing the currency of which it is no longer a member!

Syriza sources say the Greek ministry of finance is examining options to take direct control of the banking system if need be rather than accept a draconian seizure of depositor savings - reportedly a 'bail-in' above a threshhold of €8,000 - and to prevent any banks being shut down on the orders of the ECB.

 

Government officials recognize that this would lead to an unprecedented rift with the EU authorities. But Syriza's attitude at this stage is that their only defence against a hegemonic power is to fight guerrilla warfare.

 

Hardliners within the party - though not Mr Varoufakis - are demanding the head of governor Stournaras, a holdover appointee from the past conservative government.

 

They want a new team installed, one that is willing to draw on the central bank's secret reserves, and to take the provocative step in extremis of creating euros.

 

"The first thing we must do is take away the keys to his office. We have to restore stability to the system, with or without the help of the ECB. We have the capacity to print €20 notes," said one.

 

Such action would require invoking national emergency powers - by decree - and "requisitioning" the Bank of Greece for several months. Officials say these steps would have to be accompanied by an appeal to the European Court: both to assert legality under crisis provisions of the Lisbon Treaty, and to sue the ECB for alleged "dereliction" of its treaty duty to maintain financial stability.

And who "unwittingly" unleashed all of this?

 Mr Tsakalotos told the Telegraph that the creditors will find themselves be in a morally indefensible position if they refuse to listen to the voice of the Greek people, especially since the International Monetary Fund last week validated Syriza's core claim that Greece's debt cannot be repaid.

Recall last week we asked "Did The IMF Just Open Pandora's Box?" We just got the answer. Our advice to Mme Lagarde: avoid stays at the Sofitel NYC for the next few weeks.

As for Europe: welcome to your own personal Lehman weekend. We hope you too enjoy making it all up as you go along, because you have officially entered the heart of monetary darkness.

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buzzsaw99's picture

deposits should be guaranteed to at least E100K. anything less is a scumbag move that will deepen the greek depression.

Deathrips's picture

Buy real things. Sell Paper!!

Saw this floating earlier.

 

Silver!!

http://greece.greekreporter.com/2015/06/27/greek-investigators-report-fi...

 

RIPS

Looney's picture

Oh my Zeus! With the Referendum results in, I feel as if I were one of’em proud stoic Greeks. I really do!

However, I’ve just realized what the makers of the movie “300” left out…

The Persian King, Xerxes, went to Greece with an army of 300,000 debt collectors to force the socialist King Leonidas and his 299 worst deadbeats to pay up.

Well, you know the rest of the story – Leonidas wanted to call a referendum, but all of’em got slaughtered because the EU got involved and efff-ed things up. ;-)

Poor Greeks! No matter what they do, they always get violated in the end ;-)

Looney

Captain Debtcrash's picture

Greeks unilaterally print Euros?!  Wow this is going to get ugly.  I wonder if they can keep gold under wraps like last week, it will take a herculean effort that's for sure.  Those that say you should not hold ANY gold in your portfolio may soon get a rude awakening. 

kaiserhoff's picture

The Greek government has a very small window, and it is closing.

No more blather.  Whoever acts first, acts best.

Occident Mortal's picture

Prepare for QEGreece, as the Greeks repay the EU and IMF with €300bn of crisp €20 bills.

How do you like them apples? Fuckface.

Bank_sters's picture

Or in a worse case, Europe launches military action against Greece's printing press.  

 

The Horror, indeed!

caconhma's picture

Regardless of what Greeks say or vote for, their free-of-pay good life is over. Unfortunately for Greeks, they are not used to work anymore. 

Consequently, Greeks will prostitute themselves to a highest paying pimp.

NoDecaf's picture

The first step should be closing the American embassy.

HowdyDoody's picture

What did Putin say to Tsipras when he went to Russia? Do as the Crimeans did?

petar's picture

He told Tsipras to blame everything on the Evil EZ members who saved them a couple of years ago and demanded strong reforms or won't waste their money again.

palmereldritch's picture

The Greeks could always host a Russian-themed tall ships festival in Athens as part of its newly established fiscal adventure

Syriza's traditionally strong relations with Russia have been strengthened through a series of recent visits between Moscow and Athens. During his visit last month at the St. Petersburg International Economic Forum, for example, Greek Prime Minister Alexis Tsipras spoke of the Greek and Russian relationship, hinting that Greece was "ready to go to new seas to reach new safe ports."

Greece also has a strategically important location in the southeast of Europe and on the Aegean Sea. Closer ties between Greece and Russia raise the possibility that Athens might permit Russian ships the friendly use of Greek ports. This would be a major strategic concern for NATO, allowing Russia to expand its military influence not only in Crimea and the Black Sea, but to obtain a stronger foothold in the Mediterranean. The Greek-friendly Cypriot government, though not itself a NATO member, already permits such use.

It's even possible that a Grexit and closer Athens-Moscow ties could lead Greece to withdraw entirely from NATO, moving instead toward closer security cooperation with Russia

There is precedent: Greece has previously withdrawn from NATO, from 1974 to 1980. While relatively unlikely, a new Greek withdrawal from NATO would result in the loss of strategically placed bases, placing an increasing burden on Turkey to support NATO's southern security needs.

http://www.wdsu.com/national/opinion-the-lurking-danger-of-a-grexit/3400...

COSMOS's picture

But if the Germans lose those captive euro markets for their products where will they have the funds to pay for clothing, feeding, and housing all those illegal muslim immigrants coming in by the hundreds of thousands?  And where will those illegals go with their little UN rat's ass passports.  Maybe to America, yes that is it.  Que up the Neil Diamond song folks, they are coming to Americaaaaaa.

palmereldritch's picture

Nein. TPTB will ignite all that kindling in Europe.  As planned*.  Oily rags were not available (go figure).

America will be the Anti-thesis that provides the Synthesis...hence the MIC

 

*The ‘House’ of Saud — no more Islamic than Billy Graham

Following the dictates of Hegelian dialectic, the Globalists have created two antagonizing forces, the “Liberal-Democratic” West, against Terrorism, or “political Islam”, to force us into the acceptance of their final alternative, a New World Order.

The West and Islam have had a long era of compatibility, but this history has been denied to foster the myth of a “Clash of Civilizations”. In order to inflame the sentiments of the West against Islam, our attention has been focused on the specter of fanatical Wahhabism, and more specifically, its most notorious exponent, Osama bin Laden.

http://www.globalresearch.ca/globalists-created-wahhabi-terrorism-to-des...

The bigger question shaping up is:

Is the new Boogieman Al-CIA-duh or Mein Putin?

The only thing worse than fighting a war on two fronts is creating a war on two fictional fronts.

jeff montanye's picture

cosmos:

love your comments but cue or queue.  probably the former.

Boris Alatovkrap's picture

Boris' cousin Ivan is fire up to press, is provide many Euro note in 20 denomination. Is also have good deal on shoe and rubber boot.

disabledvet's picture

"There is no path forward for Greece now." Right move: Greece was set up to fail from the Getco.

I just fail to see a Plan B from.EUROPE though either.

"No need for a finance minister at this point." Greece's options are print...or have a revolution...would appear.

I could be missing something here...hope I am...totally terrifying if I am not though.

"Anyone with money in Europe better get it out NOW!"

cookie nookie's picture

So is the final collapse here yet?  I've been waiting for ages.  Is the sky finally falling?

Zero Point's picture

Nah, Volkswagon bought up all those other companies because they're the best car makers in Europe.

The Euro had nothing to do with it.

/s

datura's picture

Well, interestingly, Putin said something like (not directly to Tsipras but in his presence): "When you own somebody a whole lot of money, it becomes above all their problem not yours. (And after laughter from the audience) I mean it."

Pairadimes's picture

Unilateral printing of Euros was always the EU nightmare scenario. The knuckleheads that came up with the idea of a currency union apparently never read Garrett Hardin on "The Tragedy of the Commons".

SPAREPARTS's picture

All Greek Euros would be devalued by the rest of Europe, It would cease to be legal tender

disabledvet's picture

FINE THEN!

NO EURO FOR YOU MR ECB!

TheReplacement's picture

So the ECB is QEing left and right and now you might have invalid physical currency as well.  Those Europeans sure are confident.

disabledvet's picture

Just imagine the possibilities here...

TRILLONS of euro!

The new Wall Street of Europe!

Do not hold back Mighty Greece!
You only get one shot at this!

Element's picture

A drowning man panics and violently tries every possible twist and turn to get one more breath. But you quickly use up your oxygen reserves doing that and the problem remains, and becomes even more acute ... so you keep panicking more, and hang on as long as you can, then panic all the more again ... until suddenly, very, very surprisingly, you can't do that any longer ... you breath in the water ... it was the only option left ... so you breath in deeply ... and out ...  in ... your lungs fill ... out ... no bubbles left ... you discover that it feels wonderful! ... well, relative to how you had just been feeling ... and your relative buoyancy almost imperceptibly declines ... as your lungs fill ... and you begin to sink ... and you realize now that you're not going to be breathing any more air ... so you make do with what you have and you breath in the water more deeply and feel very grateful to have at least that much ... then of course you realize that breathing in the water doesn't actually work .. but there's nothing left that you can do ... so you just relax to that fact and enjoy breathing ... for as long as it continues ...

 

Greece just took its first deep breath of water ... and it feels wonderful!

European banks just slipped into the water and have now begun to panic.

The ECB runs to help, but slips, flails for stability, but falls in too, with a last look of appalled surprise, before the splash consumes them.

 

And they all begin to feel very grateful ... and enjoy having at least that much.

 

FrankieGoesToHollywood's picture

The most descriptive passage I have ever read on drowning.....  There is a future for you in writing.

jeff montanye's picture

true that.

but iceland and a number of other defaulting sovereigns throughout history, germany among them, call into question the permanence of the event, unlike drowning. 

Element's picture

I have the advantage of having actually gone though that drowning process, when I was 6, jeff.

A lot more I could say about that, but long story short, someone pulled me out, turned me upside down and emptied my lungs, when I was already totally gone.

So I agree with your observations.

But drowning remains a valid metaphor.  ;-)

 

edit:  btw, Yanis Varoufakis just quit.

flyingcaveman's picture

I knew I guy who got smurfed pretty bad during some navy training.  That's almost exactly how he described his near drowning experience.  Says he remembers breathing in water and thought it was awesome, took a couple more breaths and thought he was aqua-man,  then he didn't remember anything after that until he was getting water pumped out of his lungs.

Element's picture

Yeah cheers, there's no gag reflex, no pain, nothing, it's just thicker and cooler than air, otherwise feels terrific. The only unpleasant part is the panic before you start breathing it. Thanks.

Tarshatha's picture

"Unilateral printing of Euros was always the EU nightmare scenario. The knuckleheads that came up with the idea of a currency union apparently never read Garrett Hardin on "The Tragedy of the Commons"."

 

The greatest tragedy in the common that I see, is predatory institutions issuing Euro denominated bonds (out of thin air) to a debtor that could never repay and then shifting the liability from its balance sheets to that of the people through taxation and inflation.

Money Boo Boo's picture

{UNFUCK THE WORLD = FUCK THE BANKS} + DRONE STRIKE AN OLIGARCH

 

simple math, just needs to be applied in a real world fashion

 

chisler's picture

Nice! Your promo to the Greek ministry of finance is assured.

Mark Urbo's picture

Love it !!!

 

Print away and pay back the EU bankers in €20 bills !

Perfect  :o)

disabledvet's picture

They are paying twenty percent interest "plus the EU has no intention of raising rates anytime soon."

Can't pay the IMF this way...they will demand dollars.

Don't see "legally" why Greece can't just "run the debt off" from the printing press though...

runningman18's picture

They'll demand SDRs, not dollars.  The IMF knows the dollar is about to take a dive after they release their decision on China SDR inclusion this fall. 

disabledvet's picture

It doesn't make any sense to me that Draghi would allow Greece to EVER default to the IMF.

Your saying Draghi's backstop are "SDr's"?

Bwhahahah.

Not anymore would appear...

runningman18's picture

And yet they are now defaulting.   Guess you were wrong...

Buck Johnson's picture

You know damn well that is what they will do and what europe fears.

 

hedgefunddartthrower's picture

Beautiful. But why waste paper? Just print 500€, 1,000€ and 10,000€ notes. Flood the market with paper money and electronic transfers all at once. As soon as this idea is acted upon, the EU will try to use every bank to shut it down. Therefore, the greeks should do this now, before the global squid clamps down and figures out a way to make money off of Greece's collapse.  This is gonna be fun...

SofaPapa's picture

Paging Mr. Juncker:

It is becoming serious again...

jefferson32's picture

In February 2009, Epikaira magazine in Greece published a top secret document from EYP, Ethinki Ipiresia Pliroforion, i.e. the Greek National Intelligence Service, with the code name "Eidiko Deltio Enimerosis" informing Karamanli's Government that there was a plan (Pythia 1) to assassinate the Prime Minister, Kostas Karamanlis, leader of the New Democracy party. EYP was informed from FSB, the Federal Security Service of the Russian Federation, who found details of a plan by an unnamed country (obviously the USA) to stop Karamanlis new energy policy of Greece, which was oriented towards Moscow, specifically it was intended to annul the contract between Greece and Russia on the South Stream gas pipeline which was a rival to the now defunct US backed Nabucco pipeline.

According to the FSB's report the plan was designed by Western Intelligence Services led by the CIA, with participation from Israel's Mossad.

Greek daily To Vima reported that the plot to kill Kostas Karamanlis also had to do with US objections to the Bourgas-Alexandroupolis pipeline and that the telephone conservations between Costas Karamanlis, Vladimir Putin and Georgi Parvanov were tapped.

Greece should pivot to Russia and loosen ties with the USA and Israel given the serious evidence that the USA and Israel planned to assassinate Greek PM Kostas Karamanlis in 2008 in order to prevent Greek participation in the Russian led South Stream and Bourgas-Alexandroupolis pipeline projects.

From the comment section here

two hoots's picture

People in Greece should now be tending their gardens/chickens.  Food is a good thing to have when you get hungary.

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

whirling tword freedom's picture

They did the right thing but boy, it's going to suck for them for a while.

By the time it gets here there will be lots more blood letting.

COSMOS's picture

What Israel involved in assassinations of world leaders for financial gain.  I don't believe it.  NOT true. I have my ears and my eyes covered now.