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More Sellside Reactions To The Greek Referendum
Today, Greeks sent a resounding message to Brussels, Frankfurt, and Berlin that they are not willing to acquiesce to further humiliation at the hands of creditors and that, even if it means braving the economic abyss in the short-term, the country is determined to salvage a better tomorrow from what, after today's referendum, are the smoldering ashes of Greece's second bailout program.
Now, a stunned sellside — which had, over the past three months, very carefully tweaked their base cases to reflect the growing risk of Grexit — is scrambling to explain to nervous clients what happens next.
Having heard from JPM earlier, we bring you the latest from Barclays, Deutsche Bank, and RBC.
* * *
From Barclays:
A “no” vote means EMU exit, most likely
We argue that an EMU exit would become the more likely scenario, even if Greece remaining in the euro area cannot be ruled out. Agreeing on a programme with the current Greek government would be extremely difficult for EA leaders, given the Greek rejection of the last deal offered. EA leaders accepting all Greek proposals would be a difficult sell at home, especially at the Bundestag or in Spain ahead of the general elections.
How will the crisis play out? The bank liquidity crisis is likely to turn into a solvency crisis once the ECB shuts down ELA, probably no later than 20 July (when a EUR4.2bn payment to the ECB becomes due). Fiscal problems would become more acute; the government may be forced to issue IOUs, which effectively become a parallel currency to the euro. A new currency by the central bank of Greece is likely to eventually become necessary to inject both liquidity and recapitalise banks. At this stage, we would expect IOUs to be converted into the new Greek drachma (NGD).
The NGD would likely depreciate significantly and hence many local companies (clearly those in the non-tradable sector) and households would need to default on their foreign currency debt, now including euro-denominated liabilities. Many of the domestic contracts that are now denominated in euros would also become unviable and need to be restructured. Non-performing loans would surge because of: 1) the negative balance sheet effects for firms and households; and 2) the local currency needed to pay euro debts would increase with the devaluation, exceeding the increase in local currency revenue. Likewise, the government would also be forced to default on its euro-denominated liabilities.
Redenomination away from the euro would also cause massive transfers between agents, adding to the above-mentioned transfers between debtors and creditors. A majority of households with local accounts and savings will suffer substantial losses while cash rich agents with accounts abroad will be the big winners and could take advantage of the chaos to seize capital and production capacities. Given the weak state of the government, these redistributions would likely benefit the already oversized unofficial sector.
In short, the existing contracting framework and financial infrastructure would be broken and need to be rebuilt. Inflationary finance would likely be used, to some extent at least, to replace the official finance that now supports Greece. Politically difficult fiscal and structural reforms would still be required to make the country more competitive, and promote economic growth.
* * *
From RBC:
In a normal referendum the next steps would be binary––something happens or it doesn’t. But this is no ordinary referendum.
We argued last week that the next steps for a ‘no’ or a ‘yes’ vote look superficially similar. The government and creditors will have to start negotiations on a third programme (since the second one expired on Tuesday). Both sides indicated they were willing to do so even in the event of a ‘no’.
What happens on Monday?
Various European-level meetings are expected to take place. These include a EuroWorking Group meeting (i.e. top-level officials from euro area finance ministries). This may then be followed by a eurogroup teleconference (i.e. finance ministers-level) to take stock of the situation. At the Leaders’ level, German Chancellor Merkel will meet French President Hollande for a bilateral in Paris, with both calling for a European Council summit to follow on Tuesday. Separate from the political proceedings, the ECB’s Governing Council is also expected to meet to discuss Emergency Liquidity Assistance (ELA) for the Greek banking sector, though this meeting has not yet been confirmed.
The first thing to watch is how Syriza responds
On Thursday, Greek Prime Minister Tsipras claimed in the event of a ‘no’ outcome, he would be in Brussels within 48 hours signing a deal. In practice that is almost impossible––any new deal will need a lot of technical work so at best is a few weeks away. But in the first 48 hours there should be some sign of what willingness there is to compromise on both sides. If Tsipras takes a defiant tone (citing the democratic choice of the Greek people) we expect Europeans leaders to respond that they are also democratically elected (as they did after the January election). In that case we would expect the market reaction to worsen.
The second thing to watch is how the ECB responds
The Governing Council is expected to meet on Monday to take stock of the situation. A Greek government spokesperson revealed that the Central Bank of Greece would submit a request to the ECB for a further increase to the ELA facility limit, which currently stands at €89.4bn. This follows from various press reports, including Bloomberg, indicating that Greek banks were struggling to cope with deposit withdrawals even with the capital controls already in place. Note that prior to the weekend, the head of Greece’s banking association, Louka Katseli, said that ‘liquidity is assured until Monday, thereafter it will depend on the ECB decision.” She added that the liquidity cushion banks currently had stood at about EUR 1bn.
We nevertheless consider there to be limited prospect of further extension to ELA at this stage, with the risks instead skewed towards the Governing Council restricting access to the facility, including by increasing collateral requirements further. An increase to the ELA limit was not a ‘given’ even if the referendum had yielded a ‘yes’ outcome, and as such a ‘no’ vote makes that decision even more difficult, in our view. Recall that ELA lending requires banks to post “adequate collateral”, and may only be provided to “illiquid but solvent” institutions. In the current environment, whether such conditions are satisfied is predicated in part on a judgment about the likelihood of a new financial assistance programme being agreed for the Greek sovereign.
Does this mean euro exit?
A ‘no’ outcome certainly increases the risk. This is particularly the case if the Greek government believes that it will have substantially more bargaining power with the institutions and brings more ‘red lines’ to the negotiating table. Much will depend on the tenor of discussions when they begin next week.
* * *
From Deutsche Bank
There are three near-term implications of the results.
First, the vote marks a big political victory for PM Tsipras. Today's vote will allow the PM to maintain the political initiative within Greece, re-enforcing his leadership within the party as well as the government. It will be perceived by the government as a strong backing around its tough negotiating strategy.
Second, the poll masks a deeply divided electoral body. The win to the "no" vote was decisive. But opinion polls over the last few days have continued to show an overwhelming support for euro membership. How this can be reconciled with the "no" vote and rising economic costs remains to be seen in coming days. Either way, the referendum process itself and the outcome has increased polarization in Greece. Political tension both within parliament and in potential political demonstrations will be ongoing and unpredictable.
Third, the referendum result now requires Europe to more formally adopt a position on Greece, particularly given the size of the "no". The European message on whether rejection is equivalent to Eurozone exit has not been consistent, with both Merkel and Schauble in particular not adopting this interpretation. A more clear reaction from Eurozone members should now be expected.
Next steps
In coming hours, the focus will shift back to the European response.
Most imminently, Greek bank ELA liquidity is likely to be fully exhausted over the next few days, leading to an exhaustion of ATM cash reserves as well as an inability to finance imported goods via outgoing payments. The hit to the economy will be big. The Bank of Greece is holding a conference call with the Greek banks this evening to discuss the liquidity situation.
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.
On the political front, focus will now shift to whether the damaged relationship between Greece and Europe's creditors can be repaired and the immediate prospect of a resumption in negotiations. PM Tsipras last week officially applied for a 3rd ESM program, but the application was rejected pending the outcome of the referendum..
The risk is that relationships between Europe and Greece have been damaged to such an extent, that additional conditions are set before negotiations around an ESM program can be initiated. The overall ESM process will in any case take time. An ESM program requires prior ECB/IMF assessment of financing needs/debt sustainability as well as Bundestag parliamentary approval before talks around a staff-level agreement can begin.
In the meantime, political developments within Greece will be just as important. The PM's commitment to re-start negotiations will be tested tonight and tomorrow morning..
The opposition, in the meantime, has been weakened. Influential New Democracy party member Bakoyiannis is reported this evening to have asked for former PM Samaras' resignation to allow the party to re-group. The prospect of ongoing and unpredictable shifts in politics cannot be ruled out over the course of the next few weeks given rising pressure on the economy.
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Is it time to panic?
<That exit looks mighty small to me.>
Survive the crash. Only 49-1/2 free investment guides left.
A Progessive Jewish live well lived (and ended)
The family and friends of Regina Brunner Holmes faced the huge emotional challenge of balancing anger, grief and respect for a life well lived as they gathered Sunday to remember an 85-year-old woman brutally killed in her East Mount Airy home.
They took the high road.
"Yes, we are extremely angry that our mother was terribly beaten and killed," Adam Brunner acknowledged before a capacity crowd of about 500 at Joseph Levine & Sons funeral home in Trevose.
Then he expressed compassion for people whose lives are filled with "trauma, pain and sadness" and said his mother's killer "must have suffered so much for his heart to turn so cold."
He said he hoped for a prison system that truly rehabilitates rather than hardens. "We are so weary from all this violence," he said. "We don't want anyone else to suffer the way we are suffering."
His brother, Eric Brunner, said a friend told him, "The person who murdered my mother took her death, but he did not take her life."
Holmes was found a week ago in her home after she didn't come to work at her part-time job at the Chestnut Hill Local newspaper. She had been beaten and stabbed. Her throat had been slashed.
Police Saturday announced that they had arrested a man who had worked as a handyman in the neighborhood, Leroy Wilson, 37. They said their suspect had a long criminal history.
At the service, Holmes was described as a smart, spunky woman who had faced her own challenges: widowhood, divorce and cancer.
Eric Brunner said she had accomplished her life goals. "She often said, 'If I die, do not feel sorry because I have lived a full life.'"
He described his mother as an early adopter of healthy eating. A package of Tastykakes was a rare treat the family shared. She was old-fashioned enough to keep writing letters long after most people had stopped, but also had been part of an encounter group in the 70s and had chided her teenaged sons and their friends for using the word "chick."
"You have to stop using the word chick because it's degrading to young women," she told them.
Adam Brunner said his mother told him that, as a 16-year-old Overbrook High School student, she said yes when a "young man from another race" asked her to dance. Everyone else stopped dancing and moved to the edge of the floor. She and the young man kept dancing.
Brunner asked if she was worried what the others would think. "I liked this man," she said. "I wanted to dance with him."
Brunner said his mother always cared about injustice and inequality. "She did what felt right," he said. "She embodied her values."
She worked for more than 20 years at Northwest Center for Older Adults, now called Center in the Park, an agency that helped older people maintain their independence. Rennie Cohen, a coworker there, said they got off to a rocky start but became great friends. She said Holmes was a complex person to whom a wide variety of adjectives could apply. A few of them: caring, assertive, bold, perfectionist, honest and kind.
Eric Brunner said a friend told him that his mother's soul might be confused after her sudden death. It might help to give it permission to move on. So, in front of the audience, he did just that. "I want to say, Mom, it's OK to go now," he said. "The light is waiting for you. You are free from your burdens."
Read more at http://www.philly.com/philly/news/20150706_Regina_Brunner_Holmes__a_life...
What happens next is the assasination of creditors.
On a long enough timeline...
Of course the line is shorter if you live in Philadelphia.
And will be shorter still if Greece pulls everything else down.
RIP Regina
As for Leroy-- I wouldn't worry too much about earthly punishment. The devil has that well in hand. But your Maker will be waiting at the gate.
Reading the above makes me realize how imprtant is was for Greeks to buy those gold British Sovereigns when they had a chance. Those will not drop in vlalue; quite the opposite. They can only be bought now in greece at a premium is my guess.
Whenever you need some cash, simply trade in a sovereign. If you have trouble in Greece then drive over to Bulgaria or any other country and they will be glad to trade it for you for cash.
The Greek who held gold coins is sitting pretty, yes.
Read more? Why? You already forced the whole fucking third page story on us. Oh, I'm sorry, is it supposed to peak my racist rage to an all time high?
What does any of this have to do with the price of tea in China?
What is becoming clear now is that the pace of events is becoming unmanageable.
Look at the number of multiparty meetings and process gates that must be navigated over the next 10 days.
The odds of this remaining within the realms of "controlled" or "orderly" are vanishingly small.
The markets might feel the grip of the ECB and SNB levitating hand, but the streets of Europe cannot be controlled with mere algorithms.
France is going to erupt in violent protest this August. The Germans have a tough choice... Bit their tongue and underwrite a continent of frivolous slobs or dig in and watch them all burn.
Either way, history makes one thing clear... When it comes to mass violence, the Middle East hasn't got a patch on Europe.
If Europe fractures watch how quickly it becomes militarised.
"The Germans have a tough choice... Bit their tongue and underwrite a continent of frivolous slobs or dig in and watch them all burn."
It has certainly been to Germany's benefit to sell (and lend to) a bunch of frivolous slobs. And a depreciating Euro has also benefited Germany greatly. Please don't make Germany out as the poor sucker at the poker table.
"Hence. the first order of business STILL REMAINS...fuck everybody and make sure the German Banks get paid."
Move along...
You folks make it sound easy being a....."Bankster"
Nay, veerily..."A Bankster's Job is Never Done...
" No banker left behind ...." or as we say in Deutsch, " Kein Banker zurückgelassen. "
But in fact, I bet you there's lots of American financial instituitons involved here so do not be surprised if yellen floats a secret loan to the EU bankers as was done many times before not only in Europe. There is no way the fed is not intimately involved here.
No way.
yup, the fed has their fiat dick up many arses...
all behind the curtain; come out of the closet yellow stain, plez, we all what to see what ya got, ha...
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.
The IMF would not have come out last week in support of the position of the Greek Government unless Washington (And by extension The Fed) had not approved. Washingtom clearly does not relish the prospect of Russian nuclear submarine bases in The Adriatic. The question is who pays? If The EU suddenly re-assesses the situation and grants generous haircuts to Greece despite the risk of the other PIIGS joining the line, it means that those NSA dossiers must be REALLY good?
Truffle Butter
The euro is going down...
..and the cult in Brussels deserves it !
Germany is to the Greeks as the US is to the world. Have paper will loot
Not to mention how stuff runs uphill and hits the US markets in the a.m. Add to that oil down over $2 (-3.4%). The bankers have us all tied at their hip all across their $/Euro area of control. However notice China Central Bank is trying to salvage its plunging markets but no big inpact here, why, they have their own banks. Hmmmm....just how imbeded are banks in our lives even if you owe them nothing?
I agree that events are likely to spiral out of control. It may not happen tomorrow, this week, or even this month, but fraudulent "control" of the markets will not be sufficient to keep the balls in the air much longer.
the pedulum swings to its end trajjectory, it will be still for nary a brief period, period...
Sooner or later someone will yell, 'FIRE'!
FIRE.
Where are all the exits?
It was always burning since the world's been turning.
Thats an open elevator shaft.
its an alice in Wonderland door. Seems big, but diminishes as you approach it
Oh.......so we have plenty of time left!
/sarc
I thought it was a Keystone Cops routine already Cog, but this is ridiculous.
If they can't handle Greece, what happens when something big breaks?
The End Is Near. Now, where's my sandwich board?
LOL
Something big was already broken way back in 2008. They were simply able to slap a Band-aid on it and swallow some pain killers in order to continue the looting. Expect the looting to go into hyper-drive starting NOW.
Total agree Cog. That's also what the 4th turning said: 2008-NOT 2001. It was in 2008 that average Americans woke up to the painful fact that maybe the .gov doesn't have all their shit together after all.
Since then we've had increased citizen's deaths by police, asset forfeiture's for petty crimes (like marajuana), citizen's cash confiscations and increased surveillance, ALL approved by this laughable US Congress & Senate.
But thank God we're free to drink beer!
Didn't Kings just build a fortress to protect a group of workers and artisans that they required. Kings are sort of famous for ignoring when the people are attacked by bandits, marauders, invaders, or did I watch too much tv.
Then they granted lands and titles to barons, dukes, local lords to build loyalty and fealty. But basically the commoners were out there with their butts in the wind while the Royalty make threats of war and retribution all day long... or in this case just looked up stock prices and condemned Greeks and Russians.
So presumably there are Redoubts in Switzerland, Luxembourg, Berlin, Frankfurt, Brussels, Paris, Dem Hague, Vatican City, Rome, London, Wall Street, Connecticut, whatever... they will just let the Chaos reign... kick the can down the road.
They need factories to work in? Of you tell them to work harder and save more.
So the Greeks have set things straight through democracy. They will issue Drachma and devalue against the Euro. The Eurozone will probably be obliged to buy gold as part of QE.
Yawn...I hope no one actually pays for this analysis.
Very nice to see some Greek solidarity. We should all be so bold.
Well said.
The natives were restless in Philly this holiday, many shootings/stabbings etc. Even an old Jew lady robbed, raped and throat cut by a "handyman" Negro she hired.
If only that hated piece of cloth known as the Stars and Bars were made illegal, many Coloreds in Philly and an 85 year old progessive Jew bitch would be alive.
Burn that fecking flag!!!!!
If the Dukes of Hazzard reruns were banned and "General Lee" toys not able to be sold, not only black on black crime would stop, but Niggers killing Jews also.
"Why don't they peg the New Drachma .... to the Russian "Rubble" .... 56 to the Yankee dollah ?" Wordtoons by Monedas .... Comedy Jihad World Tour
the local currency needed to pay euro debt...
hahahahahahahaha!!! that's some funny shit right there.
Snowflakes in hell come to mind.
Somebody has been reading too much Treaty of Versailles history. Maybe the maggots are planning another Paris Peace Conference? lulz
They are still pushing the EU talking points and threats, but Greece will likely to use their own slanted rules against them. If they take it into court the ECB will wind up looking very bad and the longer it plays out, the more ammo they give to the other anti-EU groups out there........
Celebrating 30 days .... without a double post !
celebrating 30 minutes.... without a drink :)
Celebrating 30 days .... without a double post !
You need to go back into solitary confinement for another 60 days.
:P
You need to spray your keyboard .... with Lysol !
Looks you are a little premature
<will gold get slaughtered tomorrow
<will gold catch a bid tomorrow
Keep buying physical. Don't worry about paper cuts .
Look at the boards - they are trying hard to push gold down...
That's status quo, nothing new there.
CITIBunk is controlling it.
They have got it cornered.
Well - it's obvious that what they need to do absolutely first is to have a big - I mean really huge meeting with everyone - and discuss how many more meetings they'll need before they can come up with a final plan of attack. Meetings! WE NEED MEETINGS!!!
wow.
I almost still can't believe that the Greeks found the balls to do that.
When you already had one ball removed by the ECB/IMF/EU you tend to be protective of the sole remaining hanger.
Dup.........but not a dup testicle.
Cyclops .... a mythical Greek giant .... who has a bicycle wheel .... in the middle of his forehead .... where his eye should be !
The people who wrote the Monetas algorythm really new their shit. :D
"Politically difficult fiscal and structural reforms would still be required to make the country more competitive, and promote economic growth."
HAHAHAHAHA
Like that is ever going to happen in Greece.
Then the Bank will have to be restructured indeed.
Who is paying for what again?
What does this mean for the price of precious metals? (In the short term, not in three to five to seven to fifteen to thirty years.)
Quite simple: own 'em while you can.
It means deflation, so PM's may go down but not as much as other assets.
Then they'll print till the cows come home, Zimbabwe style, until the bitter end.
Cash out of the system is king right now.
Bitterness .... has destroyed more marriages .... than infidelity ! No one ever talks about the marriages .... that have been saved .... by a little foolin' around ?
Call Iceland for pointers (as to what happens next). Complimentary bankster indictments all around!
Leftcoastliberal .... call Governor Moonbeam .... and he'll beam you down some pointers .... from his dormer window attic love nest .... for Nubian body guards !
are you the guy on top or at the bottom in your avatar?...ugh
Enter Russia and China and suddenly all Greek goodies have Odessa on the address label.
"[...]relationships between Europe and Greece have been damaged[..]"
This tells you everything you need to know about the smug sacks of shit at DB. They are Europe. Greece is not.
Greece will not leave the EU. Greece will LEAD Spain, Portugal and Italy in a battle to oust the rot in Brussels, Frankfurt and Berlin and install a democratic EU. There is no room in the EU for unelected frausters and criminals. There is no room for financial terrorism in the EU. There is no room for slavery in a democratic EU. And there is no room for US interference in a democratic EU.
Well done MR Tsipras and thank you for being the first politician in a century with a true sence of responsibility to your constituants.
What? A Democratic EU? WTF? Why is it needed at ALL? It is just another layer of criminal politicians in Belgium looting tax payers.
It would be like having a second US Congress or a America's Union with representatives from USA, Canadad, Mexico and Latin American countries. All unelected Senate types that are essentially criminals for corporations and billionaire oligarchs.
The EU and Euro only really serve as another way to loot and rob the citizens. The f***ing rules, regulations and laws are probably a million pages long now. It kills businesses and jobs. they don't care.
Europeans are better off without an EU or Euro.
I do not understand why the New Greek Drachma would devalue as much as some predict. It all depends on the Greek government - past devaluations happened when countries continued overspending while retaining or adding to existing debt loads. Go whole hog Greeks - drop all EU/ECB/IMF debt so you are close to a balanced budget. Do that and the New Greek Drachma does not have to fall.
Also, the key is to not do a Hungary - where you have your own currency but your debt is in Euros. This is an invite to banksters to trash your currency with all their financial tricks.
The EU goal is to play hard line - offer no debt forgiveness - shut down the Greek banks - topple the Greek government -- and force new elections. The Greeks better have a plan to deal with this -- it is all hope on their part that they will now get concessions.
So, the Greeks just sit on their hands and allow this? For every action there is an (almost) equal and opposite reaction. Your scenario is almost out the door, because the Greeks have a few options and in all case the EU stand to loose all their Greek Junk investments and suffer additional collateral damage, both political and financial. So step back and watch the EU eat crow.
ZH or another site had an article where Paulson and Einhorn along with other hedge funds had placed pretty big bets on Greece. I wonder how much pressure they and the banks will be able to put on the Greeks?
They can kill Greek pols, start a cilvil war, invade Greece but no one will get paid back. They never are going to get paid back.
"opinion polls over the last few days have continued to show an overwhelming support for euro membership"
The result of this poll was so predictable its a wonder any fucking body listens to pollsters anymore. They are sophisticate scam artists. Polls are purchased, and the outcome is therefore already set. All the poling organizations do is concoct question to suggest the desired answer.
More media bias that most people don't believe. Only stupid people and the people who commission these polls believe in them. Polls are political tolls to subvert the truth.
So lending to a debt ridden country has risk, no fucking way... Troika has to be shocked that their loans just went kaput. /s Welcome to finance 101. You loan to risky debtors and there are...well....risks.
May the real market rear its beautiful head and take down the weak who profit only when central bank cronyism is the norm.
Good on ya Greece.
Time for the Greeks to do something really bold: drop the Euro, adopt the new drachma, and back it with gold.
But of course, I'm just dreaming. No Greek politician would do something so responsible. Expect them to attempt more of the same.
DB sucks
When Eisenhour launched D-Day he said go. What happened to the people who can command?
The crisis isn't in Greece.
Its now the fat unfuckable bitch merkel that has the problem.
Do you think AFD are not going to go for her throat, She just defrauded the German taxpayers of 70 billion of their fantasy euro coupons.
Lied to them ad the Bundestag and is now in deep fucking shit.
I expect her to be forced to resign now because she hasn't a fucking leg to stand on.
She is fucking toast
Aunty Merkel will be fine, everybody has the odd memory lapse when they get older.
On the one hand you have Greeks who worked and accumulated Pension obligations from their Government. On the other hand you have so called creditors, who lend money to Greece which they probably borrowed from other sources.
The pensioners will go hungry if they cannot get their pensions. The creditors will go bankrupt if they cannot get back their money.
I was very impressed to see the priorities of EU which supposedly promoted human rights.
EU has established themselves as fighting for rights of Oligarchs. The world is laughing.
EU officials must be taking a lot of medication to avoid feeling shame.