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Don't Tell Merkel: Greek Banks Need An Additional €10-14 Billion Bailout

Tyler Durden's picture




 

To be sure, Germany has dug its heels in on Greece over the two weeks since PM Alexis Tsipras decided to put creditors’ proposals to a popular vote.

Even before the referendum hardened Chancellor Angela Merkel’s position, German FinMin Wolfgang Schaeuble and a whole host of Berlin lawmakers were up in arms at what they viewed as excessive accommodation of an increasingly belligerent beggar state. Even Bundesbank chief Jens Weidmann spoke out, deploring the ECB’s permissive attitude towards Greek banks and accusing Mario Draghi of monetary financing. 

Regardless of whether Greece comes away with a third bailout after Saturday’s Eurogroup meeting, no one can say Germany didn’t drive a hard bargain and indeed, Berlin has stood firm in the face of IMF calls for Greek debt writedowns even as Christine Lagarde’s haircut demands were bolstered this week by the US Treasury itself.

Germany’s position was summed up nicely on Friday by Hans Michelbach, a German lawmaker from Chancellor Angela Merkel’s Christian Social Union Bavarian sister party who told Bloomberg that “there must be no consent to a ponzi scheme, where old debts are settled only through new debt and the Eurogroup faces the same problem of Greece’s debt sustainability again in 2018.” “I’m not sure that the creditors won’t be fooled again because so far all implementations have been questioned again repeatedly,” he added.

We’re sorry to break it to Mr. Michelbach, Frau Merkel, and the German taxpayer, but that €53 billion Greece is asking for will be just the start of things and we don’t mean in the sense that Athens will one day in the not-so-distant future be back in Brussels looking for a fourth bailout (which they probably will), we mean in the sense that Greece’s beleaguered banking sector is insolvent and will need to be recapitalized one way or another with some (or all) of the funds coming directly out of the pockets of the very same EU taxpayers that are now set to fund the third Greek sovereign bailout. As Reuters reports, the recap could well run into the tens of billions of euros: 

Greece's banks will need an estimated 10 to 14 billion euros of fresh capital to keep them afloat and more time before they reopen even if a deal is reached with European creditors on Sunday, a senior Greek banker told Reuters on Friday.

 

Despite their having bled more than 34 billion euros of deposits since December and Greece's worsening economic outlook, banks are optimistic that branches can be reopened by the end of next week, the banker said.

 

National Bank, Piraeus, Eurobank and Alpha, which account for about 95 percent of the industry, will likely need to be recapitalised after an assessment by regulators and are not likely to return to a semblance of normalcy for months.

 

"There is an estimated need of about 10 to 14 billion euros in new capital," the banker said. "Given the magnitude of the shock we have been through, regulators will take stock of the situation and the impact on non-performing loans. A stress test by September would allow time for things to normalise."

And as for where the money come from, one “suggestion” is the as yet unused ESM direct recap fund (so, from the German taxpayer, essentially).  

Banks may get a capital injection from the European Support Mechanism's Direct Recapitalisation Instrument (DRI), a new facility which has so far been unused.

 

It is unclear yet what conditions would be imposed by the ESM in return for such capital, although it is expected to involve a commitment to major restructuring of the Greek financial sector.

As a reminder, the DRI was created in order to avoid situations wherein countries borrowed from the ESM and used the money to recapitalize their banking sector. The problem with that arrangement was that it meant increasing the receiving government’s debt load, which in some cases had contributed to the banking sector’s problems in the first place, meaning governments were essentially borrowing money to recapitalize institutions whose insolvency was partly attributable to fiscal mismanagement. In other words, the DRI was created to help break the “pernicious” link between banks and their sovereigns.

The problem for Greek depositors is spelled out very clearly in the official DRI rule book

More specifically, the bail-in of private investors (in accordance with the Bank Recovery and Resolution Directive), and the contribution of a national resolution fund (or Single Resolution Fund from 2016) as a precondition for the DRI to be used has shifted the bulk of potential financing from the ESM to the institutions themselves, along with their investors and creditors. 

 

The beneficiary institution would have to be (or likely to be in the near future) unable to meet the capital requirements established by the ECB in its capacity as supervisor. It would also have to be unable to obtain sufficient capital from private sources and the foreseen bail-in would not be sufficient to address the anticipated capital shortfall. 

As you can see, if Greek banks need to be recapitalized (and they will), a depositor bail-in will in all likelihood be part of the “solution.” Of course unlike Cyrpus, it won’t be the Russian oligarch crowd who takes the hit, it will be regular Greeks as suggested last week by FT. As we noted in “As A Reminder, This Is What Capital Controls In Cyprus Looked Like,” we hope that Greeks have not placed too much faith in the idea that things will return to normal in the banking sector anytime soon. A crisis of confidence is nearly impossible to reverse in the short-term and if there is any place on earth where confidence is in short supply, it's at Greek banks.

Indeed, even if a deal is reached this weekend and the ECB raises the ELA cap on Monday, it’s difficult to imagine that the deposit outflows will cease (would you trust your deposits in a Greek bank even with a "deal"?) and as suggested above, if capital controls are lifted, the situation will be even worse because Greeks will simply take the opportunity to withdraw all of their money at once. With the liquidity "cushion" down to just €750 million (according to same official who spoke to Reuters about the recap needs), deposit flight will clearly have to be funded via more ELA, which means whatever is left in terms of pledgable collateral will soon disappear even under the rather optimistic assumption that outflows are kept at between €80-100 million per day (the current run rate). At that point (unless the ECB decides to buy the banks more time by substantially lowering haircuts), it's recap time and then ... well, see above.

In the final analysis, no one is going to trust Greek banks for a very, very long time and talk of a depositor bail-in won't do anything to help the situation. The acute lack of confidence means that any capital injected from EU bailout funds will promptly disappear as depositors continue to pull their funds, while the county's rapidly deteriorating economic situation simultaneously drives up NPLs. 

So get ready Germany; once your taxpayers have committed another €53 billion to help the Greek government pay back its existing loans, your next project is to figure out how to recapitalize the country's insolvent banking sector. 

 

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Fri, 07/10/2015 - 13:21 | 6295934 Dubaibanker
Dubaibanker's picture

Fear mongering at its best!! 

Last week FT said all Greeks will lose 30%. 

Greek banks prepare plan to raid deposits to avert collapse http://www.ft.com/intl/cms/s/0/9963b74c-219c-11e5-aa5a-398b2169cf79.html...

Today they say that Greek banks will shut by Mon...

With cash fast running out, Greek bank failures loom

http://www.ft.com/intl/cms/s/2/014ea43e-2657-11e5-9c4e-a775d2b173ca.html...

Fri, 07/10/2015 - 13:21 | 6295948 UndergroundPost
UndergroundPost's picture

International Socialism must be destroyed

Fri, 07/10/2015 - 13:24 | 6295964 DeProgrammed
DeProgrammed's picture

All International "isms" must be destroyed. Most notably banksterism.

Fri, 07/10/2015 - 13:31 | 6295968 Dubaibanker
Dubaibanker's picture

This is all propaganda using medica pressure tactics to change and influence public opinion by fear mongering...by the elites at the very top who control everything .....so that they may rob the poor to pay the bills of their own misdeeds and thus protect their riches at the cost of everything else!

Fri, 07/10/2015 - 13:35 | 6296011 Skateboarder
Skateboarder's picture

The theater is meant to induce fear. Any rational man called bullshit two bailouts ago. Extend and pretend, and slowly rob everyone's futures while presenting a picture of worthless people. Are they really worthless people, or have they been duped into looking like it? No resources, no opportunities = no productivity. Ask for a minute why the Greeks haven't jump-started their nation with local production of everything. Do they even want that for themselves? If they do, can they achieve it collectively without violence being imposed upon them?

All of this is meant to take resources away from the hands of people. Witihout proper access to resources, any of us look like worthless dumb motherfuckers.

Fri, 07/10/2015 - 14:02 | 6296136 Dubaibanker
Dubaibanker's picture

True!

Greece is no longer Greece as it was a decade ago! 90,000 people left Greece just in 2014. most of these have to be educated young hard workding folks. Most are moving to Melbourne, Toronto, London etc in search of greener pastures. Many have come to Dubai and Fujairah too being ship and oil guys.

What this means is that Greece's tax revenues, future GDP etc will be even more weaker.

There are simply no resources nor talent nor money left to 'jumpstart' the Greek economy.

No human wants worse future for themselves, but within Greece the opportunities are so useless after a good ten years of decline that the future looks bleaker than ever before for all.

In fact things are so bad in neighbouring Portugal, that barely 1.5 years after start, Portuguese Govt last week had to reduce the amount required to get into Portugal from EUR 500k to EUR 350k when invested in real estate that gives a foreigner a right of abode in Portugal. Because people simply dont want to move to Portugal or Greece....it is not just about moving...it is about the fact that what would they do once they move to these ghetto like cities or nations that went bankrupt about a decade ago and are now a failed state at par with Detroit and heading to become another Pakistan....

Greece losing people as economy struggles, data shows

Fri, 07/10/2015 - 13:25 | 6295969 nope-1004
nope-1004's picture

 

 

".....

At the discovery that all is exhausted and dissipated by the debt.

All scripts and Bonds will be wiped out."

Fri, 07/10/2015 - 13:30 | 6295993 froze25
froze25's picture

is that the "the shemitah"?

Fri, 07/10/2015 - 13:36 | 6296023 Handful of Dust
Handful of Dust's picture

Warsh the souvlaki and kabobs down with some more ouzo.

Fri, 07/10/2015 - 13:22 | 6295951 SheepRevolution
SheepRevolution's picture

The end of this whole global scam is so near a full collapse now one can almost see it in the elite. The desparation and panic is becoming more evident in the look of their eyes.

Fri, 07/10/2015 - 13:27 | 6295980 JRobby
JRobby's picture

Then it will really be 40 bil.

CB's create inflation, CB's will fill in the hole.

Fri, 07/10/2015 - 13:37 | 6296019 BLOTTO
BLOTTO's picture

Hello, my name is Angela Merkel. I came from complete obscurity - to running the most powerful country in the EU.

.

Who the fuck am I and why do the other world leaders bow to me?

 

Fri, 07/10/2015 - 13:51 | 6296090 gatorengineer
gatorengineer's picture

Come on only bathouse barry bows to other leaders.... She is a construct just like Cameron, Barry, Hollande, and others......

Fri, 07/10/2015 - 14:07 | 6296148 BLOTTO
BLOTTO's picture

I dont disagree Gator...but imo, i think she may be a bit more special then those others. Her picture on theEconomist 2015 cover may give evidence to confirm that as she is flexing the 'all seeing eye'

.

http://vigilantcitizen.com/vigilantreport/economist-2015-cover-filled-cr...

 

Fri, 07/10/2015 - 15:50 | 6296731 stocktivity
stocktivity's picture

Who would you prefer as your leader?  Hillary or Angela?  Nuff said.

Fri, 07/10/2015 - 13:51 | 6296088 boogerbently
boogerbently's picture

Bail-ins are a "one time" event, only postponing the inevitable and pissing off the masses.

Why not bail out of EU, leave the people their money to keep the country moving in drachmas ?

Fri, 07/10/2015 - 13:20 | 6295938 f16hoser
f16hoser's picture

Come on Germany, pay-up! You know you want to. Don'y you wish you could retire at 56 too??? Tee, Hee, Hee,,,

Fri, 07/10/2015 - 13:24 | 6295960 Relentless101
Relentless101's picture

LOL

Fri, 07/10/2015 - 13:32 | 6295999 rejected
rejected's picture

If your in the u.f.s.a that 56 retirement doesn't even come close to the perks your governent (Fed, State and local) receive.

Fri, 07/10/2015 - 13:39 | 6296033 Handful of Dust
Handful of Dust's picture

true, dat. My friend is retiring next year form his fire dept with a generous $2.4 million pension of which he put almost none in; almost entirely funded by his local gubmint.

 

It's very similar to China now where most bright oyung people want to join the gubmint instead of working for a living. USA is little different.

 

Very sweet, indeed!

Fri, 07/10/2015 - 13:20 | 6295941 aliki
aliki's picture

i can't believe janet yellen just referred to us as approaching a stable debt-to-gdp ratio.  approaching $20 trillion in debt is "stable".

Fri, 07/10/2015 - 13:39 | 6296035 KnuckleDragger-X
KnuckleDragger-X's picture

Plutonium is stable till it isn't. You think she would tell the truth? If the sheep ever figured out even a small part of it the system would collapse. Of course it will anyway, but they'll lie, even to themselves, as long as possible since anything else would totally fuck up their personal Emerald City......

Fri, 07/10/2015 - 13:21 | 6295946 JustObserving
JustObserving's picture

Greece has gone beyond the point of no return.

Just repudiate all debts and start again with the Drachma - learn from Iceland

Fri, 07/10/2015 - 13:46 | 6296065 chisler
chisler's picture

That is exactly what FArge told them to do and they then go and present a half credible offer.  Tsipras had them over the barrel, threatening mayhem and he lets them off!. I thought this guy was smart continually saying the Greeks wanted to stay in the EU, I thought it was TIC but it appears as if it was not.

Fri, 07/10/2015 - 13:28 | 6295982 rejected
rejected's picture

This shit is getting hilarious! They just print up the crap then act as though it's gold. What's worse?  Most of us act the same! LOL.

Nuttin bu shit paper,,, didn't even exist a few years ago.

Beggar State? Really ??

Who lied and falsified to ensure the Greeks would get the "trash paper loans" ? 

Who gets most of the bailout 'money' ?

Come on ZH.... An article on who was involved in the con,,, who continues the con,,, and who get the most from the con.

Fri, 07/10/2015 - 13:32 | 6296000 froze25
froze25's picture

Goldman cooked their books to get them in the EU to begin with right?

Fri, 07/10/2015 - 13:39 | 6296036 f16hoser
f16hoser's picture

Right

Fri, 07/10/2015 - 14:38 | 6296308 Kirk2NCC1701
Kirk2NCC1701's picture

Yes, the smartest money/profit is made by being the First in line, when creating CDS and Credit/Debt Obligations, before they are passed (like a Hot Potato) to a line of greedy but foolish Banksters. 

You have to look at it as a Process: you take an Opportunity, add Human Nature and use CSI tools (Motive, Means, Opportunity) to get a true picture of the Crime Scene. 

Fri, 07/10/2015 - 13:28 | 6295986 RiverDrifter
RiverDrifter's picture

More debt to help with problems created by far too much debt.  

 

Yea, that's the ticket Merkel...what a scam.

Fri, 07/10/2015 - 13:30 | 6295990 Chuck Knoblauch
Chuck Knoblauch's picture

Merkel chains every German in more debt by renegotiating Greece's debt.

Get rid of her before she enslaves you into more servitude.

Fri, 07/10/2015 - 13:32 | 6295997 jump_mutha_fukah
jump_mutha_fukah's picture

Fräulein Sourpuss...don't be so stingy with the dough and pass the pickled herring ya old penguine you...that cockholster of yours is pelicanesque.

Fri, 07/10/2015 - 13:35 | 6296008 Cold-Pragmatism
Cold-Pragmatism's picture

So I ask the logical question...

 

Why can't Greek Banks be recapitalized by the Greek Government. The Greek Government can sell assets, sell some of those islands, cash up, and then recapitalize using Greek assets?

They have the assets, isn't it time they should use them! Isn't that what assets are supposed to be used for? Why does it always has to be somebody else's assets?

This is nonsense. The Greeks can bail themselves out. SELL ASSETS!

Fri, 07/10/2015 - 13:38 | 6296031 Temporalist
Temporalist's picture

But then who could they blame?

Fri, 07/10/2015 - 13:39 | 6296034 Peter K
Peter K's picture

Wonder if that E17b that the Greek Central Bank has stashed in those secret accounts is still there?

 

As for the present situation, I have always found it interesting how the French always find ways to spend the Germans money. War reparations in perpetuity.....

Fri, 07/10/2015 - 13:40 | 6296039 farmboy
farmboy's picture

If a Greek banker mentions 10-14 bln he forgot the zero at the end.

Fri, 07/10/2015 - 13:49 | 6296079 LetsGetPhysical
LetsGetPhysical's picture

Somebody call Stephen Hawking cause the EU needs help with their blackhole.

Fri, 07/10/2015 - 13:54 | 6296102 gatorengineer
gatorengineer's picture

If Greek banks are leveraged 30 to 1 they are talking 500 million in non performing assets as a result of this fuster cluck.....  ?  HA HA,.......

Fri, 07/10/2015 - 14:06 | 6296145 chisler
chisler's picture

Merkel is a typical con. Their arrogance and pigheadedness always ends up with royal screws up that result in huge deficits which burden ordinary taxpayers, and the rich walk off even richer. If they could control their own greed they might, just get it right some day. Until then Mrs merkel you go get shaves bald because a haircut isn't going to do it. Good luck Mr and Mrs German taxpayer - you need it.

Fri, 07/10/2015 - 14:13 | 6296182 computer_america
computer_america's picture

Why we blame Germany for Greek problems. Greeks asked for money and money was loaned to them. That money has to be paid. Like everybody payes their credit cards or credit lines.

If Greeks wanted to live with someone else money, now they have to pay the price.

It's that simple. It's not Germany or creditors fault about situation where Greece is now.

Fri, 07/10/2015 - 14:13 | 6296183 computer_america
computer_america's picture

Why we blame Germany for Greek problems. Greeks asked for money and money was loaned to them. That money has to be paid. Like everybody payes their credit cards or credit lines.

If Greeks wanted to live with someone else money, now they have to pay the price.

It's that simple. It's not Germany or creditors fault about situation where Greece is now.

Fri, 07/10/2015 - 14:24 | 6296229 LetsGetPhysical
LetsGetPhysical's picture

Shhh... You'll upset the SJW's

Fri, 07/10/2015 - 15:05 | 6296439 shovelhead
shovelhead's picture

Funny how nobody worried while the money flowed like ouzo.

Now everybody's singing the blues.

Hmmm, I suppose there could be a lesson here...

Nah...never mind.

Fri, 07/10/2015 - 14:14 | 6296189 SpanishGoop
SpanishGoop's picture

He Merkel, drop dead you wannabe Hitler.

 

Fri, 07/10/2015 - 14:25 | 6296216 Kirk2NCC1701
Kirk2NCC1701's picture

Are you sure that it's Greece that keeps getting "saved", and not the parasitic and opportunistic Euro-banks, who are playing Hot Potato (tried to extract tasty profits, before passing it to the next, greater-fool bankster)?

The first in line,  who made the most Shylok money was the Squid.  After that, it was the French banks.  After that, as ZH has shown, it is the Spanish, Italian, German and other EU banks who are holding the hot potato that is is Greek debt (i.e. 'Credit' out of thin air).

Bottom line:  SOMEBODY has to foot the bill, lest the Dominoes start falling in this Fiat Credit Casino.

It's now only a question of Who it will be, of Who will be the Weakest Link.  Will it be the German-led coalition of Euro-Banksters, or will it be the Greeks who get "nailed" -- now that Tsipras Iscariot has sold them out for his 30 pieces of silver?

Fri, 07/10/2015 - 14:22 | 6296217 Good bi bull
Good bi bull's picture

The Greeks want out, the EU want them out - but no one wants to pull the trigger and take the blame. Both sides know the EU will implode if Greece goes.

Its a catch 22 and im loving every second of this....

 

Fri, 07/10/2015 - 14:58 | 6296399 shovelhead
shovelhead's picture

Wait until you're here another day or so...

It gets old.

Fri, 07/10/2015 - 14:29 | 6296251 Duude
Duude's picture

While I think the Greeks and the remainder of the EU would be better off long term if Greece left, I'm now fearful that if the EU and Greece dont' come to an agreement, Barack Obama will execute executive privilege and bail them out using the excuse that he thought it would be a security concern if Greece left the EU and started aligning with Russia.  Yeah, it wouldn't be popular in the US, but Obama is a lame duck President and he really doesn't give a shit anyway.  I know Bernie Sanders and Paul Krugman , among other socialists, would give it a two thumbs up

Fri, 07/10/2015 - 14:36 | 6296288 BoPeople
BoPeople's picture

Greece needs freedom, not bailouts.

Fri, 07/10/2015 - 14:49 | 6296354 Goldilocks
Goldilocks's picture

Tchaikovsky - The Nutcracker Suite, Op 71a
http://www.youtube.com/watch?v=M8J8urC_8Jw (21:34)

Fri, 07/10/2015 - 14:49 | 6296358 shovelhead
shovelhead's picture

I think I liked the Bader-Meinhof Gang better when they were robbing banks instead of running them.

Fri, 07/10/2015 - 15:48 | 6296717 falconflight
falconflight's picture

Those were the days my friend...they were bombing and assassinating as well.

Fri, 07/10/2015 - 15:36 | 6296647 frankly scarlet
frankly scarlet's picture

ten to fifteen big B Euros?  why that's chump change to the Fed or the ECB....Ukraine is picking up forty big Bs on their way past "Go" courtesy of the Fed...maybe Greece needs to declare war on China to be in the fold and score Sambucks big time.

Fri, 07/10/2015 - 15:48 | 6296723 fowlerja
fowlerja's picture

I think the Greek banks need another bailout...banks then silently move money to Greek checking accounts..then open the banks...let the Greek people bleed the system dry from ATM machines... rinse and repeat the process...at least we can be sure that the money gets down to main street instead of being loss in the financial system...

Fri, 07/10/2015 - 17:07 | 6297016 falak pema
falak pema's picture

Bottom line : As Hollande says : the EU needs to save face as Yanis has let the fox into the Eu vineyard!

So there are many ruffled feathers and hi-strung egos; with Lady LAgarde and Diesel-bloom out to shoot Yanis's ghost.

But...there is a big but...the fall out from Grexit is WORSE than kicking the can and debt hair cut of letting Greece hobble along! These guys do know how to count (juicy cunts casino bonuses for Oligarchs, like they did spice and silk)! 

So...As Obama and Lagarde and Draghi and Polak President Tusk  are all saying : keep cool and make Tsipras kneel all the way to Canossa to ask Pardon from Pope Schauble. That saves face.

And then the real war can begin. As we don't know anymore than Pope Gregory VII did then that making an  Emperor kneel to you can start a shooting match in Europe. The Emperor being the financial market (not Tsipras, he is just the Jeremiah).

'Cos the real fight is now between Mutti's version of German Nein finance and Squid's version of global scam as usual, the QE to infinity version. 

And that started a three hundred year war in Europe back then and also the Crusades! 

Some return to the past!

And Greece could be the powder keg to this Western return to past. A never ending war from Asia to Africa and beyond.

Remember Greece was where Constantinople was then. And the Crusades made a bee line to Constantinople as that was the silk and spice routes destination. They couldn't give a rat's ass for Jerusalem; it was just a lump of stone then, as today... We fight for symbols but we jack off truly for spice and silk routes (read Oil and petrodollars today).

Nothing changes, ideology is a ghost that hides the true Messalina men dream of.

Its Constantinople, not Jerusalem. Its Oil, Oil, Oll.

And the dollar reserve empire knows that! 

If Greece falls and opens the hell of Jihad fifth column and refugees into EU, if Greece joins the new Rus-Kiev/Mongol axis against the Crusaders and allows the Mameluk Jihadists to spread the fire to Africa where Pax Americana has already spread the clash of civilization rage; we are effectively back to the Feudal ages (literally, and thank u neo-con USa and GWB playing at Saint Louis!)

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