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Greece Just Lost Control Of Its Banks, And Why Deposit Haircuts Are Imminent

Tyler Durden's picture




 

Yes, Greek banks may have been insolvent - something that was clear since the first bailout of 2010 - but at least the Greek state had control over them: as such it could have mandated mergers, recapitalizations, liquidity injections, even depositor bail-ins (perhaps the harshest lesson for the ordinary Greek population as a result of this latest crisis is that deposits are not "cash in the bank" but liabilities of insolvent financial organizations).

Starting on Wednesday that will no longer be the case.

Because while Greek banks will maintain their capital controls for months and withdrawals will be limited to €60 or less for months (the ECB is well aware that any boost to the ELA will result in a promptly surge in deposit outflows until the new ELA ceiling is reached, and so on ad inf) the one key change on Wednesday when the Tsipras government, whose coalition no longer has a majority in parliament and will have to rely on opposition votes, votes through the humiliating Greek "pre-deal" to unlock negotiations for the promised €86 billion in bailouts (which will be used almost entirely to repay the Troika) is that it will hand over the keys of Greek banks to the ECB.

Here is Reuters with this little known fact:

One of the preconditions imposed on Greece for a deal is that it signs into law European rules that would put euro zone authorities at the ECB and in Brussels, rather than Athens, in charge of identifying and closing or breaking up sick banks.

 

This in turn could lead to a shake-up of the sector that could see some banks close, with losses pushed onto bondholders and possibly even large depositors. In such circumstances, there would be little that Athens could do to prevent this.

 

One European official had told Reuters that the number of big banks in the country could be reduced from four - National Bank, Piraeus, Eurobank and Alpha - to as little as two.

Keep in mind the primary leverage the ECB had over the Greek government was the hint that if only Greece agrees to the terms, the European Central Bank just may be nice enough to ease ELA haircuts and eventually boost the ELA ceiling to allow the phasing out of capital controls and permit Greeks access to their savings.

This will not happen.

Unfortunatley, the moment the Greek government votes through the "deal" required by Summit document SN 4070/15, the Greek government will not only hand over sovereignty to €50 billion of Greece's choicest assets to some escrowed fund controlled by Belgium and designed to liquidate Greek assets to repay the Troika, it will also give up all control of the nation's €120 billion or so in leftover personal and corporate deposits, also known as unsecured liabilities.

And since the banks are undercapitalized by at least €25 billion, and realistically over €60 billion, if one takes into account NPLs which at 50% are a very optimistic estimate for a country in depression for 6 consecutive years, the first decision the ECB will do once it realizes the sorry state of financial affairs in Greece is to do precisely what the government could have done but did not have the guts when it still had control: overnight it will out about 50% of Greek depositors.

In other words, Greece is about to hand over the keys to the only thing that is forcing it to hand over the keys.

Unfortunately for Greece, there will be absolutely nothing its government can do to avoid this because on Wednesday, the Greek government will vote to hand over its sovereignty to Europe for, sadly, absolutely nothing in return.

Our only question, one we first asked in April, is whether as part of the deal, the 112.5 tons of official Greek gold will also be handed over to Frankfurt, Berlin or Brussels. Recall back in 2012:

Ms. Katseli, an economist who was labor minister in the government of George Papandreou until she left in a cabinet reshuffle last June, was also upset that Greece’s lenders will have the right to seize the gold reserves in the Bank of Greece under the terms of the new deal.

Since this bailout has the most draconian terms yet, we wonder just what the fate of Greek gold will be?

 

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Tue, 07/14/2015 - 00:17 | 6309473 Why.Not.
Why.Not.'s picture

Yes. And the Greek government has to cooperate in the farce or it cannot continue. The recent referendum gave it the internal political leverage to take necessary measures, and it chickened out. Now some truly nasty consequences loom and said government is about to be rendered helpless and inconsequential. More popcorn, por favor. Time for the next cartoon reel.

Tue, 07/14/2015 - 00:24 | 6309432 Md4
Md4's picture

If we've become accustomed to anything throughout this unfolding disaster, it's that NOTHING is a done deal.

Tsipras should be removed from office if he would not step down. His performance of even the last two weeks is criminal and treasonous. NO nation's sovereignty--let alone it's citizens basic wellbeing--should be ceded or placed at risk for a debt owed, REGARDLESS of what's owed, or to whom. Human life MATTERS.

Greece has made its own bed socially, and NO one denies this. It's frivolous national lifestyle has long placed it at risk for strife should hard times come. They can be blamed for misunderstanding social responsibility and the value of productive wealth over the easy and unearned "wealth" of a too-generous socialist system. They are certainly at fault for allowing themselves luxuries not earned, and they should experience some degree of motivating discomfort to strongly encourage national, behavioral change.

I think even THEY now feel the weight of generational slough and "easy life" thinking that weakens a people, and even a nation.

BUT, the cession of ANY aspect of self government, to ANY entity, for the sake of settling any matter short of an armed conflict, which IT needlessly provoked, and lost, is a severe threat to ANY self-governed people EVERYWHERE. That it is permitted in Greece, the "cradle of democracy", and for something as puny as mere debt, at the expense of engendering DELIBERATE human suffering and misery, is a crime-in-the-making NO free government uninvolved should allow to go unpunished at LEAST as severely.

If there is but one shred of Greek self-respect left, anywhere, even SLIGHTLY approximating the courage and fortitude of ancient Sparta, NOW would be a good time to bring it forth.

If this odious "plan" is agreed to by the Greek parliament, perhaps it's high time for the rest of what's left of free people elsewhere to rise against the warped brains that produced it for her.

CLEARLY, it is increasingly in THEIR interest to do so, as any of THEM may well be next.

A beast that gains strength from previous "successes" is that much tougher of bring down later.

If we've learned ANYTHING from human history, we've learned that.

m

Tue, 07/14/2015 - 00:00 | 6309433 Plunk
Plunk's picture

Too much infighting will lead to demise of eu

Tue, 07/14/2015 - 00:18 | 6309476 Joe A
Joe A's picture

And its gone....Greece's gold reserves -just like Ukraine's- will be flown out of the country. They also have gold mines in Halkidiki -that people are protesting against- that will be exploited.

This 'deal' is a total and hostile takeover of a country. Shocking, really. And probably a blueprint of the rest of the continent.

Tue, 07/14/2015 - 00:25 | 6309486 Kina
Kina's picture

anybody who calls themself gweilow is totally shitting on themselves. wannabe chinaman taking the name....hey you....'westerner'.  makes me laugh westerners call themself  .gweilow...wai guo ren...gai jin...farang  lol  No self respect at all.

Tue, 07/14/2015 - 01:03 | 6309566 GoldIsMoney
GoldIsMoney's picture

And wyh did they lost them? Exact because all the politicians worked on it. And it all comes down to one single failure. Accepting too much debt and accepting debt to finance you status of life. That they loose everything is fair and just

Tue, 07/14/2015 - 01:06 | 6309571 onmail
onmail's picture

Yeah This is the plan.

Gobble up the banks. (who will buy them - Goldman Sachs, Meryl Lynch...)

Jewhad

Then (just like subprime ) convert the Greek debt into bonds.

Sell these shitty bonds all over the world , say to Chinese farmers who have recently learned stock trading - buy low , sell high.

So smear the whole (developing) world with shit of the latrines of Europe & America.

(You dont need to colonize them with cutlasses & bloodbath anymore)

Tue, 07/14/2015 - 01:47 | 6309640 DIgnified
DIgnified's picture

This will be a can-kicking, one way or the other. 

Tue, 07/14/2015 - 07:48 | 6310060 smacker
smacker's picture

Previously the can has been kicked down the road, now they've got to the end of the blind alley.

All that's left now is kicking it against the wall. At this point things get pointless and pointless.

Tue, 07/14/2015 - 04:07 | 6309770 Die Weiße Rose
Die Weiße Rose's picture

is the world going to end?

fuck ya ~

of course not !

I am gonna TAKE YO FOR A RIDE...

get a grip (on realitiy)

fucking morons, this is ART!

posted while pissed out of my fricking fucking mind ...

fuck all of ya fucking morons...

peace Love,

WR;)

"Moron" was coined in 1910 by psychologist Henry H. Goddard[3] from the Ancient Greek word ????? (moros), which meant "dull"[4] (as opposed to oxy, which meant "sharp" (see also: oxymoron)), and used to describe a person with a mental age in adulthood of between 8 and 12 on the Binet scale.[5] It was once applied to people with an IQ of 51–70, being superior in one degree to "imbecile" (IQ of 26–50) and superior in two degrees to "idiot" (IQ of 0–25). The word moron, along with others including, "idiotic", "imbecilic", "stupid", and "feeble-minded", was formerly considered a valid descriptor in the psychological community, but it is now deprecated in use by psychologists.[6]

Following opposition to Goddard's attempts to popularize his ideas,[7] Goddard recanted his earlier assertions about the moron: "It may still be objected that moron parents are likely to have imbecile or idiot children. 

Idiots! Morons,,,much of the same///

WR;) (still pissed )


Tue, 07/14/2015 - 05:37 | 6309838 nixy
nixy's picture

Clever* banker gives 'paper' ..... and has gold etc in return.

where * = bent

Tue, 07/14/2015 - 05:39 | 6309843 shouldvekilledthem
shouldvekilledthem's picture

Bitcoin and physical gold holders are protected from....haircuts legalized theft.

Tue, 07/14/2015 - 06:06 | 6309873 sagitarius
sagitarius's picture

TSIPRAS, INSTEAD OF EXPOSING THE BANKSTERS, EXPOSED HIS OWN NATION.

i ASSUME, gREEP PEOPLE WILL HANG HIM.

Tue, 07/14/2015 - 06:38 | 6309899 ramgold2206
ramgold2206's picture

time to get your own physical gold..asap

 

there is a shit storm coming to visit us all... may not be as dramatic as greece ... it may be worse... who knows...

but having a stack of phyzz will prove to be a positive

 

www.teamramgold.com  if you have no cash but want to acquire gold then become an affiliate use your commissions to get it 

Tue, 07/14/2015 - 07:05 | 6309961 redd_green
redd_green's picture

The killer is that the Western media keeps calling it a "bailout". Bailout my ass.  The Greek government is being "lent" money to pay interest on loans that they can't pay interest on.  Austerity indentured servitude or not, once the borrowed money runs out, what next, street signs in German?

 

 

 

 

 

 

Tue, 07/14/2015 - 07:08 | 6309965 mojojojo
mojojojo's picture

Greek debt to GDP was at 100% by 94/95. But oh yeh, blame Germany. Greece shouldnt of been allowed into the EMU. Golman Sachs fault. Greece cant pay its debts. Not Greece fault. never greece fault. always someone else.

 

Euro information

Status: Euro-area member since 1 January 2001

Fixed conversion rate: €1 = 340.750 GRD

Tue, 07/14/2015 - 12:17 | 6311170 Spart
Spart's picture

WHAT EURO

the greek people are in the fog, they belive in the politicians....... NO QUSTIONS ASKED!!!!!!

I found this on the web....... if 1 photo is worth 1,000 words then here is 279x 1,000 = 297,000 words in photos

http://jh-lightbox.com/ATHENS_WHAT-EURO/ATHENS_WHAT-EURO/index.html

Do NOT follow this link or you will be banned from the site!