As suspected, yesterday's report [7]that the Troika may be caving on Greece appears more and more as a red-herring trial balloon, leaked by the Greek press without substantiation, and which sought to lighten the tension ahead of a trading week which is already looking rather askew. Because not even a full 24 hours later, Germany fires right back with an article in the Spiegel which not only anticipates the Grexit, but what happens the day after: namely that Greece would receive further aid from the EFSF if it exited the euro. It also notes that the EFSF aid to service bonds would continue. Greece would continue to get aid as EU member as every other member state. While it is unclear if this article is in response to the WiWo piece we noted yesterday [8]which tried to quantify the costs of a Greek impact, and which has now ominously been picked up by Die Welt [9], in which Germany was finally starting to get worried about the hundreds of billions in sunk costs should Greece exit, the punchline here, needless to say, is not only the contemplation of a Greek exit but that Greece would be "all taken care of" even as the newly reintroduced Drachma lost a few hundred percent in value every day as Greece stormed its way back to FX competitiveness. Spiegel's punchline: "This is to the consequences of a possible €-egress will be mitigated." Hopefully the market agrees.
From Spiegel [10]:
Greece is to SPIEGEL information even in case of egress expect further € billion bailout from the European EFSF. The European rescue package is designed by the Federal Ministry of Finance therefore emphasize only those amounts that go directly to the household of Greece. Those billions, with which the bonds will be served, which took over the European Central Bank (ECB) as part of its rescue measures should, however, continue to flow.
This is to the consequences of a possible €-egress will be mitigated. This could be prevented with the central bank losses, hit by the end of the budgets of the Member States.
Further consideration of the House of Finance Minister Wolfgang Schäuble (CDU) provide, according to Spiegel, that the Greeks, even if they get no help from the rescue more pots of the euro countries, not to be left alone. Greece remains a member of the EU, they are entitled to assistance from Brussels, as are accorded to other EU countries with its own currency in trouble. These would be funded not only by the countries of the Euro-zone, but by all 27 EU Member States.
After the elections of last Sunday and so far unsuccessful attempt to get a government concluded in Athens, is in the black-yellow coalition government talked more openly about the possibility of a Euro exit - resentment is growing. An Athens exit from the euro would be "not the end of the euro nor the end of the EU," said CSU head Horst Seehofer: "We need to get Germany's economic strength, which is more important than a stay in Greece in the Euro zone."
But, but, less than a year ago the best and brightest among you said [11]: "Were Greece to be forced out of the euro area (say by the ECB refusing to continue lending to Greek banks through the regular channels at the Eurosystem and stopping Greece’s access to enhanced credit support (ELA) at the Greek central bank), there would be no reason for Greece not to repudiate completely all sovereign debt held by the private sector and by the ECB....In the case of a confrontation-driven Greek exit from the euro area, we would therefore expect to see around a 90 percent NPV cut in its sovereign debt, with 100 percent NPV losses on all debt issued under Greek law, including the debt held, directly or directly, by the ECB/Eurosystem. We would also expect 100 percent NPV losses on the loans by the Greek Loan Facility and the EFSF to the Greek sovereign....In our view, the bottom line for Greece from an exit is therefore a financial collapse and an even deeper recession than the country is already experiencing - probably a depression."
exit [12]