Greece Steps Closer To Default

Bold bits by me.

http://www.bloomberg.com/news/articles/2015-06-19/greece-s-ruling-party-goes-to-war-with-its-own-central-bank

EU, Greece Pursue Quiet Diplomacy to Stave Off Default

by Karl Stagno NavarraIan WishartRebecca Christie
June 19, 2015 — 1:32 AM PDT Updated on June 19, 2015 — 1:35 PM PDT

Last night in Luxembourg, Finance Minister Yanis Varoufakis launched a broadside against the Bank of Greece, accusing it of encouraging liquidity fears in an “astonishing” fashion. Earlier this week, the parliamentary speaker refused to accept the central bank’s annual monetary policy report, which urged a deal with creditors, instead releasing a document arguing that “odious” debts shouldn’t be repaid.

The clash between the ruling Syriza party and the Bank of Greece shows the extent to which the Mediterranean country’s debt crisis risks undermining the basic functioning of its governing institutions. It’s also left Prime Minister Alexis Tsipras fighting on yet another front to fulfill pledges to keep his country in the euro region without further rounds of austerity.

“This highlights the desperation of what’s happening,” said Dario Perkins, the chief European economist at Lombard Street Research in London.
[…]
Central Bank Duty

In Luxembourg yesterday, Varoufakis said the lender was “the only central bank I know personally that, even before there were any serious problems, issued a statement that there was a prospect of a liquidity shortage.” Instead, he said, “central banks have a duty to do precisely the opposite — douse any concerns about liquidity, then provide liquidity when it is lacking.”

Tsipras’s government on Thursday said there was an effort under way to spur capital flight, undermine the financial system and strengthen the creditors’ position. No conspirator was identified.

The line about the duty of a central bank to suppress liquidity fears is “exactly right”. Though in the present mess I doubt anyone would be fooled into thinking there isn’t a liquidity crisis looming. Cyprus proved that.

The Central Bank is trying to get the government to go along with the bailout terms, while the government is not going to do it. The bankers are basically sticking with the ECB bankers while the government is unwilling to go against the expressed will of the people who elected them. Said people pulling out € by the Billions.

We can count on the already burned Russians to keep tabs on how much money is being hauled out of Greek banks now that Cyprus showed how the game is to be played. I’ve bolded a couple of bits.

http://rt.com/business/268405-greece-banks-deposit-withdrawals/

Greek bank run: Deposit withdrawals hit €3 billion in four days – media

Published time: June 19, 2015 15:56
Edited time: June 19, 2015 19:07 Get short URL

Panicking savers in Greece have withdrawn over €3 billion in deposits from the country’s banks between June 15 and June 18, with a record €1 billion having left Greek banks on Thursday, banking sources told Reuters.

As the fears of Greece defaulting on its €316 billion debt and leaving the eurozone are escalating, people in Greece are rushing to take their savings out of banks. An estimated €200-€300 million a day was leaving the country prior to this week. Between October and April €30 billion left Greek banks, according to data from the Bank of Greece.

The panic accelerated Thursday ahead of the Eurogroup meeting in Luxembourg where European Finance Ministers and Greek officials were to discuss the ways Athens could deal with its international creditors. The meeting however did not show any feasible results.

On Monday, June 22, Greek banks might have to stay closed, when the EU summit takes place in Brussels, according to the European Central Bank (ECB). The summit will focus on Greece’s problem at the highest political level and is aimed to discuss ways of preventing the crisis from spreading within the EU.

Greek Finance Minister Yanis Varoufakis said on Friday that a comprehensive Greek proposal for a cash-for-reforms deal to the euro zone group of finance ministers was not discussed, and that Europe’s leaders had a duty to come up with a deal.

“Greek authorities presented a wide-ranging, comprehensive and credible proposal that can be the foundation of an agreement that not only concludes the current program but also addresses Greece’s future funding needs. Regrettably, no discussion of our proposal took place within the Eurogroup,” Varoufakis said in a statement.

Anyone leaving money in a bank in Greece is a fool. And given how the US Government is behaving, the USA will be right behind them… I can’t keep track of how fast the $Trillion meter is clicking over any more… and that path leads to where Greece is now. So watch how the game is played, and remember when the time comes to “withdraw early and withdraw often”.

Note that since Greece has about 10 million population, that € 1 Billion in one day is roughly €100 for every soul in the nation. So figure mom or dad hit the ATM for a few hundred for the family. The € 30 Billion from October to April is roughly € 3000 for every person. Given that, I suspect only major institutions have left their money in the bank. Individual citizens and any Russian Mafia money ought to be well gone by now and with only the ‘end of month’ or ‘end of week’ check deposits being left to pull out before the weekend.

It will be an interesting Monday…

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About E.M.Smith

A technical managerial sort interested in things from Stonehenge to computer science. My present "hot buttons' are the mythology of Climate Change and ancient metrology; but things change...
This entry was posted in Economics - Trading - and Money, Political Current Events and tagged , . Bookmark the permalink.

12 Responses to Greece Steps Closer To Default

  1. Verity Jones says:

    Matt in the Telegraph has an excellent cartoon on Greece today: http://www.telegraph.co.uk/news/matt/?cartoon=11687587&cc=11644969

  2. E.M.Smith says:

    Oh Verity, that’s a good one ;-)

  3. Steve Crook says:

    I think we’ll see Eurofudge and the imposition of capital controls (too late). This is part of the strategy of the Greek government. They want to get to the edge of chaos because, ultimately, threatening to fuck it up for everyone else is their only viable ploy.

    It’s clear that they’ve been wanting to push this to the brink so that they can stop dealing with finance ministers (and Schaeuble in particular) and talk to heads of government. That way we get a political rather than a fiscal settlement. Which will almost certainly be in favour of the Greeks.

    The trouble is, it will settle nothing in the longer term because Greece should never have been in the Eurozone and it still shouldn’t. All we’ll have is an agreement that the rest of the Eurozone will have to pick up the tab for whatever the next barmpot Greek government decides it wants to do.

    Ironically, what no-one is asking, yet, is what effect this might have on the results of the UK referendum on leaving the EU. Polling is close at the moment, and another year or two of what we’ve just seen with Greece may be enough to hand a slim majority to the No lobby.

  4. Tony Hansen says:

    EM,
    For a long time it would seem that I have lived with the misapprehension that austerity actually meant spending less than one earned. Now reading various sites, it seems that just spending less than before is austere… even if one is still running a deficit. Has this always been the case?
    If spending less is austere… what is the term for balancing the budget?
    What is it called if a country/entity spends less than it earns?

  5. p.g.sharrow says:

    IT certainly could happen in this country, Again! Back in 1932, The Fed needed real money,Gold”, to pay it’s international debits so they outlawed the private holding of gold and forced the population to give up their gold in exchange for Fed paper.
    Today they just seize bank accounts. A few years ago Governor Brown/California “found” $6billion to solve the states financial crises by plucking it out of business accounts as “tax” leans for unrecognized income. This rescission/depression had reduced business income taxes to the state, too much, so business people “Must” owe the state income additional taxes. Not the first time California has raided their small business people accounts. pg

  6. Paul, Somerset says:

    As always, watch what they do, not what they say. Varoufakis may claim to be appalled at the Bank of Greece effectively encouraging ordinary people to withdraw their money from Greek banks, but surely that’s precisely what you want to happen if the banks are going to lose the ECB support which has kept them functioning. That way the Greek people will still have their cash to rebuild the country after the collapse.

  7. p.g.sharrow says:

    If German Bankers foreclose on emptied Greek banks, they get nothing! End of debt! Greeks still have their money. If the debt is restructured the Greeks are still in the poorhouse, deep in debt to their EU creditors/masters.
    Reminds me of the time Bank of America threatened to foreclose on Mexico for Sovereign Debts. Mexican official replied that “if BofA foreclosed on Mexico, then BofA was bankrupt.” and smiled!
    The US government finally bailed out Mexico as well as the BofA.
    George Soros made billions on that game. Makes me wonder if he isn’t involved somewhere in this game. pg

  8. Sera says:

    These people appear to be professional can kickers- they’ve been doing it for years and will continue to do so. Cyprus was a fluke that went beyond control, or they were asleep at the wheel, but I don’t see that being allowed to happen again. Another never ending story.

  9. Paul Hanlon says:

    There was a lot of talk on the TV the other day about a meeting and handshake between Putin and Tsipras, with talk of the Russians helping the Greeks out of their malaise. Nothing about the quid pro quo in return, with a few people speculating that it might mean a Russian Naval Base in the Mediterranean.

    I’m guessing that that will lead to a “focusing of minds” in the EU and IMF, and a “last-minute” deal will be done centred around the Greek proposal. If that happens, expect to see the Portuguese, Spanish, Italian, and Irish governments kicking up a huge fuss about all the austerity they’ve had to go through. It may also tip the British electorate into “No to Europe” territory.

    If Greece do default on the €316BN debt, the banks (mostly European) will be lucky to get 30-50c per Euro. That’s a (potentially) €200BN loss. Maybe they’ll be able to absorb it somehow through the QE route, but this is going to leave Europe as an entity permanently weakened. It wouldn’t surprise me if we see parity between the Euro and the Dollar whatever the outcome.

  10. Steve Crook says:

    @Paul Hanlon
    “If Greece do default on the €316BN debt, the banks (mostly European)”
    Most Greek government debt is held either by Eurozone countries or by the ECB. There’s been a move over the last five years to insulate commercial banks from the risks involved in dealing with Greece. It has, effectively, been shifted to taxpayers in the Eurozone.

    I think something like 85% of the money ‘given’ to Greece as part of the bailout was used to either pay back bonds, meet interest payments, or to buy Greek debt…

    Also, you’re spot on as far as a UK no vote is concerned. If there’s a NO vote it would lead to a rapid re-ballot on Scots independence and a YES vote from them. All in all, it’s making my head hurt…

  11. E.M.Smith says:

    Well, Greece hss defaulted. This ought to be interesting…

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