Iceland Vs Greece

Sometimes a chart says it all. Its no wonder the lamestream media completely ignore the Icelandic success story because to follow would mean the end of the Euro. Taxpayers must be forced to prop it up at all costs so we know where Cyprus is heading judging by this chart.

Iceland Vs Greece – who made the right decision?

Greece Once Again Threatens The Euro

During the week the Greek finance minister was caught out lying about a troika bailout outcome but now Greece needs to face up to labour reforms over the weekend or else…

Tim Geithner’s carefully scripted plan to avoid European “reality” until the US election is unraveling. While previously Greece was not supposed to be an issue until after November 6, the recent escalation with the Greek FinMin openly lying about a Troika interim bailout outcome (which may or may not happen, but only following yet another MoU which would see Greece fully transitioning to a German vassal state in exchange for what is now seen as a €30 billion shortfall over the next 4 years, and which would send Syriza soaring in the polls in the process ensuring that a Grexit is merely a matter of time) has forced a retaliation. According to the Greek press, the Troika now demands that Greece resolve its objections to labor reforms (which as reported earlier have forced the ruling coalition to split) by Sunday night, or else… The implication, it appears, is that absent a compromise, the next Troika tranche of €31.5 billion is not coming, and Greece is out.

……

From Kathimerini:

“The government is facing a Sunday deadline for a full agreement on the package of measures that will see it cash in the next bailout tranche of 31.5 billion euros. The three-day extension it got in order to get maximum backing within the three-party coalition will be necessary as minor partner Democratic Left insists on an improvement in the terms concerning labor reforms that it staunchly opposes.” Will Greece come through in the clutch? And if not, just what happens with the EURUSD on Sunday night as Greece calls the Troika’s bluff? Deja vu shades of early summer, and plunging European risk come to mind…

It will not be an easy agreement to reach and any fallout will be assessed on Monday by the Euro Working Group.

The Euro Working Group (EWG) of eurozone finance ministry officials will convene again on Monday to discuss whatever conclusions Athens has come to and prepare the blueprint that the Eurogroup of euro area finance ministers may discuss on Wednesday through a video conference that sources from Brussels say is likely to take place in order to discuss Greece.

The prime minister appears determined to have the measures passed immediately through Parliament, either in one or in two draft laws, ordering on Thursday the preparation of the bills required.

At the same time there are also disagreements within PASOK, the other minor coalition partner, as a number of deputies are threatening to vote against a Finance Ministry measure regarding privatizations.

Source: ZeroHedge

Greece Takes Next Step To Serfdom

The bankers demands get more and more brazen but this latest one takes the biscuit. According to a leaked Troika letter, Greeks are about to be asked to work a 6 day week. This comes on top of a OECD report in 2010 which said the Greeks are the 2nd hardest workers in the world, after the South Koreans.

Area: Flexibility of labour arrangements

Measure: Increase flexibility of work schedules:

 

•     Increase the number of maximum workdays to 6 days per week for all sectors.

•     Set the minimum daily rest to 11 hours.

•     Delink the working hours of employees from the opening hours of the establishment.

•     Eliminate restrictions on minimum/maximum time between morning and afternoon shifts.

•     Allow the consecutive two week leave to be taken anytime during the year in seasonal sectors.

This is right up there with that Australia nut job, (300 lb) Rinehart (the worlds richest woman, who inherited her wealth and knows nothing about having to work for it).

Australian mining magnate Gina Rinehart has criticised her country’s economic performance and said Africans willing to work for $2 a day should be an inspiration.

Chrstine Lagarde’s recent condescending comments towards Greece demonstrate further, what the elites feel about them. Whats in store for the rest us ?

“I think more of the little kids from a school in a little village in Niger who get teaching two hours a day, sharing one chair for three of them, and who are very keen to get an education. I have them in my mind all the time because I think they need even more help than the people in Athens.”

Source: Zero Hedge,  BBC,   The Telegraph

Greece Is Printing Its Own Euros And Everyone Turns A Blind Eye

Nobody is brave enough to finally pull the plug on Greece and force it to exit the euro so the game continues. The Troika are due to release their report in September but in the meantime on 20 August a €3.2 billion bond is due to be paid. The ECB has stopped accepting Greek collateral. So where does Greece get its funding from? And here lies the fragility of the monetary system because Greek is printing its own money and everyone is turning  a blind eye.

A lot of politicians in Germany, but also in other countries, issue zingers about a Greek exit from the Eurozone and the end of their patience. Yet those with decision-making power play for time. They want someone else to do the job. Suddenly Greece is out of money again. It would default on everything, from bonds held by central banks to internal obligations. On August 20. The day a €3.2 billion bond that had landed on the balance sheet of the European Central Bank would mature. Europe would be on vacation. It would be mayhem. And somebody would get blamed.

So who the heck had turned off the dang spigot? At first, it was the Troika—the austerity and bailout gang from the ECB, the EU, and the IMF. It was supposed to send Greece €31.2 billion in June. But during the election chaos, Greek politicians threatened to abandon structural reforms, reverse austerity measures already implemented, rehire laid-off workers….

The Troika got cold feet. Instead of sending the payment, it promised to send its inspectors. It would drag its feet and write reports. It would take till September—knowing that Greece wouldn’t make it past August 20. Then it let the firebrand politicians stew in their own juices.

 

In late July, the inspectors returned to Athens yet again and left on Sunday. After another visit at the end of August, they’ll release their final report in September. A big faceless document on which people of different nationalities labored for months; a lot of politicians can hide behind it. Even Merkel. And the Bundestag, which gets to have a say each time the EFSF disburses bailout funds.

Alas, August 20 is the out-of-money date. September is irrelevant. Because someone else turned off the spigot. Um, the ECB. Two weeks ago, it stopped accepting Greek government bonds as collateral for its repurchase operations, thus cutting Greek banks off their lifeline. Greece asked for a bridge loan to get through the summer, which the ECB rejected. Greece asked for a delay in repaying the €3.2 billion bond maturing on August 20, which the ECB also rejected though the bond was decomposing on its balance sheet. It would kick Greece into default. And the ECB would be blamed.

But the ECB has a public face, President Mario Draghi. He didn’t want history books pointing at him. So the ECB switched gears. It allowed Greece to sell worthless treasury bills with maturities of three and six months to its own bankrupt and bailed out banks. Under the Emergency Liquidity Assistance (ELA), the banks would hand these T-bills to the Bank of Greece (central bank) as collateral in exchange for real euros, which the banks would then pass to the government. Thus, the Bank of Greece would fund the Greek government.

Its against the governing treaties but when has that stopped the elites in the EU who can break the rules whenever it suits them. As Eddie Van Halen once said, “To hell with the rules. If it sounds right, then it is.”

Precisely what is prohibited under the treaties that govern the ECB and the Eurosystem of central banks. But voila. Out-of-money Greece now prints its own euros! The ECB approved it. The ever so vigilant Bundesbank acquiesced. No one wanted to get blamed for Greece’s default.

If Greece defaults in September, these T-bills in the hands of the Bank of Greece will remain in the Eurosystem, and all remaining Eurozone countries will get to eat the loss. €3.5 billion or more may be printed in this manner. The cost of keeping Greece in the Eurozone a few more weeks. And on Tuesday, Greece “sold” the first batch, €812.5 million of 6-month T-bills with a yield of 4.68%. Hallelujah.

“We don’t have any time to lose,” said Eurogroup President Jean-Claude Juncker. The euro must be saved “by all available means.” And clearly, his strategy is being implemented by hook or crook. Then he gave a stunning interview. At first, he was just jabbering about Greece, whose exit wouldn’t happen “before the end of autumn.” But suddenly the floodgates opened, and deeply chilling existential pessimism not only about the euro but about the future of the continent poured out. Read….. Top Honcho Jean-Claude Juncker: “Europeans are dwarfs”

Source: Testosteronepit.com

Greek Drachma Appears On Bloomberg Ticker

Russia Today have reported signs of the Greek Drachma appearing on Bloombergs Ticker while Bloomberg themselves have said that its a test. It has since been removed.

Traders around the world have been staring at their Bloomberg screens, hardly believing their eyes. The electronic information platform has been showing details for possible Greek Drachma trading.

The Bloomberg helpdesk described it as “an internal function which is set up to test.”

The news comes in the wake of the heated discussions over the future of the euro zone and the membership of Greece. While many experts insist that Greece should leave the Euro and default, some suggest it should remain the union and introduce a parallel currency to the Euro to repay the country’s debt.

The Head of the European Investment Bank Werner Hoyer said on Tuesday that Greece will be able to remain a member of the union. “Greece will have the opportunity to solve the huge problems that it is facing. Continuing support from the EU will contribute to this, in case, of course, the very Greeks would want that,” Hoyer said.

And a survey at the weekend showed that Greeks prefer to stick to the Euro and not revert to the old drachma.

The Greek Drachma details have now been taken down from the Bloomberg service.

 

 

 

Greece’s Electric Network On The Verge Of Being Cut Off

The power generation companies in Greece for some time are struggling to pay their bills. This time the natural gas supplier DEPA has called enough is enough, pay up or else. It’s the last thing a struggling economy needs and hopefully disaster can be averted.

ATHENS (Reuters) – Greece’s power regulator RAE told Reuters on Friday it was calling an emergency meeting next week to avert a collapse of the debt-stricken country’s electricity and natural gas system.

“RAE is taking crisis initiatives throughout next week to avert the collapse of the natural gas and electricity system,” the regulator’s chief Nikos Vasilakos told Reuters.

RAE took the decision after receiving a letter from Greece’s natural gas company DEPA, which threatened to cut supplies to electricity producers if they failed to settle their arrears with the company.

Source: Reuters

Greece Must Remain In Euro, Otherwise Its Success Outside, Would Encourage Others To Leave

Normally a country in debt crisis would devalue its currency, suffer short-term pain and then reap the rewards of instantly being cheaper. Although in the case of Greece which doesn’t have a strong export industry it would still have a massive benefit if it was to leave the euro. In the case of Iceland, it successfully devalued and is growing its economy again, although it has mainly escaped the attentions of the presstitutes. There you have it, the MSM and EUssr does not want Iceland’s success story to be told for the same reason it doesn’t want Greece to leave the euro, because it knows this is the correct way to handle the debt crisis and other countries would want to follow.

The elites of the EUssr are desperate for Greece to remain with the euro because its eventual successful recovery with a new currency with cause the euro to collapse. Consider the following article on FT from Arvind Subramanian (a Senior Fellow at the Peter G. Peterson Institute for International Economics, which counts amongst its directors numerous influential Bilderberg members, including former Federal Reserve chairman Paul Volcker, former United States Treasury Secretary Lawrence Summers, and Bilderberg kingpin David Rockefeller). Someone is scared!!!

Expelled from the eurozone, Greece might prove more dangerous to the system than it ever was inside it – by providing a model of successful recovery.

There is an overlooked scenario in which default is not a disaster for Greece. If this is the case, the real, more existential threat to the eurozone might be a very different one, in which the Greeks have the last laugh. Consider that scenario.

The immediate consequences of Greece leaving or being forced out of the eurozone would certainly be devastating. Capital flight would intensify, fuelling depreciation and inflation. All existing contracts would need to be redenominated and renegotiated, creating financial chaos. Perhaps most politically devastating, fiscal austerity might actually need to intensify, since Greece still runs a primary deficit, which it would have to correct if EU and International Monetary Fund financing vanished.

But this process would also produce a substantially depreciated exchange rate (50 drachmas to the euro, anyone?) And that would set in motion a process of adjustment that would soon reorientate the economy and put it on a path of sustainable growth. In fact, Greek growth would probably surge, possibly for a prolonged period, if it adopted sensible policies to restore rapidly and sustain macroeconomic stability.

Examples of successful devaluations

What is the evidence? Just look at what happened to the countries that defaulted and devalued during the financial crises of the 1990s. They all initially suffered severe contractions. But the recessions lasted only one or two years. Then came the rebound. South Korea posted nine years of growth averaging nearly 6 per cent. Indonesia, which experienced a wave of defaults that toppled nearly every bank in the entire system, registered growth above 5 per cent for a similar period; Argentina close to 8 per cent; and Russia above 7 per cent. The historical record shows clearly that there is life after financial crises.

This would also be true in Greece, even allowing for the particularities of its situation. Greece’s low export-to-GDP ratio is often said to preclude the possibility of high export-led growth. But that argument is not ironclad because crises can lead to dramatic reorientations of the economy. India, for example, managed to double its similarly low export-to-GDP ratio within a decade after its crisis in 1991, and doubled it again in the following decade even without a big currency depreciation.

To put in context, Greece’s successful potential exit from the euro could have massive ramifications. Germany may have to concede way more ground to hang on to its free lunch.

Suppose that by mid-2013 Greece’s economy is recovering, while the rest of the eurozone remains in recession. The effect on austerity-addled Spain, Portugal and even Italy would be powerful. Voters there would not fail to notice the improving condition of their hitherto scorned Greek neighbour. They would start to ask why their own governments should not follow the Greek path and voice a preference for leaving the eurozone. In other words, the Greek experience could fundamentally alter the incentives for these countries to remain in the eurozone, especially if economic conditions remained grim.

At this stage, politics in Germany would also be affected. Today, Germany grudgingly does the minimum needed to keep the eurozone intact. If exit to emulate Greece becomes an attractive proposition, Germany will be put on the spot – and the magnanimity it shows in place of its current miserliness will be the ultimate test of how much it values the eurozone. The answer might prove surprising. The German public might suddenly realise that the eurozone confers on Germany not one but two “exorbitant privileges”: low interest rates as the haven for European capital and a competitive exchange rate by being hitched to weaker partners. In that case, Germany would have to offer its partners a much more attractive deal to keep them in the eurozone.

Such a scenario would be rich in irony. Greece is viewed as the pariah polluting the eurozone; its expulsion might make it a far bigger threat to the single currency’s survival. If a eurozone exit creates the conditions for a rebound in Greece, it may prove an infectious model. The ongoing Greek tragedy could yet turn out not too badly for the Greeks. But tragedy it might well be for the eurozone and perhaps for the European project.

Christine Lagarde – Payback Time For Greece

It’s easy to criticize someone in Greece when you are pulling in over $500k a year and basically couldn’t give a shit because you are not Greek, but it’s another thing to say it publically as IMF chief Christine Lagarde has done. Her attitude could best be summed up by, the Greek people borrowed too much and now deserve the suffering, so they should pay more tax and shut up. The mask has slipped, but is her position more in line with her fellow elite?. Certainly the way Greece has been treated has been nothing short of disgraceful coupled  with a biased media coverage of the Greek people.

There may well be tax avoidance, but never is discussed the corrupt political elite which was responsible for this behaviour or the fact that the Greeks in 2010 were the hardest workers in Europe, 2nd only to South Korea in OECD countries.

In an interview with the British Guardian newspaper published Friday, the head of the International Monetary Fund (IMF), Christine Lagarde, vented her class hatred for the workers of Greece, denouncing them as tax scofflaws and ruling out any respite from the austerity measures that have devastated the country.

In the interview, Lagarde was questioned about the social catastrophe resulting from five years of economic crisis and austerity measures dictated by the IMF and the European Union. She was asked, in particular, to respond to the plight of pregnant women who “won’t have access to a midwife when they give birth,” patients who “won’t get life-saving drugs,” and the elderly who “will die alone for lack of care.”

Contemptuously dismissing the suffering and death caused by the policies she is helping to impose, Lagarde replied: “I think more of the little kids from a school in a little village in Niger who get teaching two hours a day… I have them in my mind all the time, because I think they need even more help than the people in Athens.”

The crocodile tears of Lagarde, formerly the finance minister under French President Nicolas Sarkozy, for the impoverished children of Africa carry little weight given the quasi-genocidal record of French imperialism in Africa and the neo-colonial interventions in the Ivory Coast, Libya and other parts of the continent carried out by the Sarkozy regime.

The IMF head continued: “As far as Athens is concerned, I also think about … all these people in Greece who are trying to escape tax.”

Asked whether she thought more about non-payment of taxes than “all those now struggling to survive without jobs or public services,” Lagarde replied, “I think of them equally. And I think they should also help themselves collectively … by all paying their tax.”

The Guardian article continued: “It sounds as if she’s essentially saying to the Greeks and others in Europe, you’ve had a nice time and now it’s payback time. ‘That’s right.’ She nods calmly.”

Lagarde, who makes more than half a million dollars after taxes as IMF chief, reflects the outlook of the financial aristocracy that dictates policy in Europe and around the world. In condemning the people of Greece to unspeakable suffering and misery, she speaks for the entire European bourgeoisie and all of its national governments and European Union institutions.

Her “Let them eat cake” attitude sums up the loathing and fear of her class for the working class throughout Europe and internationally. Her remarks underscore the fact that Greece has been selected to serve as a benchmark for a deliberate policy of exploiting the capitalist crisis to effect a fundamental and permanent restructuring of class relations. The bourgeoisie is determined to eradicate all of the past social gains of the working class and carry through a social counterrevolution, imposing conditions of poverty and exploitation not seen since the end of the 19^th century.

Source: wsws.org

What Happens When A Country Defaults

From The Financial Times

Greek Interactive Election Poll

Click on Reuters link for an interactive view of the latest poll for the Greek election. [Interactive Poll]

 

EU Admit Working On Greek Exit(Grexit) Plan

It has been reported in the Irish Independent that the EU has been working on a Grexit. Its like pulling teeth sometimes trying to get the EU to admit what is sometimes blindingly obvious. Two years many felt that the debt burden Greece carried was too large and would come to this. The only question now is this too little too late.

THE EU is working on an emergency plan for a Greek euro exit, a key economic commissioner admitted for the first time today.

Karel De Gucht, a former Belgian foreign minister before he became EU trade commissioner, said that the EU is ready to handle the “cataclysm” of Greek exit without a “domino effect” – despite the financial turmoil engulfing Spain. ”How much will it cost? I do not know, but it will cost money. What I am assured of is that there will be no contagion: a Greek exit does not mean the end of the euro,” Mr De Gucht said. Painting a grim picture the commissioner said that if Greece left the euro it was “finished” and that, while the euro would survive it would have to fight off a “cataclysm”.

 ”C’est fini. It [Greek exit] means that after a while you can no longer pay your officials who can no longer pay your pensions,” he said.  ”All you can do is have your central bank to print money, and then you get hyperinflation. That would cause a cataclysm in other countries that are now under pressure.”

Citibank fear the contagion affect.

“Contagion Risks Are Trickier – In the run-up to potential Grexit, all eyes would likely be focused on the contagion risks to Ireland, Italy, Spain and Portugal (IIPS). With sufficient fiscal resources and an accommodating ECB, contagion to Italy and Spain should be manageable. We estimate the ECB would need to deploy up to an additional €800bn in liquidity to support potential deposit outflows and debt refinancing for the IIPS banks – the equivalent of a one LTRO and a half. ECB’s assets could rise to around 41pc of EA GDP versus 33pc today.

Apparently, its a piece of piss to start printing new drachmas, just give DeLaRue a shout and tell them how much you want printed.

De La Rue has drawn up contingency plans to print drachma banknotes should Greece exit the euro and approach the British money printer, an industry source has told Reuters. 

 

Greek Banks Cut Off By ECB

Fresh rumour reported by Karl Denninger that Greek banks have just been cut off by the ECB. As I did a quick search, I also see Reuters run with the same story.

Flash off the rumor mill, unconfirmed — it appears the Greek banks were just cut off by the ECB.

If this is true then this is the latest “Gun up the nose” game by the Germans and ECB, and is almost-certain, in this political climate, to blow up their face (and quite possibly with shooting involved on the part of the Greeks too.)

This instantly hit the Euro and US stock market, which had been having a reasonably decent day.

If true and confirmed then Greece has been effectively orphaned.  This appears to be a facial attempt to stick a tourniquet on Greece’s neck, as with elections due next month cutting off Greek banks now will basically guarantee they all detonate.

Expect the incipient bank runs to resume en-masse within hours if not minutes.

Time to critical mass is now measured in days if not hours, and if acceleration occurs the weekend is the perfect time for Greek authorities to drop the hammer in the form of a bank holiday and capital controls as they will have no choice irrespective of the critical damage that will result from them doing so.

More as I’m able to learn and/or confirm it.

Update: Just repeated on CNBC – ECB stopping monetary policy operations with “some” Greek banks.  Hmmm…. what’s “some” gents?

More updates: Flying tweets from all sides on this and on a rumored withdraw limit.  Who knows what the truth is — or if this was a trial balloon.  Note that the time to drop a hammer like this that is “least disruptive” is when banks are CLOSED — like, for example, the weekend.

Reuters reports as follows;

(Reuters) – The European Central Bank has stopped monetary policy operations with some Greek banks as they have not been successfully recapitalized, euro zone central bank sources said on Wednesday.

The ECB declined to comment.

The ECB only conducts its refinancing operations with solvent banks. With no access to ECB funds, the banks concerned must go to the Bank of Greece for emergency liquidity assistance (ELA).

It was unclear exactly how many banks were affected.

One person familiar with the matter said four Greek banks’ capital was so depleted they were operating with negative equity capital. According to its own rules, the ECB cannot provide liquidity to banks in such a situation.

The ECB said earlier on Wednesday it continued to support Greek banks.

Paul Krugman – Greece To Leave Euro, By Possibly Next Month

Paul Krugman writes in the New York Times today of Greece leaving the euro and sees it all happening if not next month, then shortly after that. Here’s the breakdown of how Krugman sees it play out. Mind you, it’s not a very bold prediction, I think most would see this from a while back as being a strong possibility.

Some of us have been talking it over, and here’s what we think the end game looks like:

1. Greek euro exit, very possibly next month.

2. Huge withdrawals from Spanish and Italian banks, as depositors try to move their money to Germany.

3a. Maybe, just possibly, de facto controls, with banks forbidden to transfer deposits out of country and limits on cash withdrawals.

3b. Alternatively, or maybe in tandem, huge draws on ECB credit to keep the banks from collapsing.

4a. Germany has a choice. Accept huge indirect public claims on Italy and Spain, plus a drastic revision of strategy — basically, to give Spain in particular any hope you need both guarantees on its debt to hold borrowing costs down and a higher eurozone inflation target to make relative price adjustment possible; or:

4b. End of the euro.

And we’re talking about months, not years, for this to play out.

What Is Next For Greece?

In all probability Greece will hold elections as it seem very unlikely now that a coalition can be formed. What has not been discussed is on May 15th Greece has bond redemptions worth €450 million which are governed under English Law. These were the bonds that refused to be restructured earlier in the year. The big question, with no government in place what happens to the repayment of these bonds and will Greece end up defaulting on them?

New elections have been mooted for some time in June but the new Government faces the prospect of putting together medium term spending plan for 2013/2014 which is due to be delivered to the Troika for June 30.

ZeroHedge write as follows

Timeline of events for Greece

The next weeks are crucial for Greece, as political paralysis could threaten the new program, potentially triggering tail risk scenarios that could eventually result in an exit from the euro area. New elections in June (10 or 17 June) appear very likely, but it remains unclear whether these would deliver a government that implements the agreed-upon program, or even a government at all. At this stage, based on media reports, in our view two options still appear to be on the table: a coalition led by New Democracy that allows for further muddling through, and, with similar probability, a government led by Syriza that refuses the Troika program and eventually is forced by a collapsing economy to exit the euro. A low probability scenario would be a temporary exit, as that would implicitly include support from the EU.

 If Greece was to leave the Euro what would the consequences be?

Before Greece decides to default and eventually exit the euro, the country could face the temptation of closing its budget deficit by using IOUs to pay salaries and fund a bank recapitalisation, which risks establishing a shadow currency. How long Greece could be within the euro and live with its own internal currency is an open debate. The main issue in our view, would be that this domestic shadow currency would not enable Greece to fund its current account deficit, making it likely that Greece would default on its external debt (about €370 billion including portfolio and other foreign investment liabilities).

In the event of a default and an exit scenario, Greece must reintroduce its own currency and ensure the proper functioning of its banking sector. Failure to meet its payments would put Greece into default position, the effects of which could in our view result in the following:

• Deposit flight would be very likely (not only in Greece but possibly spreading to other peripheral banks). Indeed, Greek banks have already lost 30% of heir private sector deposits since their peak in late 2009.
• Greek banks would likely require an immediate recapitalization and face a liquidity shortfall, given that Greek debt would no longer be eligible as collateral for ECB operations (through Target 2 Greek NCB owes about €109bn to the ECB; although the ESCB holds c.€50bn of government bonds directly through the SMP). And, the ECB would likely veto the Emergency Liquidity Assistance (another €60bn) following a default, again making an exit from the euro area likely following a default.

The consequences for the other eurozone countries would mean a downgrade as Fitch has already threatened if Greece leaves. Although this might not affect Portugal and Ireland for the moment because they are in a program with the Troika it would have massive implications for the other eurozone countries hit with a downgrade.

ZeroHedge writes of actions needed should a Greek exit and default happen.

Given the contagion risks to large countries, the piecemeal approach with limited commitment would have to be replaced by the “full bazooka.”

• The ECB could cut rates to 0.50%, and renew its liquidity provisions (most likely in the form of another 3-year LTRO); The ECB would probably have to commit to buy unlimited amounts of Spanish and Italian government debt to stop contagion to these countries. This commitment would have to be supported by all remaining euro area countries to be credible and require a renouncement of the ECB’s effective senior creditor status.
• Major central banks could open currency swap lines to avoid funding problems in major currencies, as during 2008/09, but possibly at lower costs.
• Banks would have to be ring-fenced, via deposit guarantees and capital injections, over and above the ECB’s liquidity support described above. This would possibly entail state injection of capital (even if only in the form of promissory notes), ie, nationalization, or European money (euroization). The deposit guarantee would have to be backed jointly by euro area governments to be credible.
• A European funded bank recapitalization, a European deposit insurance scheme, as well as the ECB’s purchases of government bonds would require further surrendering of fiscal power to the European Commission.
• Capital controls would potentially need to be introduced between the euro area and the rest of the world. Such controls are allowed under special circumstances that could threaten stability, and the scenario under consideration clearly qualifies.
• Going forward, the fiscal stance as well as other economic policies (such as industrial policy) would have to be redesigned at the euro area level to ensure growth could kick start as quickly as possible

Source: ZeroHedge

Greece’s Path Back To The Drachma

Its long been suspected that Greece will eventually exit the euro and find its way back to the Drachma (new version), but last weekend’s election may have hastened that timeframe. ZeroHedge reports on the path as outlined by Handlesblatt.

There has been much speculation about how the Greek endgame will play out, but precious little from the perspective of Germany. Until today. Courtesy of a three part series from Handeslblatt (here, here and here) we now know precisely what the next steps are as visualized by Europe’s piggybank, which now is telegraphing it is set to cut Europe’s most wayward child loose.

Step by Step summary of how its likely to happen.

1. Greece cannot stand by the spending cuts expected by the Troika. €11.5 Bn until June
2. The creditors refuse the payment of the next tranche. Greece must pay €30 Bn until the end of June, to pay pensions, civil servants salaries, and support its ailing banking sector.
3. Greece cannot service its debt anymore. Which means essentially service its debt to debtors like banks, bringing its banking sector to a likely bankruptcy (remember Greek banks were already hardly met by the €80 Bn PSI in March, 2 big Greek banks already have negative equity).
4. Greece must save its banks to avoid a bank run. There will be no other way than reintroducing the Drachma since no one will lend them money, IMF or EU.
5. Greece gets out of the Euro and reintroduces Drachma. “It wouldn’t be that easy since to avoid panic and a bank run, a banking holiday (perhaps a week) would be necessary. Even with capital controls with foreign contries, the process would remain technically difficult. For the Greeks this would mean serious consequences as loans would see the value drop and prices would go up. On the short term, the competitiveness of the country would improve. According to economists, a 50% depreciation would be necessary. That would, at least theoretically, mean that holidays in Greece would be substantially cheaper. It can still be doubted that Greece would solve its problems its way. Who wants to spend there its holidays , where unrest and chaos reign. “Greece could earn air to breath on the short term. This would change nothing to its problems on the longer term”, Commerzbank economist Christoph Weil says.”

 

Greek Government Provides Emergency Cash For Electricity Supplier

Greece is on the verge of the electricity network collapsing, but the government is to provide €250 million in emergency funding to keep the lights on. You could argue that it was the fault of government policies that caused the situation in the first place. The power utility PPC was used as a property tax collector but ultimately many desperate people choose not to pay and have their electricity cut off instead. Greece also has to pay over the odds to secure fuel for generating power as a result of mistrust of suppliers of Greece paying its bills.

Greece will provide 250 million euros  in emergency funds to its ailing electricity providers to prevent a California-style energy crisis, government officials said on Friday.

..

The temporary aid will shore up the accounts of main power utility PPC, allowing it to maintain operations and reimburse other suppliers of electricity and natural gas on whom the smooth functioning of the country’s energy system depends.

..

Greece’s energy market has fallen into disarray due to a combination of stagnant power demand, rising fuel costs and a government decision to use PPC as a tax collection vehicle.

 

An increasing number of consumers stopped paying their electricity bills after the government started collecting a 1.7 billion euro property tax through them last year, in a desperate effort to meet its budget targets under an EU/IMF bailout.

 

Non-payments blew a hole into the accounts of PPC, which is Greece’s biggest power producer and its sole electricity retailer. PPC, which posted a record loss in the fourth quarter, is also the biggest client for upstart producers generating about 23 percent of Greece’s electricity.

Source: Athennews

Greece For Sale On ebay

Spotted the following article on ZeroHedge. A greek citizen with a sense of humour has just put his country up for sale and has generously throw in 300 politicians along with other perks.

I’m offering my country for sale. What is left of it anyway. Slightly used, low wages, low pensions,  low expectations. Lots of sunshine though, free at the moment.

Many natural resources, minerals etc that are still untouched. Bureaucracy at its best. Great bribe-to-do system, over 20 years of experience.

Obedience at the IMF, bankers and the Troika is guaranteed, no questions asked.

The buyer will get for free 300 politicians, highly trained at the University of  Fine Arts of Scandals. And free Greek Bonds with extremely high international market value. For confetti.

I will provide the best possible certificate that you will ever imagine, maybe even a custom one that you’ll ask.

P.s.
No hard feelings.

 

Movement In Greece Closes Toll Booths

Although Greece is a little further down the road to ruin than the rest of us, there are things that we can learn from them in the fight back 😉 and how to cope. Currently in Greece is a movement called ALANYA which stands for Members of the Solidarity, Disobedience and Resistance. Their last move is to close lanes on the motorway and wave people through the remaining ones without paying. They also arrange for free travel on the trains by covering the ticket stations. Why not when you know the revenue is simply going to bankers to cover odious debt.

The road they chose is in private hands, sold off after the Greek people had already paid for it.

The day before, the government announced plans to imprison people for three to six months if they open the toll booths. The group said that they would continue the actions when the bill becomes law, and are prepared to go to prison to stop the rich making profits out of what should be public services. They also said that the government’s response shows how effective actions like this are- in the past year, 50 million euros worth of toll charges has gone uncollected .

source: ReelNews

Greek Government Robs Hospital and Public Accounts To Pay Bondholders.

Do politicians have any shame when they rob hospital funds, university and utility companies to pay bondholders just before they are going to default anyway? The perpetrators of this act clearly have no morals or the people’s interest at heart. All the monies were withdrawn after hours on March 8th.

The illegally denied default of Greece entered a dramatic new phase this afternoon with the revelation by mainstream Greek public health website Health News that, shortly before midnight on March 8th – the eve of Greece’s psi completion on Friday March 9th– on average 70% of public utility funds in varous large, interest-bearing accounts at the Bank of Greece were raided. These included most of the State’s regional hospital budgets, various universities and (it is alleged) at least one utility company.

The shortfalls came to light late last week and this morning as various hospital purchasing cheques in particular began to bounce. The monies – estimated by one source to total some 1.4 billion euros – appear to have been used to pay off the tiny minority of private sovereign creditors who, under the original terms of their bond purchase, were entitled come what may to full payment of the bond’s yield entitlement.

…..

“The Greek government used this money in order to purchase government bonds from various bondholders without getting permission from the bank account owners,” one reliable Athens source told The Slog in commenting on the story, “hospitals and universities have been robbed of hundreds of millions of Euros, absolutely essential for their core functionality.”

Source: The Slog

Greece Defaults First – Who Is Next?

Call it anything you want, but Greece’s defaulting restructuring of its debts has officially being called a credit event which will trigger credit-default swap contracts by the International Swaps and Derivatives Association. Thats a default by any other name. Question is, what happens next. Although ISDA says only €3.2 billion has been triggered in credit-default swap contracts, the Huffington Post has  this to say;

If you remove all hedges and offsetting swaps, there’s about $70 billion in default-insurance exposure to Greece out there, which is a little bit bigger pill for the banking system to swallow. Is it possible that some banks won’t be able to pay on their default policies? We’ll find out.

Greeece’s restructuring is not so straight forward now. But what of the collective action clauses that Greece invoked. Remember that these were used retrospectively. Ambrose Evans-Pritchard wrote

The Greek parliament’s retroactive law last month to insert collective action clauses (CACs) into its bonds to coerce creditor hold-outs has added a fresh twist. These CAC’s are likely to be activated over coming days. Use of retroactive laws to change contracts is anathema in credit markets.

Many now believe that Portugal is next in line.

Right now, the combination of all public and private debt in Portugal comes to a grand total of 360 percent of GDP.

In Greece, the combined total of all public and private debt is about 100 percentage points less than that.

So yes, Portugal is heading for a world of hurt.  The following is more about Portugal from the recent Telegraph article mentioned above….

Citigroup expects the economy to contract by 5.7pc this year, warning that bondholders may face a 50pc haircut by the end of the year. Portugal’s €78bn loan package from the EU-IMF Troika is already large enough to crowd out private creditors, reducing them to ever more junior status.

The truth is that the European financial system is a house of cards that could come crashing down at any time.

German economist Hans-Werner Sinn is even convinced that the European Central Bank itself could collapse.

After the major restructuring if its debts, how do you think Greece is fairing?

The Greek economy has been in recession for five years in a row and it continues to shrink at a frightening pace.  Greek GDP was 7.5 percent smaller during the 4th quarter of 2011 than it was during the 4th quarter of 2010.

Unemployment in Greece also continues to get worse.

The average unemployment rate in Greece in 2010 was 12.5 percent.  During 2011, the average unemployment rate was 17.3 percent, and in December the unemployment rate in Greece was 21.0 percent.

Young people are getting hit the hardest.  The youth unemployment rate in Greece is up to an all-time record of 51.1 percent.

The suicide rate in Greece is also at an all-time record high.

Source: theeconomiccollapseblog.com