Greece on the Eve of Elections

As Greek Banks Run Out Of Safe Deposit Boxes, An Eerie Calm Takes Over The Country 24 Hours Before D-Day

Zero Hedge,

16 June, 2012

A day before the Greek D-Day, which was unexpectedly punctuated with a surprising last-minute Greek victory in Euro2012 over Russia, sending the country into the elimination rounds (a Greece vs Germany game would be quite interesting) which may have rekindled patriotic spirits just enough to boost Syriza's chance that little bit more, the Greek bank trot, which was a jog some days ago, has surprisingly not metastazied into a full blown sprint. And with an all too real possibility that Greece may leave the Eurozone in as little as 24 hours, this is somewhat unexpected: after all taking physical possession of electronic money is merely a free put on the return to the Drachma, and currency (and debt) devaluation. On Monday it may simply be too late. Surely, most locals have figured this out.

Spiegel reports: "Joanna Stavropoulos is not proud of what she has done. "I had a guilty conscience when I withdrew my money from Greece," says the 43-year-old. Of course she knew what would happen if everybody does the same: Greece's banks would be threatened with collapse. But she says she had to think of her two-month-old daughter, Josephina, who is currently asleep on Joanna's shoulder. Increasing numbers of Greeks are following Joanna Stavropoulos' example and emptying their accounts. They are afraid that Greece may leave the euro zone and return to the drachma.... Stavropoulos is one of the few people who know very well what this scenario would look like in concrete terms.. She has also lived in Zimbabwe, where three-digit inflation destroyed the currency. Joanna is sure that Greece could face the same thing if it returns to the drachma. "My country is going downhill," she says." And yet instead of taking the cash and converting it into something of real value, what has happened is that the €50 billion now hidden in various homes has led to a surge in home burglaries. As a result, Greeks are forced to worry not only about their currency returning, but about being robbed. End result: take the cash, but park it back at your bank: 

"Many customers have left their money in the bank itself, Christiana says -- but in a safe deposit box rather than in their accounts. "It's currently impossible to find a free safe deposit box in a Greek bank," she says." We wonder what happens when these same people try to access their "safe deposit boxes" should the entire banking system collapse. Then again, nobody said a currency union disintegrating was a logical, rational and orderly process...

Oddly enough, despite the all too real dangers of a complete lock out by and of the local banks, Greeks refuse to believe that the worst case scenario could realistically happen:

There is still little sign of panic in Greece, and there has not been a stampede to the banks. Nevertheless, people are withdrawing hundreds of millions of euros from the banks every day. In May alone, outflows totaled €5 billion. According to official figures, €80 billion has been withdrawn since the start of the crisis.

Which however is not to say that most people have not already commenced preparations:

Christiana (not her real name) can see the capital flight every day with her own eyes. The 46-year-old, who wishes to remain anonymous, works as an asset manager at a large Greek bank. "It's not just that it is increasing," she says of the withdrawals. It's not only major customers who have been taking out money in recent months, she explains, but all kinds of clients, from account holders with a few hundred euros to the bank's most important private customers. "Naturally, the wealthy ask particularly often what they should do with their money," she says.

Rich Greeks have long been moving billions to countries such as Italy or Switzerland, or buying luxury properties in London. But overall, according to estimates by the Greek central bank, only about one-fifth of the total money withdrawn has gone abroad. Many customers have left their money in the bank itself, Christiana says -- but in a safe deposit box rather than in their accounts. "It's currently impossible to find a free safe deposit box in a Greek bank," she says.

Those customers clearly don't want to be surprised by a currency reform. There has long been speculation over how that could work. The banks could close over a weekend, take stock of the euro holdings in their accounts and prevent further transfers to foreign accounts. Euro bills which are already in circulation would be marked with stamps. The export of unmarked bills would be prevented at the borders. Within a short time, the drachma could be reintroduced.

If it gets that far, Marianna's clients want to be prepared. Like Christiana, she also works as an asset consultant at a Greek bank, And like Christiana, she does not want her real name to be used. Her clients are lawyers, doctors or top managers. "On average, they have between €200,000 and €300,000, which they can withdraw at any time," Marianna says.

Not unexpectedly, the local thieves have figured out what is going on too. And all that physical cash sitting in various homes is just too tempting:

Quite a few wealthy clients also tell Marianna that they are keeping their money at home. Many people are apparently doing the same thing. Greeks now have around €50 billion stashed at home, reports the Greek newspaper Ta Nea, citing the Greek Finance Ministry. Burglaries are increasing as a result. In Crete, they have gone up by 700 percent within two years. Burglars recently stole €50,000 in cash from a house of an old couple in Athens.

The crisis may now increase the social divide in Greece, just as it has done many times in recent years. While members of the upper class have long managed to stash their money in safe places, a possible currency reform and the subsequent devaluation would probably hit many low-income earners unprepared.

In retrospect, the threat of robbery may pale in comparison with the consequences of a coordinated global bank holiday:

Even a cosmopolitan woman like Joanna Stavropoulous has been overwhelmed in her attempts to come up with the right strategy. In 2010, as the signs of Greece's economic crash intensified, she moved her savings to a Spanish bank. Then Spain's economy got into trouble. She moved her money back to Greece -- until the next bout of bad news. She has paid more than €100 ($125) in bank fees alone, she says, due to the constant movement of her money.

When her daughter was born, Stavropoulos paid €12,000 for the birth, a sum that is not considered unusual in private Greek clinics. Now, she has barely any money left. She has now invested the last of her savings in foreign currency, hoping that they will hold their value if Greece returns to the drachma.

Yet the most ironic moment in the Greek denouement will come when fractional reserve lending collapses onto itself:

Stavropoulos and her friends have a new strategy to deal with their daily expenses. "We charge everything to our credit cards," she says. If the Greek banks fail, they won't be able to collect the outstanding debts, she argues. "If they want to mess me around, I will do the same to them."

In other words, Greece is now America, where the vast majority of people also live on credit alone, and have taken up the following motto when dealing with banks: "you pretend to be solvent, we pretend to have money."

At the end of the day, it is all just one big global monetary circle jerk, only this time in reverse, as the snake of fractional reserve banking has finally started to eat its own tail. With people spending money they don't have, and in debt to their eyeballs to a banking system that itself is just as insolvent, is there any wonder that nobody really panics any more over daily threats the grand reset is finally coming?

Greek Election Cheat Sheet

Zero Hedge,

16 June, 2012

Information surrounding the Greek Election, Courtesy of Global Macro Leverage Sales:

12:00 EDT/17:00 London Polls close

14:00 EDT/19:00 London – 15:00 EDT/20:00 London First official projection

17:00 EDT/2200 London Updated projections

19:00 EDT/24:00 London another updated projection

1:00 EDT/6:00 London (Monday) Final results expected

The outcome will be too close to call if the difference between the first two parties is less than 2%-3% with strong precedent of exit polls failing to predict the outcome when the race is tight.

Where can I follow the results?

• Official results are to be streamed onto the Ministry of Interior website (ekloges.ypes.gr).
• These results will NOT be an accurate representation of the final outcome. Numbers are fed through as they come in and this strongly biases the sample towards the rural regions in the early hours of counting.
• The Ministry of Interior will be releasing more reliable estimates of the final result on Greek TV - this will not be available on the website.
• The international press may also be reporting the unweighted "raw" results rather than the weighted sample - so, care needs to be taken in interpreting these results.

Who will win?

• Polls released before the blackout period pointed to a moderate lead for New Democracy over SYRIZA, but with a large number of undecided.
• The absence of a TV debate (talks on arranging that broke down one week ago) is likely to have worked in favour of New Democracy leader, Samaras.
• The Spanish bank recapitalization package has not had a major influence on the strength of the political discourse of either SYRIZA or New Democracy, merely strengthening both parties' calls for the need to re-negotiate.

What happens on Monday?

• In Greece, coalition talks will begin immediately.
• It is unlikely that any party wins a sufficient number of votes to form an independent government.
• A combined 35-40% of the vote (depending on how many parties cross the 3% threshold to enter parliament) is required to have a sufficient number of MPs (more than 150) to form a government.
• The party leader of the top three parties each has the right to attempt to form a government for three days.
• If these attempts fail, the President of the Republic convenes all leaders to try and generate consensus.
• If this fails, a third election will be called.

Will a government be formed?

• If New Democracy comes first, a government with PASOK (and possibly Democratic Left) will be formed in a relatively short period. Participation from the Democratic Left would be a positive as it would broaden the new government's democratic legitimacy and increase its stability.
• If SYRIZA wins, formation of a government would be more difficult. This would likely involve support or "tolerance" from one or more of the Independent Greeks, Democratic Left, PASOK and the Communists, in roughly that order of likelihood.
• Tolerance" would involve the parties abstaining from parliament during the confidence vote. Confidence vote can be obtained (subject to 120 being present in parliament) subject to a majority of MPs present voting in favour.