Friday, 27 February 2015

The Greek crisis - 02/27/2015

Greece Warns It May Default On IMF Loan Next Week

26 Febraury, 2015

Now that the Greek tragicomedy of the new government "threatening" to leave the Eurozone if it doesn't get its way, has been postponed for a few weeks, if not months, we can go back to the biggest story involving Greece, one we first covered in October of 2014, when we said that Greece needs about €43 billion through the end of 2015 to cover its funding needs. Earlier today, the broader market finally woke up to precisely this problem for Greece, when MarketNews reported that Greek creditors are now contemplating a third bailout which could be as large as €30 billion.

Of course, the only "use of proceeds" of this bailout would be to cover prior financing obligations: maturities and interest on pre-existing debt. None would actually go to the Greeks themselves; however a third bailout would certainly come with even more draconian conditions and terms that would make the current Greek "austerity" measures seem like a walk in the park.

So now that the Greek topic is back to overall debt sustainability, a few hours ago Greece Kathimerini reported that the Euro Working Group "discussed Greece’s imminent funding problems on Thursday amid mounting concern about how the country will meet its obligations next months."

This follows a suggestion earlier in the day by the Greek Minister of State for Coordinating Government Operations Alekos Flambouraris that "Greece might delay payment to the International Monetary Fund if it cannot find the necessary money.

According to Kathimerini calculations, Greece is due to pay the IMF 1.6 billion euros next month but Flambouraris said that Athens might ask to delay this payment for two months. "Greece has a total of 7.27 billion euros in obligations next month of which 4.6 billion euros is in treasury bills that are due to be rolled over. The government’s first T-bill issue will have to take place by Thursday as 1.6 billion euros has to be rolled over the next day."

One possible solution is for the Troika, pardon, Institutions to raise the €15 billion limit on T-bill issues, a request which however the ECB has so far rejected.
But wait, how does a country "delay" a payment on a debt obligation, especially when it is due to the very IMF that has over the past year refused to even consider lending Greece any more money (apparently all of its spare cash goes to Kiev these days)?

Well, it doesn't. Back to Kathimerini which reports that "the possibility of Greece postponing the repayment of any debt tranches to the International Monetary Fund is seen as “exceptionally complicated” with “many obstacles,” according to officials familiar with the subject. They stress that such a move would constitute a “clear default,” with consequences for a large number of other loans Greece has received."

A delayed IMF loan repayment would generate multiple consequences, which market professionals estimate would have a negative impact on Greece and its economy, as when the Fund lends money to a country it is always the first to be paid back. If a country forfeits a repayment, this is considered a credit event, or default.

Wait, so, after all the drama of the past month, and all the posturing by the once-proud new Syriza government whose spine, leverage and confidence have since been crushed, Greece may actually have no money to pay the IMF with? Well, yes, because remember: the biggest problem - as explained yesterday - that has always faced Greece, is not its massive debt load, but the reason why Greece accumulated this massive debt load in the first place: its chronic inability to collect taxes!

Greeks consider taxes as theft,” said Aristides Hatzis, an associate professor of law and economics at the University of Athens. “Normally taxes are considered the price you have to pay for a just state, but this is not accepted by the Greek mentality.”

And that's the whole problem in a nutshell.

So when is the Greek drama set to make a surprise come back appearance?
Greece is due to pay the IMF 310 million euros on March 6, 350 million on March 13, 580 million on March 16 and another 350 million on March 20.

We suggest readers grab a seat and some popcorn on any of those days, because the inevitable day when Greece finally runs out of not just its own but other people's money, may arrive as recently as one week from today.

Full Circle: The First Anti-

Government Protest In 

Greece Turns Ugly

26 Febraury, 2015

Athens: first anti-gov’t protest by far-left ANTARSYA turns ugly

The first anti-government rally in Athens turned ugly as anti-authoritarian protesters started to smash the windows of a pastry shop and two jewelry shops and put two vehicles and several garbage bins on fire.

via @MakisSinodinos


According to latest information, there was no intervention by riot police although squads were standing near by.

Earlier KTG wrote:

The first anti-government protest has been launched in Athens on Thursday afternoon. A month after the left-wing/nationalist SYRIZA-Independent Greeks coalition took office, a week after the Eurogroup agreement in Brussels.

With anti-EU banners and red party flags, members of  Anticapitalist Left Cooperation for the Overthrow (ANTARSYA) took to the streets in downtown Athens to protest the extension of continuation of loan agreements and Varoufakis’ Reform List with “austerity measures.”

picture via @MakisSinodinos

ANTARSYA calls for defaulting on Greece’s debt, and nationalization without compensation of major industries, banning of lay-offs, the disarmament of the police, full political and social rights for immigrants.

Although ANTARSYA is not successful in parliamentary elections it does manage to  win seats in municipalities since 2010. In January elections, ANTARSYA received 39,411 votes (0.64% of the overall vote).

For tomorrow, Friday, the Greek Communist party KKE has called for a anti-government protest against austerity and the loan agreements. According to KKE, Varoufakis’ Reforms list contains “all the measures adopted by the capital,  the governments and the EU against the workers.”

In Greek Parliament KKE holds 15 seats.

KKE is against the €uro, the European Union, and against everything and everyone in general. It vehemently rejected any offer form SYRIZa for coalition government. It is the party of eternal opposition.

PS I f you ask me, when Nea Dimokratia and PASOK and Potami will launch anti-government protests all I can tell you: not for the time being.

Greece Suffers Biggest Bank 

Run In History: January 

Deposits Plunge To 2005 


26 Febraury, 2015

One of the biggest question marks surrounding the Greek negotiation and ultimately, bailout extension, was just how panicked was the Greek population and domestic corporations. Recall that as explained previously, the tension boiled down to this: the Troika did everything in its power to accelerate the bank run in order to crush any negotiating leverage Varoufakis may have; Greece on the other hand was desperate to make its cash drain appear far better than rumored.

Moments ago the Bank of Greece presented its latest, January, deposit data. And it's a doozy:following a record €12.2 billion monthly outflow, greater in absolute and relative terms thananything experienced during any of the previous Greek crises and bailouts, the total amount of Greek corporate and household deposits has now tumbled to just €148 billion, down 7.7% from the month before, and down 10% since November. This number is in line with some of the more pessimistic expectations, and brings the total cash holdings at Greek banks to the lowest level since August 2005.

What's worse is that the outflow has most certainly continued in February, when according to rumors another €10 billion or more may have been withdrawn. And while the new FinMin is desperate to make it seem that now that Greece has a can kicking bailout extension "deal" the bank run has stopped, this is very much in doubt.

One thing is certain: Greek banks, already crushed by record NPLs somewhere in the 40% range, and without any equity buffer, are now all, without exception, dead banks walking following this latest cash rush. And absent another bailout - one which S&P calculated in October will need to fund Greece with more than €40 billion in additional cash - and one which will come with even more draconian conditions, we simply don't see how Greece gets away from its current "self-reinforcing feedback loop" predicament without Cyprus-style capital controls.

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