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Greece could seek Russian, US, Chinese cash if Germany blocks new deal
10
February, 2015
Greece
warns that if informal EU leader Germany remains rigid on granting
Athens a new deal, it will seek assistance elsewhere. The US, Russia
and China are the possible candidates.
The
warning came from new Greek Defense Minister Panos Kammenos, who
assumed office after the populist Syriza party won a general election
in January and its leader Alexis Tsipras took over as prime minister
from Antonis Samaras.
"What
we want is a deal. But if there is no deal - hopefully (there will
be) - and if we see that Germany remains rigid and wants to blow
apart Europe, then we have the obligation to go to Plan B. Plan B is
to get funding from another source," Kammenos
told Greek television on an overnight show running into early
Tuesday, as reported by Reuters.
"It
could be the United States at best, it could be Russia, it could be
China or other countries," he
said.
Syriza
gained a plurality of votes thanks to its EU-skeptic platform and a
promise to oppose austerity measures imposed on the ailing
Mediterranean nation by the "Troika" of
foreign creditors in exchange for a debt bailout.
Kammenos
is not a member of Syriza, but comes from the Independent Greeks, an
ally in the coalition government. In the program he said his party
and Syriza had converging views on “80 percent of issues” and
that way of dealing with the debt is among those they agree on.
The
new Greek cabinet wants part of the national debt written off, a
demand that Germany has rejected. Athens also opposes some of
Brussels' policies, most notably the anti-Russian sanctions over the
Ukrainian crisis, which led to a painful trade war between Russia and
Europe.
In
the wake of Syriza’s victory, Moscow indicated that it may consider
offering a loan to Greece.
Greek
Foreign Minister Nikos Kotzias will visit Moscow on Wednesday to meet
his Russian counterpart Sergey Lavrov, the Russian embassy in Athens
reported on Tuesday.
Greek FinMin Varoufakis Warns "Be Ready For A Clash"
10
February, 2015
Germany's
Steinmeier reiterated that "Greece
needs to respect its bailout pledges," but
Greek Finance Minister Varoufakis told lawmakers that "the
post-bailout period for Greece begins today,"
warning that...
- *GREECE WON'T ACCEPT BAILOUT TERMS DEEPENING CRISIS: VAROUFAKIS
- *VAROUFAKIS: WE DON'T SEEK A CLASH, WE ARE AWARE OF PROSPECT
Demanding
a new loan contract with partners, Varoufakis concluded that Greece
"seeks an honest anti-bailout agreement." Not
what the EU wants to hear...
Varoufakis
added:
- *GREECE WANTS A NEW LOAN CONTRACT WITH PARTNERS, VAROUFAKIS SAYS
- *VAROUFAKIS: ONE SHOULD BE READY FOR CLASH IN ORDER TO NEGOTIATE
- *VAROUFAKIS: I WON'T PLAY GAME THEORY WITH GREECE'S FATE
- *GREEK FINANCE MINISTER SAYS 30 PCT OF BAILOUT IS TOXIC AND WE WILL REJECT IT
- *VAROUFAKIS: GREECE WON'T REJECT TAX SYSTEM REFORM
- *VAROUFAKIS: GREECE TO SEEK HONEST ANTI-BAILOUT AGREEMENT
The European view
The
REAL Greek Negotiations: Situation Is “Berserk", "There
Is No Plan", "Greeks Digging Own Graves"
Forget any conciliation: what is going on behind the scenes a day ahead of the Eurogroup meeting is nothing short of нdisaster.
“The Greeks are digging their own graves,” warns one EU official, according to MNI, with another exclaiming the Greek plan as “hopeless” and added “how can you have a plan when you make no payment obligation till the autumn and then you probably scrap that.” Simply put, speaking on condition of anonymity, an EU official described the situation as “berserk” adding “there is no pln.”
The carefully orchestrated dance between the new Greek government and its European creditors appeared to crack Tuesday, with top Brussels officials infuriated by what they see as wildly misleading claims coming from Athens.
...
A senior European official, who spoke on condition of anonymity, described the situation as “berserk” and said, “there is no plan.”
...
“The Greeks are digging their own graves,” the EU official said.
At the start of the Tuesday, Greece floated its latest funding plan via press leaks, including to the Kathimerini newspaper, proposing a bridge financing programme that would lead to a “new deal” with creditors from September onwards.
There were reportedly four parts to the new deal: 30% of the existing memorandum with the Troika will be cancelled and replaced with 10 new reforms agreed with the OECD; Greece’s primary surplus target would be cut from 3% of GDP this year to 1.49%; Greek debt would be reduced via an already announced swap plan; and the “humanitarian crisis” would be alleviated via policies announced by Prime Minister Alexis Tsipras Sunday.
...
The first official described the plan as “hopeless” and added “how can you have a plan when you make no payment obligation till the autumn and then you probably scrap that.”
An exchange between the new Greek finance minister Yanis Varoufakis and Europe’s representatives, Thomas Wieser and Declan Costello, on Sunday was not successful, according to a source with knowledge of the encounter. The source said the Greek side gave the impression that if the Eurogroup did not agree with its stance, then the creditors could “go to hell.”
...
“For the Eurogroup to just agree new liquidity puts an awful lot of faith in a new government, without knowing what’s planned,” he said. “The ECB has stopped support, the EFSF and ESM need programmes and bilateral loans would be hard to pass domestically.”
READ MORE HERE...
And
finally...
Meanwhile, the only advisor to the new Greek government, the investment bank Lazard, is not seen as playing a positive role by the EU side to date.
One EU official described the Lazard bankers as “incompetent” and “counterproductive.”
Compromise?
Meanwhile,
we may have just hit peak trial balloons. Too bad the ECB can't
monetize those when it runs out of Bunds to buy.
Commentary from Zero Hedge
How Fast Would Contagion Spread If Greece Exits The Eurozone
10
February, 2015
Perhaps
the most curious aspect of this, third, Greece ""exit
crisis, is just how completely unnoticed it has gone by the capital
"markets", or rather non-Greek capital markets. Which,
considering the changed dynamics of the negotiations, was to be
expected. As explained
again earlier,
this time around it is imperative on the central planning regime to
keep stocks and bonds as stable as possible heading into tomorrow's
negotiations with Greece, because should global risk not bat an
eyelid, it will mean that Greek leverage is
non-existent as the "market" (which courtesy of central
banks no longer really exists) does not anticipate any contagion, and
is why the S&P has actually been surging in the past week.
There
are two problems with this, as UBS
laid out yesterday:
1) (lack of) risk no longer reflecting reality doesn't make sense and
2) "Breaking the deadlock" in negotiations voluntarily may
not be easy, "hence, outside pressure—in the form of financial
and market dislocations—seems necessary to focus minds."
However,
as we noted
yesterday,
point 2 is only relevant for Europe: Syriza, and largely Greece, no
longer cares what the stock market does:
only the Eurozone does (and as long as the ECB is there to backstop
it in any case, the European "market" isn't going
anywhere). If anything, the only concern of the Greeks is what
happens to bank deposits, although by this point anyone who would
have pulled their money from the bank already has.
Which
means that once again, thanks to central bank intervention, the
discounting process is broken, and has been skewed to reach a
specific political outcome. However, in the worst case scenario - one
in which Greece does exit the Eurozone - it will simply mean that the
moment of reality has been at best postponed. And the moment when the
can kicking ends and reality can no longer be avoided is the
millisecond after Greece announces it has quit the Eurozone.
What
happens then is why UBS has dedicated an entire section to the
contagion risk which is now being thoroughly masked by central bank
intervention, and which will only emerge, and with a vengeance,
if the worst case does indeed transpire. Needless to say, when it
emerges it will be fast.
Here
is how UBS believes a Greek Eurozone contagion will play out:
The
contagion risk of a euro exit reflects the fact that there is a
meaningful risk that other countries would join Greece in leaving the
euro. The euro is patently not an optimal currency union at the
moment, which gives economic momentum to the idea of a broader
fragmentation.
Whether
other countries leave the euro is contingent on two questions with
binary outcomes:
- Do bank depositors think that their country could leave the euro?
- Does the euro area guarantee the integrity of the banking system?
A
"double lock" is required to prevent contagion. An
assurance that bank deposits are guaranteed by the ECB is completely
worthless if the general public believe that the country is going to
leave the Euro.
If one believes that one's country may leave the euro, then what the
ECB does or does not do will no longer apply within one's
country, and
so it is rational to withdraw one's money sooner rather than later.
The parallel here is to the Czech and Slovak monetary union break-up
in 1993; the governments both assured the public that the monetary
union would stay and their savings were safe, but the public did not
regard these statements as credible and so removed their savings from
banks. The
process became self-fulfilling as the extent of deposit flight
contributed to the governments being forced to break their promises
and end the monetary union.
If
on the other hand, the authorities (in this case the euro area
governments and the ECB) demonstrate so strong a commitment to the
integrity of the remainder of the euro that they convince depositors
that their money is safe, then there is no motivation to withdraw
money from the banking system of a country as the assertion that
depositors will be protected has validity. The parallel here is the
US monetary union fragmentation and reforming between 1932 and 1933.
The statements of the Federal government were not believed (and the
monetary union fragmented) until what has been referred to as the
"one, two punch" of a closing of the entire banking system
and a "fireside chat" from the newly inaugurated President
Roosevelt. The scale of the emergency banking legislation was seen as
sufficient to guarantee the integrity of the system.
It
is very difficult for governments to control the progress of a
monetary union break-up because the example of one country exiting
will create a precedent in the eyes of other members of the monetary
union.
The transmission channel is not government bonds, nor equities, not
currency markets, but
banks.
In the event of a Greek exit from the euro, the
loss in the real value of Greek bank deposits would encourage bank
depositors in other countries to withdraw their funds. This
is not a question of bank solvency in these other countries – just
as deposit withdrawal from Scottish banks ahead of the Scottish
referendum in 2014 was presumably not motivated by questions of
solvency. Rather the motive is the perception of risk around what
currency one will receive in exchange for one's deposit in the
future, and what that currency will buy relative to what it can buy
today.
The
process can be very rapid indeed.
In
its 1933 report the US Federal Reserve commented, with commendable
understatement, that at the start of the year "In addition to
currency hoarding, there were substantial transfers of deposit
accounts from banks in which depositors had lost confidence to other
institutions, involving in many cases the shift of funds from one
section of the country to another."
Nevada
was the first state to declare a bank holiday on 31 October 1932. The
contagion was initially quite slow, but then accelerated – on 4
February 1933 Louisiana joined in, and then on 14 February Michigan
declared a four-day holiday and then extended it. Michigan's actions
are regarded as the tipping point for contagion.
Less than a fortnight later a bank holiday was declared in Maryland.
On 1 March 1933 four states declared holidays, another six declared
on 2 March, another seven on 3 March, and five (including New York)
on 4 March 1933. On 6 March 1933 the national banking system was
closed by Presidential order.
In
the case of the euro area it seems unlikely that the current,
incomplete banking union and non-existent fiscal union would
be sufficient to prevent the contagion of bank runs spreading to
other countries in the wake of a Greek exit from the euro.
The starting point is that other countries are at risk of departure
in response to a Greek exit. If
the political status quo is maintained, it has to be thought likely,
maybe probable, that Greece will not be alone in exiting the euro.
It would be irrational for depositors to gamble their life savings if
they believe that there is even a 5% chance that their country could
leave the Euro. A
5% chance of a 60% loss in the value of one's savings (assuming a
Greek parallel) would make the effort of withdrawing or transferring
funds worthwhile. As with the deposit withdrawal within Greece, once
the first spark of fear has been ignited the conflagration of
contagion is likely to spread very rapidly.
The
issue is whether, subsequent to those strains emerging, new policy
initiatives from the euro area would be sufficient to change
perceptions around the credibility of the political will to defend
the integrity of the euro. Unlimited
support from the ECB to euro area banks, large-scale debt
monetisation and euro area fiscal confederation would be the sort of
policies that could change the perception of credibility.
All, of course, come at a cost. One metric to measure the success of
such policies might be analysis of the contagion not of bond or other
financial markets, but of household sight deposits at banks. The
correlation of the change in Greek deposits with the changes in sight
deposits in some other peripheral countries has also been high in the
past (notably in the wake of 2008 and in the wake of the first wave
of concerns about membership of the euro area). While the
correlations of deposit change are generally quite low, they are
rising. Correlation is not causation, and there are many other
factors (including overall economic performance) that can encourage
such a correlation, but this fact does rather emphasise the risks.
The
rise of European anti-establishment political parties in recent years
has, perhaps, increased the risk of a more widespread contagion to
other financial systems. Deference to authority, and particularly to
authority within Europe, has diminished. Official assurances of the
"irrevocable" monetary union (except for Greece) would
likely carry less weight. The
fact that anti-establishment parties have (to generalise) tended to
draw support from lower skilled, older voters may further compound
the problem. This economic demographic is less able to adjust their
savings so as to hedge break-up risk (making physical cash the main
option), and as an older age cohort they are more likely to have
savings that are vulnerable.
This
then adds an entirely unpredictable element to the Euro area cost of
a Greek exit from the euro.
The direct costs can be calculated, and an intelligent approximation
of the costs of increased risk can be factored in. However, if the
break-up of the union expands, the direct costs expand exponentially
(because the costs of the Target 2 system increase, and the costs of
recapitalising for the remaining members increase, and the costs of
financial system exposure increase). The
transmission of fear may not be to the most obvious of candidates of
course – this is not a question of solvency or of economics. If a
Greek exit from the euro leads to other countries exiting,
it will be the lack of plausibility of policy makers that generates
the collapse.
* *
*
Which
is precisely why Syriza is still, in this late 11th hour, maintaining
its uncompromising position in hopes that Europe finally grasps that
the downside risk from a Grexit is far, far greater than the downside
from appearing weak and caving to one peripheral nation. It remains
to be seen if Europe agrees with this, although following today's
seesaw rumor-induced action, it appears that the standoff may well
end without any agreement.
Yanis Varoufakis retweeted
Yanis Varoufakis im Interview (engl. Originalton) | tagesschau.de http://www.tagesschau.de/multimedia/video/video-60403.html … #vinb
tagesschau
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