Posts
Greece
Just Lost Control Of Its Banks, And Why Deposit Haircuts Are Imminent
Greece: Protester burns Syriza flag after Tsipras accepts bailout programme
13
July, 2015
Yes,
Greek banks may have been insolvent - something that was clear since
the first bailout of 2010 - but
at least the Greek state had control over them: as
such it could have mandated mergers, recapitalizations, liquidity
injections, even depositor bail-ins (perhaps the harshest lesson for
the ordinary Greek population as a result of this latest crisis is
that deposits are not "cash in the bank" but liabilities of
insolvent financial organizations).
Starting
on Wednesday that will no longer be the case.
Because
while Greek banks will maintain their capital controls for months and
withdrawals will be limited to €60 or less for months (the ECB is
well aware that any boost to the ELA will result in a promptly surge
in deposit outflows until the new ELA ceiling is reached, and so
on ad
inf)
the one key change on Wednesday when the Tsipras government, whose
coalition no longer has a majority in parliament and will have to
rely on opposition votes, votes through the humiliating
Greek "pre-deal"
to unlock negotiations for
the promised €86 billion in bailouts (which will be used almost
entirely to repay the Troika) is that it will hand over the keys of
Greek banks to the ECB.
Here
is Reuters
with this
little known fact:
One of the preconditions imposed on Greece for a deal is that it signs into law Europeanrules that would put euro zone authorities at the ECB and in Brussels, rather than Athens, in charge of identifying and closing or breaking up sick banks.
This in turn could lead to a shake-up of the sector that could see some banks close, with losses pushed onto bondholders and possibly even large depositors. In such circumstances,there would be little that Athens could do to prevent this.
One European official had told Reuters that the number of big banks in the country could be reduced from four - National Bank, Piraeus, Eurobank and Alpha - to as little as two.
Keep
in mind the primary leverage the ECB had over the Greek government
was the hint that if only Greece agrees to the terms, the European
Central Bank just
may be
nice enough to ease ELA haircuts and eventually boost the ELA ceiling
to allow the phasing out of capital controls and permit Greeks access
to their savings.
This
will not happen.
Unfortunatley,
the moment the Greek government votes through the "deal"
required by Summit
document SN 4070/15,
the Greek government will not only hand over sovereignty to €50
billion of Greece's choicest assets to
some escrowed fund controlled by Belgium and designed to liquidate
Greek assets to repay the Troika, it
will also give up all control of the nation's €120 billion or so in
leftover personal and corporate deposits, also known as unsecured
liabilities.
And
since the banks are undercapitalized by at least €25 billion, and
realistically over €60 billion,
if one takes into account NPLs which at 50% are a
very optimistic estimate
for a country in depression for 6 consecutive years, the first
decision the ECB will do once it realizes the sorry state of
financial affairs in Greece is to do precisely what the government
could have done but did not have the guts when it still had control:
overnight it will out about 50% of Greek depositors.
In
other words, Greece
is about to hand over the keys to the only ting that is forcing it
to hand over the key.
Unfortunately
for Greece, there will be absolutely
nothing its
government can do to avoid this because on Wednesday, the Greek
government will vote to hand over its sovereignty to Europe for,
sadly, absolutely nothing in return.
Our
only question, one
we first asked in April,
is whether as part of the deal, the 112.5 tons of official Greek gold
will also be handed over to Frankfurt, Berlin or Brussels.
Recall back
in 2012:
Ms. Katseli, an economist who was labor minister in the government of George Papandreou until she left in a cabinet reshuffle last June, was also upset that Greece’s lenders will have the right to seize the gold reserves in the Bank of Greece under the terms of the new deal.
Since
this bailout has the most draconian terms yet, we wonder just what
the fate of Greek gold will be?
How
The Greek Deal Almost Collapsed At 6am In The Morning
13
July, 2015
What
began at Saturday's Eurogroup meeting as a contentious exchange
between EU finance ministers (who experessed their extreme
consternation at the projected size of a Greek ESM package which was
suddenly 43% larger than the figure from the Greek proposal thanks to
a €25 billion provision for bank recapitalization) nearly
ended in a Grexit, both figuratively and literally when,
at 6am Monday morning Brussels time, Greek PM Alexis Tsipras headed
for the door after discussions with Angela Merkel hit what both
leaders deemed to be an intractable stalemate.
Or
so the story goes.
The closest Greece has come to leaving the eurozone was at around 6am on Monday morning, just as dawn was breaking over Brussels.
Alexis Tsipras of Greece and Angela Merkel, the German chancellor, decided after 14 hours of anguished talks that they had reached a dead end. With no room for compromise, neither saw any reason to carry on. Grexit was the only realistic option.
As the two leaders made for the door it was Donald Tusk, the president of the European Council, who moved to prevent the fatigue and frustration from triggering a historic rupture for the eurozone.
“Sorry, but there is no way you are leaving this room,” the former Polish prime minister said.
The sticking point was the size and purpose of a privatisation fund to be backed by sequestered Greek assets. Ms Merkel wanted the €50bn of sales to be devoted to debt repayments; Mr Tsipras saw that as a national humiliation that would cede control of assets worth almost a third of Greek national income. His alternative was a smaller fund, whose proceeds would be reinvested in Greece.
A compromise was ultimately found after more than an hour discussing nearly a dozen different structures. It was to be the coda to a weekend that featured one of the most exhausting and fraught negotiations in a seemingly interminable crisis that has provided the EU’s sternest test.
Yes,
a "compromise" was found, and one which has undoubtedly
left the majority of Greeks wishing Tsipras had ignored Tusk and
simply announced to the world that the drachma was about to make its
not-so-triumphant return to the global FX markets because by sticking
around, the PM who came to Brussels with a clear mandate to lead his
country out of the euro "with his head held high" (to quote
Nigel Farage) left without €50 billion in airports,
planes, and infrastructure and
more importantly, without the collective pride of the Greek people.
Thanks
Donald Tusk.
Returning to Athens on Monday with a new deal for a bailout package that would keep Greece in the eurozone, Greek Prime Minister Alexis Tsipras is facing strong opposition to the agreement within his own government, as well as protests in the streets.
After long hours of talks on Sunday and Monday with eurozone leaders, Tsipras might have some more sleepless nights ahead, as now the Greek parliament needs to approve all of the laws implementing the reforms by an EU-imposed deadline of July 15 in order to receive billions of euros in aid.
5
key points in landmark Greek debt accord
RT,
13
July, 2015
Seventeen
hours of talks, more than five months of tough negotiations between
Greece and its international creditors… And a crucial accord seems
to be found. RT explains the deal and what is in store for Greece.
1-What just happened?
Greece
and the Troika of international creditors – the IMF, the ECB and
the European Commission along with the eurozone leaders have agreed
on a €80 billion plus bailout package over the next three years
which should put an end to fears of Greece leaving the euro.
2-What
are the details of the deal?
The
key point is that the agreement, worth about €82-86 billion, means
a Greek exit from the eurozone is no longer on the agenda.
In
more figures, Greece agreed to set up a €50 billion fund to repay
its debt, 50 percent of the fund will go to recapitalizing banks. The
deal also includes €35 billion investment from the European
Commission into the Greek economy.
On
the part of the EU, increased taxes, better sustainability of the
pension system, as well as scaled up privatization lay at the heart
of the requirements.
3-Why now?
The
Greeks voted ‘No’
to the proposals from the creditors in the national referendum on
July 5. This meant that Athens was closer to leaving the eurozone
than ever. So, the creditors decided to take emergency steps to avoid
the fear of a Greek exit would trigger a domino effect and mark the
start of the end of the currency union, as Spain and Portugal could
have followed the lead.
After failing to
pay its €1.6 billion debt to the IMF by the July 1 deadline, Greece
became the first eurozone country to default on its international
obligations. On the same day the second bailout deal for Greece
expired. Since 2010 the two aid packages for Greece are estimated to
be worth €240 billion. The ECB turned
down the
Greek request to expand emergency liquidity assistance (ELA) to its
lenders by €6 billion to tackle bank runs in the country. As a
result, banks in Greece have been closed since then and daily cash
withdrawals have been limited to €60.
4-What’s for Greece now?
Tsipras
acknowledged that the proposals are complex, but Athens avoided state
property transfer abroad, as well as financial strangulation and the
destruction of the financial system.
However,
banks are still closed,
the stock exchange is not functioning and the country is
cash-strapped with people only able to withdraw €60 a day.
Tsipras
and new Greek Finance Minister Euclid Tsakalotos still have work to
do to square the details of the deal. The Greek parliament has to
approve all the reform laws by July 15 in order to receive the aid,
according to Eurogroup President Jeroen Dijsselbloem.
5-What was the reason for the deadlock?
Greece
and its creditors had been failing to meet halfway for more than 5
months.
Prime
Minister Alexis Tsipras and his leftist Syriza party came to
power in January on promises to put an end to years of austerity
measures in Greece. The European negotiators demanded higher taxes,
raising the retirement age, reducing pensions and cutting Greek
military expenditures in order to lessen the €316 billion debt.
Tsipras and his then finance minister Yanis Varoufakis were hard to
budge in talks, and declined the proposals from creditors, calling
them “absurd” and “blackmail”.
The Greek government’s counterproposals were unacceptable to the
eurozone, as the lenders criticized them for lack of concrete
proposals.
After marathon talks to secure third bailout, Greek prime minister prepares for showdown with MPs opposed to deal described as harsher than Versailles treaty
If
Greece fails to find an agreement with its creditors, which demand
from the government in Athens more austerity measures, the rest of
the continent might be eventually be in danger of a “European
Spring,” Jean-Paul Mounier, a columnist for Boulevard Voltaire,
said.
A
new deal for Athens is the worst of all worlds and solves nothing
Like
the Neapolitan Bourbons – benign by comparison – the leaders of
the eurozone have learned nothing, and forgotten nothing.
The
cruel capitulation forced upon Greece after 31 hours on the
diplomatic rack offers no conceivable way out the country’s
perpetual crisis. The terms are harsher by a full order of magnitude
than those rejected by Greek voters in a landslide referendum a week
ago, and therefore can never command democratic assent.
They
must be carried through by a Greek parliament still dominated by MPs
from Left and Right who loathe every line of the summit statement,
the infamous SN 4070/15, and have only agreed – if they have agreed
– with a knife to their throats.
EMU
inspectors can veto legislation. The emasculation of the Greek
parliament has been slipped into the text. All that is missing is a
unit of EMU gendarmes.
Such
terms are unenforceable. The creditors have sought to nail down the
new memorandum by transferring €50bn of Greek assets to “an
independent fund that will monetise the assets through privatisations
and other means”. It will be used in part to pay off debts.
This
fund will be under EU "supervision". The cosmetic niceties
of sovereignty will be preserved by letting the Greek authorities
manage its day to day affairs. Nobody is fooled.
'1984'
Comes To Europe - The End Of Freedom Of Speech In Spain
13
July, 2015
Spain
has shown that it is fully on board with the Brussels authoritarian
direction of ending democracy. Those in power have simply convinced
themselves that the people do not understand what is good for them so
they must impose their will upon the people but raw force. How
does this differ in any what from the justification of imposing
communism? This
is the death of all freedom and it is upon our doorstep.
Here
are the new laws in Spain:
1.
If you photograph security personnel and then share these images on
social media: up to €30.000 fine (particularly
if photo exposes violence used against a member of the public). This
fine could increase depending on the number of Instagram or social
media followers you have.
2.
Tweet or retweet information or the “location of an organized
protest” can now be interpreted as an act of terrorism as
it incites others to “commit a crime” (now that “demonstrating”
in many ways has become a crime). Sound “1984”-ish? Read about
Orwell and his time in Spain.
3.
Snowden-like whistle blowing is now defined as an act of
terrorism. If
you write for a local publication, be careful what you print, whom
you speak to, and whether the government is listening.
4.
Visiting or consulting terrorist websites – even for investigative
purposes – can be interpreted as an act of terrorism. Make
sure you use “Tor” browser, reject cookies, and don’t allow
pop-ups. Not to mention, don’t post it on your Facebook timeline!
5.
Be careful with the royal jokes! Any
satirical comment against the royal family is a new crime “against
the Crown”. For example, “What did Leticia and the Bishop have to
say after they ––“ (SORRY CENSORED).
6.
No more hassling elected members of the government or local
authorities – even if they say one thing in order to be elected,
but then go and do the exact opposite. Confronting
them about this hypocritical behavior. Even if you see them in the
street chatting to a street cleaner, dining at their favorite
expensive restaurant, or having their shoes shined by that physics
graduate who cannot find a decent job in the country, hassling them
about their behavior is now a criminal offence.
7.
Has your local river been so polluted by that plastic factory along
the edge that all life has extinguished? Well, tough! Greenpeace or
similar protests are now finable from €601–€30.000.
8.
Protests in a spontaneous way outside Parliament are now illegal. For
example if Parliament passes a hugely unpopular bill, or are debating
something extremely important to you or your community, it is now
finable from €601 – €30.000. Tip: Use Google Maps to protest
just around the corner – but don’t tweet the location!
9.
Obstructing an officer in the course of their business, “resisting
arrest”, refusing to leave a demonstration when told, or getting in
the way of a swinging baton are all now finable offences from €601
– €30.000.
10.
Showing lack of respect to officers of the law is an immediate fine
of €100 – €600. Answering
back, asking a disrespectful question, making a funny face, showing
your bottom to an officer of the law, or telling him/her that their
breath reminds you of your dog’s underparts is now, sadly, not
advisable.
11.
Occupying, squatting, or refusing to leave an office, business, bank
or other place until your complaint has been heard as a protest is
now a €100 – €600 fine (no more flash mobs).
12.
Digital protests: Writing
something that could technically “disturb the peace” is a now a
crime.Bloggers
beware, for no one has yet defined whose peace you could be
disturbing.
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