More On Greece And More QE

From http://truthingold.blogspot

One of the biggest issues in Europe at the moment is whether or not Greece will exit, or be allowed to exit, the EU.  My view is that the massive bailouts that have been going on globally since 2008, starting with the massive taxpayer bailout of the big U.S. banks, are about saving the banks and not about saving countries. Because of this, I would argue that Greece will be kept in the EU family and the financial systems in Spain/Italy/France/England/U.S. will be re-monetized, likely in that order.

But let’s look just at Greece for a moment.  It has been estimated that the big banks have around $60-70 billion in derivatives exposure to Greece.  The “net” exposure is supposedly around $3 billion.  Of course, we are now seeing with the JP Morgan derivatives meltdown going on that the “net” number reported by banks and widely accepted by regulators and institutional investors is not to be trusted.

I think it’s probably fair to estimate that, in a chaos, “2-sigma” scenario, that the likely “net” exposure to Greece via derivatives is at least 50% of the notional.   Mind you, this estimate rests on the viability of the counterparties who have issued payment guarantees in the event of default being able to stand up their side of contract.  This is not a given.  But let’s go with 50% for the sake of running a “stress test” (note:  a realistic stress test as opposed to the Fed’s fraudulent version of a stress test – see JP Morgan for more proof the Fed is full of shit).

Now let’s run through the math if Greece leaves the euro.  If this happens, Greece would reinstate the drachma as its currency, which would then start trading against all other fiat currencies (plus gold) in the world forex market.  It has been estimated that a new drachma would likely trade at about 30-40 cents vs. euro, so roughly 38-50 cents vs the dollar.  Now,  what happens to the value of a credit default swap on Greek debt that was denominated in euros but is now denominated in drachmas, because Greece would now be paying those debt claims back in devalued drachmas?

For the sake of argument, let’s say banks which are the largest underwriters of credit default swaps have 90% of the exposure to Greek credit default swaps.  This is actually a quite realistic assumption per the quarterly BIS report on OTC derivatives, with JP Morgan by far the largest underwriter of these instruments.  This would mean that U.S. banks likely have gross derivatives exposure $45-63 billion in Greek credit default swaps.  If Greece were to revalue and repay its debt claims using drachmas, it would mean that the big banks like JP Morgan would potentially be on the hook for their ratable share of $22-32 billion in credit losses.

Greece will run out of money in ‘a few weeks’ says former Prime Minister George Papandreou [arabianmoney]

After the Spanish banking bailout drama the action now swings back to Greece for the election this weekend. Former Prime Minister George Papandreou tells Bloomberg TV’s Sara Eisen that Greece has ‘a few weeks’ before its government runs out of money and that this is a ‘make or break’ period.

What a classic understatement: Greece is going down and wants to pull the whole global financial system down with it. In short, the message is save us or you destroy your system. It is this sort of blackmail and subterfuge that has gotten Greece into such a horrendous mess.

Read more  – Video

Max Keiser and Hugo Salinas Price on Sunny TV – Athens, Greece



Save us from the saviours


Slavoj Žižek  on

Imagine a scene from a dystopian movie that depicts our society in the near future. Uniformed guards patrol half-empty downtown streets at night, on the prowl for immigrants, criminals and vagrants. Those they find are brutalised. What seems like a fanciful Hollywood image is a reality in today’s Greece. At night, black-shirted vigilantes from the Holocaust-denying neo-fascist Golden Dawn movement – which won 7 per cent of the vote in the last round of elections, and had the support, it’s said, of 50 per cent of the Athenian police – have been patrolling the street and beating up all the immigrants they can find: Afghans, Pakistanis, Algerians. So this is how Europe is defended in the spring of 2012.

The trouble with defending European civilisation against the immigrant threat is that the ferocity of the defence is more of a threat to ‘civilisation’ than any number of Muslims. With friendly defenders like this, Europe needs no enemies. A hundred years ago, G.K. Chesterton articulated the deadlock in which critics of religion find themselves: ‘Men who begin to fight the Church for the sake of freedom and humanity end by flinging away freedom and humanity if only they may fight the Church … The secularists have not wrecked divine things; but the secularists have wrecked secular things, if that is any comfort to them.’ Many liberal warriors are so eager to fight anti-democratic fundamentalism that they end up dispensing with freedom and democracy if only they may fight terror. If the ‘terrorists’ are ready to wreck this world for love of another, our warriors against terror are ready to wreck democracy out of hatred for the Muslim other. Some of them love human dignity so much that they are ready to legalise torture to defend it. It’s an inversion of the process by which fanatical defenders of religion start out by attacking contemporary secular culture and end up sacrificing their own religious credentials in their eagerness to eradicate the aspects of secularism they hate.

But Greece’s anti-immigrant defenders aren’t the principal danger: they are just a by-product of the true threat, the politics of austerity that have caused Greece’s predicament. The next round of Greek elections will be held on 17 June. The European establishment warns us that these elections are crucial: not only the fate of Greece, but maybe the fate of the whole of Europe is in the balance. One outcome – the right one, they argue – would allow the painful but necessary process of recovery through austerity to continue. The alternative – if the ‘extreme leftist’ Syriza party wins – would be a vote for chaos, the end of the (European) world as we know it.

The prophets of doom are right, but not in the way they intend. Critics of our current democratic arrangements complain that elections don’t offer a true choice: what we get instead is the choice between a centre-right and a centre-left party whose programmes are almost indistinguishable. On 17 June, there will be a real choice: the establishment (New Democracy and Pasok) on one side, Syriza on the other. And, as is usually the case when a real choice is on offer, the establishment is in a panic: chaos, poverty and violence will follow, they say, if the wrong choice is made. The mere possibility of a Syriza victory is said to have sent ripples of fear through global markets. Ideological prosopopoeia has its day: markets talk as if they were persons, expressing their ‘worry’ at what will happen if the elections fail to produce a government with a mandate to persist with the EU-IMF programme of fiscal austerity and structural reform. The citizens of Greece have no time to worry about these prospects: they have enough to worry about in their everyday lives, which are becoming miserable to a degree unseen in Europe for decades.

Such predictions are self-fulfilling, causing panic and thus bringing about the very eventualities they warn against. If Syriza wins, the European establishment will hope that we learn the hard way what happens when an attempt is made to interrupt the vicious cycle of mutual complicity between Brussels’s technocracy and anti-immigrant populism. This is why Alexis Tsipras, Syriza’s leader, made clear in a recent interview that his first priority, should Syriza win, will be to counteract panic: ‘People will conquer fear. They will not succumb; they will not be blackmailed.’ Syriza have an almost impossible task. Theirs is not the voice of extreme left ‘madness’, but of reason speaking out against the madness of market ideology. In their readiness to take over, they have banished the left’s fear of taking power; they have the courage to clear up the mess created by others. They will need to exercise a formidable combination of principle and pragmatism, of democratic commitment and a readiness to act quickly and decisively where needed. If they are to have even a minimal chance of success, they will need an all-European display of solidarity: not only decent treatment on the part of every other European country, but also more creative ideas, like the promotion of solidarity tourism this summer.

In his Notes towards the Definition of Culture, T.S. Eliot remarked that there are moments when the only choice is between heresy and non-belief – i.e., when the only way to keep a religion alive is to perform a sectarian split. This is the position in Europe today. Only a new ‘heresy’ – represented at this moment by Syriza – can save what is worth saving of the European legacy: democracy, trust in people, egalitarian solidarity etc. The Europe we will end up with if Syriza is outmanoeuvred is a ‘Europe with Asian values’ – which, of course, has nothing to do with Asia, but everything to do with the tendency of contemporary capitalism to suspend democracy.

Here is the paradox that sustains the ‘free vote’ in democratic societies: one is free to choose on condition that one makes the right choice. This is why, when the wrong choice is made (as it was when Ireland rejected the EU constitution), the choice is treated as a mistake, and the establishment immediately demands that the ‘democratic’ process be repeated in order that the mistake may be corrected. When George Papandreou, then Greek prime minister, proposed a referendum on the eurozone bailout deal at the end of last year, the referendum itself was rejected as a false choice.

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HSBC Tests Cash Machines in Athens for Drachmas [greekreporter]


HSBC has tested its cash machines in Greece to check whether they could cope with the reintroduction of the drachma if the country drops out of the euro. It is the clearest sign yet that the international financial sector believes Greece is on the brink of quitting the single currency and returning to its former currency.

An HSBC spokesman said, “Like all banks, we have been working with regulators to undertake preparatory work at multiple levels in the event of a sovereign default, an exit from the euro, or any other eventuality.”

Banking sources noted that it was the fear that Royal Bank of Scotland customers would not be able to withdraw their money from ATMs that marked the high point of the financial crisis in Britain in 2008 when the Government intervened to prop up RBS and the rest of the banking sector.

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Food Shortage in Peloponnesian Prisons Due to State Budget Cuts


Amidst the deepening financial crisis, the state budget for many prisons has decreased to a minimum for some months now resulting in hundreds of detainees being malnourished and literally surviving on the charity of local communities, aProto Thema article reveals.

The latest example is the prison in Corinth where there’s a supply stoppage from the nearby military camp, and prisoners are about to starve reports prison staff, since not even one grain of rice has been left in their warehouses. The prison staff reports they haven’t received any state funds for the last three months.

A few days earlier, the commander of the camp announced to prison management the transportation stoppage, citing lack of food supplies even for the soldiers, and had shut down the last source of supply for 84 prisoners. The response of some Corinth citizens was immediate as they took it upon themselves to support the prisoners, since all protests to the Justice Ministry were fruitless.

In the past few days, groups of Corinth residents have started collecting food as a small token of solidarity and respect to people who may be denied certain rights by the justice system.

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EUROBLOWN BREAKING….Greece heading for second stalemate as prisons run out of food [The Slog]


New opinion polls in this morning’s Greek press have New Democracy and Syriza still way ahead, and Pasok stuck at slightly above its vote last time.

The figures look like this:

5 ND 23,4%, SYRIZA 22,1%, PASOK 13,5%, INDGR 7,4%, ΚΚΕ 5,9%, DEMLEFT 5,1%, Neo Nazis 4,2%.

Still, Berlin-am-Brussels can take some cold comfort in that 54,2% of respondents say the country should ‘accept implementation of the bailout schedules’ as a precondition in order to stay in the eurozone. This does, however, give the lie to German tabloid hysterics insisting that the Greeks want it every which way.

But the obvious news in bold black type is that Athens will be without any clear sight of a ruling Coalition on June 18th. Although the way things are going, byt then the whole exercise might by academic anyway: I’m not usually a great supporter of non-political prisoners’ rights, but amidst the deepening Greek crisis, the State budget for many prisons has shrunk to a bare minimum. Hundreds of detainees are malnourished, the Greek newspaper Proto Thema reveals this morning.

At the prison in Corinth, food supplies have stopped completely, so their charges are about to starve say prison staff,…

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Economists React: What Happens If Greece Leaves Euro Zone? [WSJ]

By Katie Martin and Laura Clarke from

The prospect of Greece leaving the euro is the only thing anyone is talking about in the markets at the moment. It even has its own nickname: Grexit.

Nothing is certain here; Greece may or may not leave, and there’s a huge range of potential policy responses. So, making allowances for some guesswork, here’s a rundown of the latest on some economists’ and analysts’ views on what could happen next.

CAPITAL ECONOMICS: “Leaving the euro zone could indeed be the only way for these countries to avoid a sustained and damaging period of deflation [and] an exit and devaluation would result in a significant and lasting boost to a departing country’s competitiveness, potentially kick-starting an economic recovery.”
The repercussions if Italy and Spain left would be immense, causing another deep recession. But for Greece, and possibly for the rest of the currency bloc, the advantage of regaining full control of monetary and fiscal policy is likely to outweigh the costs. “After a partial breakup, euro-zone policy makers may feel less need to set an example for weaker countries that have left, perhaps prompting looser monetary and fiscal policy. It may eventually result in all the existing euro-zone economies staging stronger and more balanced growth than if the euro zone remained intact.”

DEUTSCHE BANK: Amid all the concern about Greece leaving the euro altogether, Deutsche Bank suggests another path: introducing a parallel currency, which it nicknames the “Geuro,” to run alongside the remaining common currency. Leaving the euro altogether would cause economic, political and social chaos, the bank says, whereas a parallel currency would give the authorities “the power to stabilize the exchange rate of the Geuro…so as to keep the door open to a future return.”
Rather than a clear-cut and fully voluntary process, Deutsche Bank thinks that a Greek exit would emerge as the unwanted conclusion of a series of micro-decisions on the austerity package, bank recapitalization and the role of the European Central Bank.
In the long run, Greece could be better off out of the euro area, but the change to another currency regime would be extremely painful for the country in the nearer term, with a contraction in the economy and in disposable income worse than was seen in Russia and Argentina. Containing the damage from a euro exit would require swift action and a capacity for policy coordination that has seldom been seen since the beginning of the crisis.

JP MORGAN: There’s now a 50% chance of Greece leaving, up from 20% before the country’s politicians failed to produce a coalition government. Regional unemployment could be higher than “anything seen in the past half-century.” In terms of policy responses “the euro-system’s direct exposure appears manageable in the context of large revaluation gains but if losses exceed the readily available buffer, euro-zone sovereigns may be called upon to make immediate capital injections.”
Among the paths it lays out from here, the “chaos scenario” for JP Morgan goes as follows: “outright victory by the Radical Left or significant influence in a coalition and declaration of a debt moratorium, which the ECB/International Monetary Fund/European Union troika would respond to by ending the financing program and denying Greece access to ECB borrowing. If Greece then introduced the drachma, EUR/USD would probably decline to 1.10 due to widespread capital flight from the region. If instead the government backtracked and re-engaged the troika given that 80% of the electorate favors retaining the euro, the currency would stabilize around 1.20.”
A Greek departure is likely to be disruptive and disorderly, pushing the euro to around $1.15-1.10 against the dollar and causing a 2% drop in euro-zone gross domestic product.

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Lagarde does not pay income taxes

Google translation

Having incurred the wrath of the Greek people that it calls to pay his taxes, the Executive Director of the IMF is at the heart of a controversy based on their specific tax status as international civil servants.

New outcry for Christine Lagarde. Three days after he shocked the political establishment by urging Greeks to pay taxes, the Executive Director of the International Monetary Fund suffers lightning ranks.

Most complain that the former Minister of Economy, who currently earns 380,939 euros per year, pays no income taxes.The explanation is given by the Vienna Convention on Diplomatic Relations from 1961: as an official international, Christine Lagarde benefit of a specific tax status. Article 34 states that “diplomatic agent is exempt from all dues and taxes, personal or real, national, regional or municipal.”

However, the article adds that the diplomatic agent is liable for certain other taxes such as “taxes on private immovable property situated in the territory of the receiving State, unless the diplomatic agent holds it on account of the sending State for the purpose of the mission. “

The Foreign Ministry said that this specific tax status also benefits the leaders of international institutions like the International Atomic Energy Agency, the World Health Organization, UNESCO or the International Bank for Reconstruction and Development. European officials have also in part of this tax benefit. Find this article on


Capital Controls Coming to Greece and Switzerland [Zerohedge]

A few weeks ago I wrote about my conversation with a friend in Athens  (Link). At the time, he believed that the June 17 election would bring a different result than the May 6 election disaster – the catalyst for change being the fear of leaving the Euro. So far he has been proven right. So I called to get an update.



BK – It seems you might be right. The polls from Greece this weekend have given the European markets a lift today. Do you still believe that the centrist parties will win sufficient votes to form a coalition government and avoid a catastrophe?

Athens – Only a fucking idiot would invest money based on these polls.

BK – Are the polls not correct?

Athens – The European leaders have scared the Greeks with their talk about throwing Greece to the wolves. So yes, I think that the fringe on the extreme left and right will not get as many votes as they did on May 6. But Syriza (anti-bailout) has gained votes. The election is a complete crapshoot.

It may not matter. It’s not certain that Greece can make it to June 17 without a crisis.

BK – Explain that.

Athens – There is no money left in Greece. In the first two weeks of June, the government and the banks will face a huge cash squeeze. Everyday more money leaves as depositors withdraw cash and transfer money out of the country.

It’s clear to everyone who lives here. Greeks are not stupid. Either exchange controls happen before the election, or they happen immediately after. The election will not change that either way.

BK – What do you mean by “exchange controls?”

Athens – A ban on money transfers out of the country. Limits on the amount of cash that can be withdrawn from a bank or ATM.

BK – What are the odds that this happens before June 17?

Athens – The election is now twenty days away. For Greece that is a very long time. If the Europeans wanted to send a message to Greece, they would stop the emergency lending. So I would say it’s 50-50 that we see some measures before the election .

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Greek Misery: Looted, suicidal, desperate

Greece debt creating healthcare crisis, warn chemists [The Guardian]

Greek public insurers’ inability to pay bills combined with worsening shortage of prescription drugs is causing panic

Greece's pharmacies


Greece is on the brink of a severe healthcare crisis as shortages of medicines are exacerbated by panic among patients unable to get cancer or cardiac drugs, pharmacists have warned.

The insolvent country’s worsening liquidity has led to public insurers being unable to pay bills and prescription drugs running dangerously low, say chemists. On Wednesday, the sector staged a one-day strike to highlight the “emergency situation”.

“I give it 15 days. If the European Union doesn’t release the loans it has promised by then, there will be scenes of utter chaos here,” said Dimitris Karageorgiou, secretary general of the Panhellenic Pharmaceutical Association.

“The situation will become dramatic. Already we have cancer sufferers going from hospital to hospital to try and find drugs because no one can afford to stock them,” he said. “If the shortages get worse, God knows what we will see.”

The effects of the twice bailed-out nation’s internationally mandated scramble to rein in runaway public debts have been felt across the board in the last month as concerns have grown over Athens’ ability to remain in the eurozone.

“In that time 120 pharmacies have closed in Athens alone because of pressures from delays in payments for prescriptions from social security funds,” said Karageorgiou. “Whatever you read about shortages is little. There are about 300 medicines that are no longer readily available. It’s tragic.”

Seated in her pharmacy in Plaka, the ancient district beneath the Acropolis, Mary Papazoglou said shortages ranged from antibiotic creams to thyroid and heart drugs.

“The situation with anti-cancer drugs is out of control but what can we do?” she said. “Because we’re not being reimbursed we can’t pay suppliers who can’t pay the companies. It’s a chain effect.”

Under pressure from its “troika” of international creditors at the EU, European Central Bank and International Monetary Fund, Athens amalgamated 13 social security funds into one body – the National Organisation for Healthcare Provision (EOPYY) – after being first propped up with rescue loans in May 2010.

But the pharmaceutical association, with 12,000 members, says the funds were unified “so violently” in the space of a year, with donations either not forthcoming or drying up completely, that NOPF quickly collapsed.

A fifth straight year of recession, which will have seen the Greek economy contract by around 27% by the end of 2012, had also had a devastating effect, said Karageorgiou.

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Ahead of the Euro Area Summit – The Pressure Mounts [acting-man]


More on the Greek Banking Calamity

Rumors have been making their way over the wires on Tuesday that the four largest Greek banks will receive € 18 billion in the form of ‘EFSF bonds’ on Friday in a first tranche of the recapitalization effort that is part of Greece’s latest bailout deal. The report was updated several times during the day, until Friday had morphed into ‘perhaps Wednesday’.  Below is an excerpt of the report as it appeared at Reuters:

„Greece’s bank stability fund approved an 18 billion euro ($22.96 billion) injection to rescue its four largest banks on Tuesday, and an official said they would get the urgently needed funds as soon Wednesday.

Bankers say the recapitalisation will allow them to again receive funding from the European Central Bank (ECB), which cut off some Greek banks last week because they lacked enough capital to be considered solvent.

Huge losses from a sovereign debt swap in March nearly wiped out the capital of Greece’s systemically important banks and Greek authorities are scrambling to wrap up a bridge recapitalisation to help them cope with a cash crunch.

The Hellenic Financial Stability Fund (HFSF) said it had approved an agreement to release the funds, which will come in the form of notes issued by the euro zone’s financial rescue fund, the European Financial Stability Fund (EFSF). The HFSF statement said the deal would be presented to the Greek banks for signing on Wednesday, and an HFSF official said the funds would be released as soon as it was signed.

Recapitalising Greece’s limping banks is a vital part of the 130-billion-euro EU and International Monetary Fund bailout Greece agreed in March to stave off national bankruptcy.

But with Greece lacking an elected government after an inconclusive vote on May 6, implementation of the deal is largely on hold. With details of the overall 50-billion euro recapitalisation plan for the banks still unresolved due to political deadlock, authorities have come up with an interim solution to keep the four biggest banks afloat until a new government is formed to finish the framework.

Greece will hold a repeat election on June 17, and opponents of the March bailout agreement have surged in opinion polls, alarming European leaders who say that if the bailout is rejected at the ballot box Greece could face swift bankruptcy and economic collapse.

Greeks have been withdrawing their funds from banks for months, and the pace has picked up dramatically since the May 6 vote. That has forced Greek banks to cover their funding gaps by tapping liquidity from the ECB and the Greek central bank’s more expensive emergency liquidity assistance (ELA) window against collateral.

They already had borrowed 73.4 billion euros from the ECB and another 54 billion from the Bank of Greece via ELA, based on the most recent data as of January.

Together, the sums translate to about 77 percent of the banking system’s household and business deposits, which stood at about 165 billion euros at end-March.

Last week the ECB suspended some Greek banks from its funding operations because their capital was too low, forcing them to migrate to higher-cost funding at the Bank of Greece’s ELA facility.“

Evidently the ECB has stopped its open market operations with Greece’s banks due to their lack of acceptable collateral some time ago already. This has left the ELA (‘emergency liquidity assistance’) program as the sole funding tool, which is administered by the national central banks (NCB’s) in the euro system and requires the ECB’s placet. As might be imagined, the collateral eligibility criteria for the ELA program are significantly below the already quite generous rules employed at the central ECB level.

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ECB halts liquidity to some Greek banks [Martin Cole + chicagotribune]


So when will bank deposits start to be run down in other weakened eurozone nations, such as portugal and Ireland then presumably leading to Italy and Spain?

Are those in charge in the EU making decisions such as that reported in this posting’s headline, as confirmed in the Chicago Tribunelinked here, really aiming to bring chaos across the entire EU? – Martin Cole


Workers maintain the huge Euro logo in front headquarters of ECB in Frankfurt


BERLIN/FRANKFURT (Reuters) – The EuropeanCentral Bank has stopped providing liquidity to some Greek banks as they have not been successfully recapitalized, the ECB said on Wednesday, confirming news earlier reported exclusively by Reuters.

The news sent the euro lower against the dollar, fanning concerns among investors and in Greece that the country may have to leave the euro zone.

The development highlights the weak state of the banking sector in Greece, where Greeks are pulling euros out of the banks in fear that their country may exit the European single currency despite the declared determination of EU powers Germany and France to keep Athens in the monetary union.

“As recapitalization wasn’t in place, the ECB stopped monetary policy operations,” a euro zone central bank source told Reuters, declining to be identified. “They are now in the ELA of the Greek central bank.”

The ECB only conducts its refinancing operations with solvent banks. Banks which fail to meet strict ECB rules but are deemed solvent by the national central bank (NCB) concerned can nonetheless go to their NCB for emergency liquidity assistance (ELA).

The sources did not name the banks concerned.

An ECB official later added: “Pending the recapitalization of Greek banks that are severely undercapitalized as a result of the recent PSI (debt restructuring) operation, some of the Greek banks have been moved to Emergency Liquidity Assistance.”

“Once the recapitalization process is finalized, and we expect this to be finalized soon, the banks will regain access to standard Eurosystem refinancing operations,” the official added. “The ECB/Eurosystem (of euro zone central banks) continues to support Greek banks.”

It was unclear exactly how many lenders were affected but the development marked a increase in the number of Greek banks depending on emergency borrowing from the Bank of Greece.

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.

ECB policymaker Luc Coene told the Financial Times in an interview released earlier this week Greek banks on ELA were still solvent.

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Counting the costs of Grexit [Maxkeiser + Mish]

Once again, I sadly report that Ambrose Evans-Pritchard at The Telegraph hits the nail on the head as to what is happening, yet cannot hit the broadside of a barn with a shotgun from 15 feet in regards to the solution.

It really pains me to see excellent analysis go straight into the toilet with hopeless proposals to problems at hand.

Please consider Appetiser cost of Greek exit is €155bn for Germany, France: trillions for meat course by Ambrose Evans-Pritchard.

 Eric Dor’s team at the IESEG School of Management in Lille has put together a table on the direct costs to Germany and France if Greece is pushed out of the euro.

These assume that relations between Europe and Greece break down in acrimony, with a full-fledged “stuff-you” default on euro liabilities. It assumes a drachma devaluation of 50pc.

Potential losses for the states, including central banks.

Upper bound of the losses
Billions €
French State
German State
TARGET2 liabilities of the Bank of Greece
Greek sovereign bonds held by the Eurosystem: SMP
Bilateral loans to Greece in the context of the first programme
Guarantees to bonds issued by the EFSF to provide loans to Greece in the context of the second programme
Guarantees to debts issued by the EFSF in the context of its participation to the “Private Sector Involvement” –restructuration of the Greek debt:“sweetener”
Guarantees to debts issued by the EFSF in the context of its participation to the “Private Sector Involvement” –restructuration of the Greek debt: payment of accrued interest
Guarantees to bonds issued by the EFSF to provide loans to Greece in order to buy back sovereign bonds used by banks as collateral to obtain funding from the Eurosystem

Sounds about right.

So far so good. I think a 70% devaluation is about right, but let’s not quibble.


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Greeks Rush the Banks; Lines Form at ATMs; Nearly $1 Billion Withdrawn in Past Week [SHTFplan]

Without a government for the last eleven days, and amid mainstream discussion of a Euro Zone exit, the Greek people are realizing that the economic and political system as they know it is rapidly descending into chaos.

With massive jobless rates that have forced many into bartering to survive, and facing credit destruction across the entirety of the country that has led to shortages of critical supplies like life saving medicines, those with any money left at national banks are taking the desperate step of withdrawing as much of their savings as they can from a banking system on its last leg.

This is what it looks like when a populace plagued with uncertainty finally loses trust in the credibility of their country’s leadership and financial system.

Anxious Greeks have withdrawn as much as 700 million euros ($893 million) from the nation’s banks since the inconclusive May 6 election, President Karolos Papoulias told party leaders yesterday, according to a transcript of the meeting posted on the presidency’s website today. Papoulias said he got the information from the head of the Bank of Greece, the central bank, George Provopoulos, according to the transcript.

Via Zero Hedge

Greeks line up at ATM’s across the country to withdraw cash:

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Banks prepare for the return of the drachma [Reuters]

By Douwe Miedema and Sarah White

LONDON (Reuters) – Banks are quietly readying themselves to start trading a new Greek currency. Some banks never erased the drachma from their systems after Greece adopted the euro more than a decade ago and would be ready at the flick of a switch if its debt problems forced it to bring back national banknotes and coins.

From the end of the Soviet Union – which spawned currencies such as the Estonian Kroon and the Kazakh Tenge – to the introduction of the euro, they have had plenty of practice in preparing their systems to cope with change.

Planning behind the scenes has been underway since Europe’s debt crisis erupted in Greece in 2009, said U.S.-based Hartmut Grossman of ICS Risk Advisors who works with Wall Street banks.

“A lot of the firms, particularly in Europe and also here, have been looking at that for a long time,” said Grossman, who added that the latest Greek political crisis had brought matters “to a little bit of a head”.

“But there really has been contingency planning at all of the financial institutions for that to happen … Greece leaving the euro zone is not a new idea,” he said.

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Greece Next Next Steps [Zerohedge]

Tyler Durden's picture
Submitted by Tyler Durden

With the Greek tempest-in-a-teapot about to hit Whale-size, as Tsipras says he will not join the coalition and Venizelos says that Syriza’s participation is a prerequisite (via Bloomberg), it seems now would be an opportune time to look forward (not backward at the GGB2s dropping below EUR17 for the first time ever!). As we were among the first to state that their would be a second (if not more) election in Greece, we look at the schedule of events in Europe over the next few weeks (including the payments due on the PSI holdout bonds), and discuss the scenarios and consequences of a Greek exit (for both Greece living without Euro support and the Euro-zone coping with a Lehman-event).

Via UBS:

Bank Of America: Hot topic: Dra(ch)ma

In a former piece analyzing scenarios for the euro area (here), we highlighted that in order to stabilize the euro economies, the euro area needed to address its three main problems: a beleaguered banking sector, sharply deteriorated fiscal positions and weak EU institutions.

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“Once A Liar, Always A Liar”: The Incredible (Un)Truth About Italy, Greece, And The Birth Of The Euro [Zerohedge]

Submitted by Tyler Durden

The must read article from

Operation Self-Deceit: New Documents Shine Light on Euro Birth Defects
By Sven Böll, Christian Reiermann, Michael Sauga and Klaus Wiegrefe

Newly revealed German government documents reveal that many in Helmut Kohl’s Chancellery had deep doubts about a European common currency when it was introduced in 1998. First and foremost, experts pointed to Italy as being the euro’s weak link. The early shortcomings have yet to be corrected.

Many of the euro’s problems can be traced to its birth defects. For political reasons, countries were included that weren’t ready at the time. Furthermore, a common currency cannot survive on the long term if it is not backed by a political union. Even as the euro was being born, many experts warned that currency union members didn’t belong together.

Pushing Ahead Regardless

But it wasn’t just the experts. Documents from the Kohl administration, kept confidential until now, indicate that the euro’s founding fathers were well aware of its deficits. And that they pushed ahead with the project regardless.

In response to a request by SPIEGEL, the German government has, for the first time, released hundreds of pages of documents from 1994 to 1998 on the introduction of the euro and the inclusion of Italy in the euro zone. They include reports from the German embassy in Rome, internal government memos and letters, and hand-written minutes of the chancellor’s meetings.

The documents prove what was only assumed until now: Italy should never have been accepted into the common currency zone. The decision to invite Rome to join was based almost exclusively on political considerations at the expense of economic criteria. It also created a precedent for a much bigger mistake two years later, namely Greece’s acceptance into the euro zone.

Of course, financial data doesn’t play much of a role when it comes to war and peace. Italy became a perfect example of the steadfast belief of politicians that economic development would eventually conform to the visions of national leaders.

However, the Kohl administration cannot plead ignorance. In fact, the documents show that it was extremely well informed about the state of Italy’s finances. Many austerity measures were merely window dressing — either they were accounting tricks or were immediately dialed back when the political pressure subsided. It was a paradoxical situation. While Kohl pushed through the common currency against all resistance, his experts essentially confirmed the assessment of Gerhard Schröder, the center-left Social Democratic Party (SPD) candidate for the Chancellery at the time. Schröder called the euro a “sickly premature baby.”


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“We Embittered the People to Protect the Future of the Nation” [Mish]

If you want to understand the reason PASOK went down in flames in a crushing defeat in Greek elections, simply look at the arrogance and gall of party leader Evangelos Venizelos in a statement following the election.

“We embittered the people so we could protect the future of the nation”, said PASOK party leader and troika sponsored clown, Evangelos Venizelos.

Ekathimerini reports Election swing leaves Greece teetering.

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European Markets overview post French and Greek elections











‘Greece needs people’s revolution to oust foreign meddling’ [PressTV]

Greece is at the epicenter of the eurozone debt crisis as austerity cuts grip the country, with one in every five workers unemployed and pensions and salaries slashed by up to 40 percent.

This comes as the outgoing coalition government has adopted painful spending cuts to secure emergency bailout funding from the International Monetary Fund and the European Union.

However, the parliamentary elections are set to be held in Greece on Sunday amid the country’s deepening economic troubles and the ongoing austerity crisis.

Press TV has conducted an interview with Paolo Raffone, secretary general CIPI Foundation, to further discuss the issue. The following is a transcription of the interview.

Press TV: Given what our guest from Athens stated and at the end there she talked about the banks, it seems like this vote is basically based on two options for the voters: simply for the Greeks to give a clear answer as to whether they want to follow this pro-European course which equals to deep cuts and austerity; or not, which is why it’s been called a protest vote.

Raffone: Yes, it is the unfortunate history of Greece, is that of continuing occupation from outside.

On the other hand, the disgraceful leadership of the elites within the country has been conducting the entire population and the Greeks as a nation to the point of no return.

What is happening now under the EU and the supposed way to save Greece from bankruptcy is, as it was said from Athens hidden type of occupation, people have to understand this.

The Greek people are not below the capacity and standards of others in Europe. On the contrary, their history, even their recent history, has proven that they can be avante garde to the others.

There is a protest. The vote of protest will come out. Unfortunately, even in extreme right-wing parties which do not promise any good. But of course it’s a protest vote.

Press TV: What type of government, then, can we look at to ensure Greece’s stability in that area? Hope doesn’t seem to be on the side of these two main parties in the coalition government.

Raffone: I would say that the issue of the coalition government that may come out is almost irrelevant.

The thing that is very important is that Greece has to get out of the situation of subjugation which has been put for a very long time, since the time of the British, over there.

I even see a sort of connection between the history of what is going on in Greece and what has been going on in Iran itself. There is a need of a people’s revolution in Greece to get rid of these foreign people muddling with their internal affairs, and using the country as their own garden.

Those representatives of the coalition government will not change anything. They are still coming from the same elite groups that have brought Greece to the brinks.

Press TV: What is going to be in the works given the fact that this coalition government is going to be elected? What are we going to be looking at as these troika, these three organizations, are going to come in, probably, right after the elections? What kind of cuts are we going to see for Greece so we can get perhaps a pulse on what lies ahead for Greece?

Raffone: In spite of the various specific situations of Greece which I have [implied] before, meaning that the leaderships of Greece have been rapacious, people taking the blood from the Greeks in Greece to put in foreign accounts, this has been done for decades. This is an issue that the Greeks have to resolve with their own leaders, kicking them out of the country if they want to survive.

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New poll sees anti-Troika gains, chaotic outcome in Greek elections [The Slog]

From The Slog

With five days to go to next Sunday’s Greek General Election, more leaked figures from a secret Athens study still show New Democracy holding its own, but continuing growth by the minority Parties, in the regions around the Capital. I now have copies of polling in the five major regions of Attica (A, B and Rest of of Athens County) and the prefecture of Piraeus (A and B of Piraeus). But I still don’t know with any degree of certainty which foreign Embassy is conducting the study.

The heaviest betting is that it is the German Embassy, although that probably reflects as much the unpopularity of Berlin in Greece rather than any hard evidence. Quite a few think it may well be the Americans, or perhaps the Russians. If you have any strong evidence on this Athenians, please contact me at
The main loser is clearly Evangelo Venizelos’s PASOK Party. Although still well placed in the Establishment areas of Athens, even there it has only 13% of the voting intentions; elsewhere the Party’s position is under 10%. In Athens County, for example, PASOK garnered a risible 5.7% share. Although New Democracy will probably be the biggest Party in the next Greek Parliament, in Piraeus B it has only 8.1%: and minority Parties are catching it up.
The most spectacular gains have been made by the hard-Left Party SYRIZA. In Athens County it has over 20% of the vote, and nowhere in these polls is it lower than 2nd in the rankings. But the far-Right Party Independent Greeks has made great strides in the Piraeus region, where it has over 13% of the vote.

Richard Koo On The Three Problems With Bullish Speculation On Europe [Zerohedge]

The balance sheet recession diagnosis of many of the world’s developed nations remains among the clearest explanation linking the failure of textbook   monetary policy to the dismal multipliers, transmission mechanism breakages, and sad reality of a recovery-less recovery. Whether you agree with Richard Koo’s traditional but massive Keynesian fiscal stimulus medicinal choice is a different matter but the Nomura economist delineates the three problems (two macroeconomic and one capital flow) exacerbating the eurozone crisis and notes that “bulls have gotten ahead of themselves”. Noting that the central bank supply of funds may help address financial crises but cannot resolve problems at borrowers, and that authorities have never admitted they were wrong, Koo stresses the three key reasons that bullish speculation on eurozone is premature – monetary accommodation’s ineffectiveness when the private sector is deleveraging, active fiscal retrenchment by the core when fiscal stimulus is the only plus for aggregate demand, and Japanese and US lagged-examples of that dash any short-term hope that structural reforms will lead to growth. Even his solution to the European debacle – one of financial repression limiting the sale of government bonds to each nation’s own citizens – while retroactively limiting a nation’s largesse seems to only lead to the inevitable Japanification we have discussed at length. In the meantime, Koo appears far less sanguine than the markets about the prospects for anything but further demise in Europe (and the US).

Two Opposing Macroeconomic Problems

The current crisis in the eurozone consists essentially of two macroeconomic problems and one capital flow problem. The first macro problem is profligate government spending, as exemplified by Greece. In such cases austerity is required: the government must cut spending and raise taxes to regain its financial health and credibility.

The second macro problem is massive private sector deleveraging in spite of record low interest rates observed in countries such as Spain, Ireland and Portugal following the bursting of their real estate bubbles. The private sectors in these countries are minimizing debt instead of maximizing profits to repair balance sheets plunged underwater when asset prices collapsed but liabilities remained. But when the private sector as a whole is saving money even with near-zero interest rates, the saved funds will leak from the income stream and trigger the kind of deflationary spiral now known as a balance sheet recession. Left unattended, these economies will follow the path of the US during the Great Depression, when GDP shrank 46 percent in just four years because everyone was paying down debt and there were no borrowers.

Monetary policy is largely ineffective in this type of recession because those whose balance sheets are underwater are not interested in increasing their borrowings at any interest rate.


The first macro problem demands fiscal austerity, but the second requires fiscal stimulus. Any solution to the eurozone crisis must address both of these challenges.

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Greece to seize money from SUSPECTED tax evaders’ accounts

The Greek government is to begin seizing money from the bank accounts of suspected tax evaders, Finance Minister Filippos Sachinidis told Skai TV on Thursday.

Sachinidis said that the relevant authorities have been instructed to seize the amount that account holders are suspected of owing to the state.

The minister said that this would happen before suspected tax evaders go on trial.

Last week, the Finance Ministry said it would put into use its cross-checking software to monitor transactions and catch more tax cheats.

Banks, insurance companies and the stock market will have to submit the full details of transactions by taxpayers so that the ministry can draft a property profile for each person and compare it with the tax statement submitted.

Public and private hospitals to send information about the doctors they employ and their activity.

Private insurance companies as well as social security funds must supply in electronic form all the statements they issue to their clients or beneficiaries for tax purposes, showing the taxpayers’ payments and contributions, while utilities, including cell phone networks, must supply account data such as total annual bills.

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