Tag: EU

Is there one last kick in the can? It doesn’t look like it:

Greece admitted its sovereign coffers are totally empty this week when it “bundled” its modest €345 million payment to the IMF along with others, for a lump €1.5 billion payment, which may well never happen.

And the bigger problem for Greece is that after testing yesterday the faith and resolve of its depositors (not to mention the Troika, aka the Creditors) and found lacking, said depositors no longer believe in the full faith (ignore credit) of the Greek banking system.It may have been the Greek government’s final test.

Because according to banking sources cited by Intelligent News, things today went from bad to horrible for Greek banks, when Greeks “responded with massive outflows to the Greece’s government decision to bundle the four tranches to IMF into one by the end of the June.”

According to banking sources, the net outflows sharply increased on Friday and the available liquidity of the domestic banking system reduced at very low and dangerous levels.

    The same sources estimate the outflows on Friday around 700 million Euros from 272 million Euros on Thursday. The available emergency liquidity assistance (ELA) for the Greek banks is estimated around 800 million Euros. In addition, the outstanding amount of the total deposits of the private sector (households and corporations) has declined under 130 billion Euros or lower than the levels at early 2004.

    The total net outflows in the last 7 business days are estimated 3.4 billion Euros threatening the stability of the Greek banks.

This means 2.5% of all Greek deposits were pulled in just the past 5 days! Indicatively, this is the same as if US depositors had yanked $280 billion from US banks (where total deposits amount to about $10.7 trillion)

Greece didn’t default yesterday because they said they would make the payment at the end of the month. It appears, however, that the government is merely giving the Greek people time to empty out their accounts so that they will not be bailed-in as creditors when the default takes place.

Greece appears almost ready to do what they should have done years ago and default:

Greek premier Alexis Tsipras has accused Europe’s creditor powers of issuing “absurd demands” and come close to warning that his far-Left government will detonate a pan-European political and strategic crisis if pushed any further.

Writing for Le Monde in a tone of furious defiance after the latest set of talks reached an impasse, Mr Tsipras said the eurozone’s dominant players were by degrees bringing about the “complete abolition of democracy in Europe” and were ushering in a technocratic monstrosity with powers to subjugate states that refuse to accept the “doctrines of extreme neoliberalism”.

“For those countries that refuse to bow to the new authority, the solution will be simple: Harsh punishment. Judging from the present circumstances, it appears that this new European power is being constructed, with Greece being the first victim,” he said.

The Greek leader, head of the radical-Left Syriza government, issued a stark warning that his country will not submit to these demands and will instead take action “to entirely transform the economic and political balances throughout the West.”

Alexis Tsipras made his thoughts known in a piece for Le Monde, the French newspaper

“If some, however, think or want to believe that this decision concerns only Greece, they are making a grave mistake. I would suggest that they re-read Hemingway’s masterpiece, “For Whom the Bell Tolls”,” he said.

Hey, the debt-funded Euro party was fun. But it’s over. Now it’s time to default, bring back the drachma, and return to the world of real world economics.

Greek has their finger on a bigger trigger than most people realize:

The political detonating pin for Greek contagion in Europe is an obscure mechanism used by the eurozone’s nexus of central banks to settle accounts. If Greece is forced out of the euro in acrimonious circumstances – a 50/50 risk given the continued refusal of the creditor core to acknowledge their own guilt and strategic errors – the country will not only default on its EMU rescue packages, but also on its “Target2” liabilities to the European Central Bank.

In normal times, Target2 adjustments are routine and self-correcting. They occur automatically as money is shifted around the currency bloc. The US Federal Reserve has a similar internal system to square books across regions. They turn nuclear if monetary union breaks up.

The Target2 “debts” owed by Greece’s central bank to the ECB jumped to €49bn in December as capital flight accelerated on fears of a Syriza victory. They may have reached €65bn or €70bn by now….

The Eurogroup insists that the primary budget surplus be raised from 1.5pc of
GDP in 2014, to 3pc this year and 4.5pc next year. As Nobel economist Paul
Krugman says, they want to force a country that is already reeling from six
years of depression – with the jobless rate still near 50pc – to triple its
surplus for no other purpose than paying off foreign creditors for decades
to come. They are doing to Greece what the Western allies did to a defeated
Germany at Versailles in 1919: imposing unpayable and mutually-destructive
reparations on a prostrate nation.

Combined with the fact that ISIS is planning to flood southern Italy with “immigrant” invaders, it becomes readily apparent that the EU may not last another eight years. The difference between 1933 and 2023 is that the enemy is no longer defined as other Europeans, but Islamic and African invaders.

Italians are already demanding that the Italian navy start sinking boats coming across the Mediterranean and attacking refugee holding centers. The Spanish are looking at the Greek situation and wondering why they should not do the same. The Front National is rising quickly in France; the rise of PEGIDA has been arrested but it will resume soon enough, along with support for AfD once the news of Germany being on the hook for up to €515 billion penetrates the electorate.

No wonder Juncker, the unelected Head of the European Commission has turned openly anti-democratic. But he is as delusional as Hitler in the bunker. Gunnar Beck from London University makes an equally apt comparison: “Germany’s leaders can’t let Greece leave the euro, and the Greeks know
it. They will die in a ditch to defend the euro. This is our Eastern Front,
our Battle of Kursk, and I’m afraid to say that it will end in unconditional
surrender by Germany,” he said. 

Like gravity, economics always wins in the end.

Daniel Hannan observes that it isn’t a Greek bankruptcy that would be the real catastrophe as far as the EU is concerned:

A default and devaluation would offer a fresh start. Although the economy has been pummelled by six years of Euro-austerity, some of the fundamentals have improved. The bureaucracy has been slimmed, taxes are now collected and, if debt repayments were taken out of it, the budget would be in balance. In truth, this is what EU leaders fear. Not that Greece will leave the euro and collapse, but that Greece will leave the euro and prosper.

A competitive Greek economy, exporting its way back to growth, might inspire Spaniards and Italians, who have also been paying the price of the euro, to follow. For those Eurocrats who see the single currency as a component of political integration, that prospect is too horrible to contemplate.

We’ve been here before. Two years ago, when it looked as if Cyprus might leave the euro, Brussels went so far as to lift money directly out of private bank accounts to pay off the country’s creditors.

The extreme measure was necessary, the European Central Bank admitted, ‘to prevent worries over the reversibility of the euro resurfacing’.

I observe that Iceland, which rejected the EU’s bank-first dictates, is doing considerably better than Italy, Ireland, Spain, and Portugal, which obediently followed the EU’s instructions. I tend to doubt this observation has escaped the new Greek government.