Greece's Euro Exit Seems Inevitable - page 4
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For Greece All Bets Are (Literally) Off: Bookie Closes Grexit Market
You know it's over when the bookies are closing their markets.
From bookmaker William Hill...
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As a reminder, Thursday morning, reports indicated that Athens has appealed to the IMF for a reshuffling of its debt repayment schedule so that the government can pay pensions and public sector wages while attempting to negotiate a deal with creditors — Tsipras was rebuffed.source
Greece Between Scylla and Charybdis
In the ancient epic poem known as the Odyssey, the Greek king Odysseus was forced to navigate a narrow strait between the six-headed sea monster named Scylla, and a ship-eating whirlpool called Charybdis. As it was impossible to avoid both, he chose to confront Scylla, losing a number of his best sailors in the battle that followed – but averting utter annihilation.
In the next few weeks, Greece will face a similar choice; between defaulting on its obligations to international creditors in the Eurogroup and at the International Monetary Fund – or defaulting on salaries and abandoning promises made to citizens during the recent election. The country’s borrowing costs have exploded upward in recent days, with three-year yields touching 27% as market participants become increasingly convinced that a default is imminent.
After years of crisis, many observers might see this as yet another “boy who cried wolf” situation, but there are signs that the threat is real this time. Agreed-upon reforms have not been delivered, political positions have hardened substantially, and Greece has asked the IMF about delaying a payment due on May 12th – something that only a few impoverished African countries have done previously.
Euro area policymakers are reportedly drawing up plans to manage a Greek default within the common currency zone, and there is some likelihood that this could be accomplished with a minimum of disruption – but this would still be the largest default in history, and would unquestionably destabilize global markets.
With Greece simmering in the background, risk premia are rising, pushing increasingly cautious investors and speculators out of the momentum trades that many have been riding for the last six months.
Somewhat counter-intuitively, our theory is that the situation is helping to boost the euro higher, by making carry traders less confident about investment prospects in other areas of the world. This echoes the dynamic that made the currency surprisingly robust during the early years of the crisis.
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They (ECB) are already considering an alternative currency for Greece http://www.zerohedge.com/news/2015-04-17/ecb-considering-parallel-greek-currency- what would be the purpose of that only the morons of ECB know : how in the name of god would one central bank manage two currencies?
Greek default necessary but Grexit is not
Until last week, discussions with Greece did not go well. That changed when the circus of international financial diplomacy moved to Washington for the spring meetings of the International Monetary Fund and the World Bank. Then it became worse.
My hunch is that this show will go on for quite a while. The Greeks want to merge the talks on the extension of the current, second, loan programme with the talks on the new third one. For that to work they will require temporary bridging finance to get through the summer. This sounds like somebody has a plan. But this is not my impression. I have never seen European finance officials so much at a loss .
The big question — whether Greece will leave the eurozone or not — remains unanswerable. But I am now fairly certain it will default.
My understanding is that some eurozone officials are at least contemplating the possibility of a Greek default but without Grexit. The complexity is severe, and they may not have had the time to work it out. But it may be the only way to avert utter disaster.
On whom could, or should, Greece default? It could default on its citizens by not paying public-sector wages or pensions. That would be morally repugnant and politically suicidal for the Syriza-led government. In theory, it could default on the two loans it received from its EU partners, though it is not due to start repaying the first of those until 2020, and the second in 2023. It could also default on the remaining private-sector bondholders but that would not be a good idea. Greece might need private sector investors later.
It could also default on the IMF and the European Central Bank. The IMF is expecting a series of repayments. The ECB wants its money back in the next few months on debt it holds on its books. Defaulting on the IMF and ECB is the only option that would bring genuine financial relief in the short term. Nobody has ever done that. It might trigger Grexit.
Then again, it might not. Default is not synonymous with exit. There is no EU ruling that says you have to leave the eurozone when you default on your debt. The link between default and exit is indirect; if a country defaults, its defaulting securities are no longer eligible as IOUs for the country’s banks to tender at ECB money auctions. The same applies to any other debt guaranteed by Athens. The Greek banks hold quite a bit of the latter category, and might find it hard to obtain liquidity if their government falters.
So to default “inside the eurozone” one only needs to devise another way to keep the banking system afloat. If someone could concoct a brilliant answer, there would be no need for Grexit.
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WSJ: "Europe Braces for Messy Greek Endgame"
A down beat article from the Wall Street Journal:
But among European politicians and officials gathered in Washington DC last week for the International Monetary Fund's Spring Meetings, there was little optimism that a deal will be agreed by then.
The two sides are no closer to an agreement than when the Greek government took office almost three months ago.
source
This whole nonsense is going on for three moths already
I know that politicians always have time - but isn't it time that they actually do something?
Wonder when the final final final and the final final final final deadlines will be.
Wonder when the final final final and the final final final final deadlines will be.
When politicians start talking sense
ECB Is Studying Curbs on Greek Bank Support
The European Central Bank is studying measures to rein in Emergency Liquidity Assistance to Greek banks, as resistance to further aiding the country’s stricken lenders grows in the Governing Council, people with knowledge of the discussions said.
ECB staff have produced a proposal to increase the haircuts banks take on the collateral they post when borrowing from the Bank of Greece, the people said, asking not to be named as the matter is private. While the measure hasn’t been formally discussed by the Governing Council, it may be considered if Greece’s leaders fail to quickly convince euro-area finance ministers they can reform their economy and secure bailout funds, one of the people said.
Greek lenders are mostly locked out of regular ECB cash tenders while the country’s government, which holds talks with euro-area partners in Riga this week, tussles with its creditors over the much-needed aid payments. Instead, the banks currently have access to about 74 billion euros ($79 billion) of emergency funds from their own central bank -- an amount that has been rising and which will be reviewed this week.
There’s “no doubt” that the ECB is losing patience with Greece, said Frederik Ducrozet, an economist at Credit Agricole CIB in Paris. “Greek banks will need more funding before long, so in a way larger haircuts or a lower ELA cap are equivalent.”
The FTSE/Athex Banks Index slid 1.3 percent at 10:37 a.m. Athens time. The euro fell 0.7 percent to $1.0668.
Riga Meeting
The ECB staff proposal outlines three routes for reducing the amount of cash lenders can access for a given amount of collateral, one of the people said. The haircuts set under ELA operations aren’t public. An ECB spokesman declined to comment.
Officials are viewing the Latvian meeting of euro-area finance ministers and central-bank governors as a test of the Greek government’s willingness to make the economic reforms demanded of it in return for the final payments of its 2012 bailout package. Without fresh funds, the government may run out of money by May.
As Greek depositors pull cash from bank accounts amid uncertainty over the country’s future in the currency bloc, the central bank seeks to match the outflow with ELA. The Bank of Greece keeps a buffer of around 3 billion euros of ELA allowance in reserve, to give it time to react to a possible bank run, one of the officials said.
The Frankfurt-based ECB has insisted on tight control of the operations, on concern banks will use the cash to directly fund the government in contravention of European Union law.
Even so, ECB President Mario Draghi has signaled he isn’t yet convinced of the need to squeeze Greek lenders further. Speaking to reporters on April 15, he said the subject was “mentioned, not discussed” by governors at their monetary-policy meeting. “We will come back on this issue in due time,” he said.
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Germany's Schaueble not thinking of Plan B for Greece right now
And back to market news we have a few comments floating around after the Riga meeting finished yesterdayGerman fin min Wolfang Schaeuble said EU policy makers shouldn't be confronted with questions about preparations for a possible Greek default, the impostion of capital controls and the issuance of debt certificates
At the same press conference Bundesbank head Jens Weidmann said that officials will discuss haircuts on collateral for emergency funding for Greek banks but he has misgivings about granting emergency funding to Greece as the liquidity situation at the country's banks has not improved. ECB's Draghi said yesterday that Emergency Liquidity Assistance (ELA) would continue to be given to Greek banks as long as they are solvent and have adequate collateral.