Grandma Yellen and her fellow central banker minions are probably burning up the phone lines this weekend. Greece is throwing a monkey wrench into their monetary fiat machine. Their extend and pretend solution to un-payable debt has been to create more debt and pretend that it would eventually be paid off. Well, it can’t and it won’t be repaid. The dominoes are lined up and once they begin to fall, nothing will be able to stop the consequences of corruption, delusion, and debt. Will the Plunge Protection Team successfully avoid a Meltdown Monday? Maybe. Can they avoid a meltdown forever? No.
Eurozone Rejects Greek Bailout Extension: All Bailout Programs Expire On June 30, Referendum Moot
Submitted by Tyler Durden on 06/27/2015 10:58 -0400
First thing this morning, when summarizing the flurry of overnight events, we focused on today’s final gambit by Greece:
“… moments ago Varoufakis was quoted as saying he would ask the Eurogroup for a bailout extension of a few weeks to accommodate the referendum.
And the punchline: if the Eurogroup says “Oxi”, then the entire Greek gambit, which has been a bet that to Europe the opportunity cost of a Grexit is higher than folding to Greek demands, collapses.
If the Eurogroup declines Varoufakis’ request, there simply can not be a referendum, as the “institutions proposal” will no longer be on the table. As such, the only question is whether the ECB will also end the ELA at midnight on June 30, adding insult to injury, and causing the collapse of the Greek banking system days ahead of a referendum whose purpose would now be moot.”
And, as expected, with the Eurozone meeting on Greece having just ended after a brief hour of deliberations, AFP reports that the answer, was indeed, no.
And then this:
- EUROGROUP PRESS CONFERENCE CALLED OFF IN BRUSSELS
- EURO-AREA FIN. MINISTERS TO CONTINUE TALKS WITHOUT GREECE: ANP
- EUROGROUP TO RECONVENE AFTER BRIEFING W/O GREECE: EU OFFICIAL
In effect, and very symbolically, Greece is already out of the Eurogroup. Worse: the referendum is now moot as the programs will expire on Tuesday night and Greece won’t have anything actionable to vote on next Sunday.
What happens next: Eurogroup makes it official that the Greek proposal ends on June 30 making the referendum moot as the institutions proposal will no longer be on the table, the ECB pulls a “Cyprus” on Greek ELA, and a Greek bank system which is put on indefinite hiatus, leading to a “soft” Greek default if not outright Grexit, paving the way for even more ECB QE.
In the meantime, here is the live feed from the Euro-ex-Greece-Group where now only 18 countries are allowed to opine on the future of the costliest, and most artificial monetary experiment in history.
And here is the official Eurogroup Statement on Greece, whose most important line is the footnote:
Since the 20 February 2015 agreement of the Eurogroup on the extension of the current financial assistance arrangement, intensive negotiations have taken place between the institutions and the Greek authorities to achieve a successful conclusion of the review. Given the prolonged deadlock in negotiations and the urgency of the situation, institutions have put forward a comprehensive proposal on policy conditionality, making use of the given flexibility within the current arrangement.
Regrettably, despite efforts at all levels and full support of the Eurogroup, this proposal has been rejected by the Greek authorities who broke off the programme negotiations late on the 26 June unilaterally. The Eurogroup recalls the significant financial transfers and support provided to Greece over the last years. The Eurogroup has been open until the very last moment to further support the Greek people through a continued growth-oriented programme.
The Eurogroup takes note of the decision of the Greek government to put forward a proposal to call for a referendum, which is expected to take place on Sunday July 5, which is after the expiration of the programme period. The current financial assistance arrangement with Greece will expire on 30 June 2015, as well as all agreements related to the current Greek programme including the transfer by euro area Member States of SMP and ANFA equivalent profits.
The euro area authorities stand ready to do whatever is necessary to ensure financial stability of the euro area.
[1] Supported by all members of the Eurogroup except the Greek member.
Presenting the Euro-ex-Greece-Group
Tsipras to Merkel-Hollande: Greece will survive!
http://goo.gl/SESV3y
EU Officials Unleash The Fearmongery: “The Crisis Has Commenced”
Submitted by Tyler Durden on 06/27/2015 15:19 -0400
Presented with little comment aside to ask if someone is off-script?
*NOONAN: THE CRISIS HAS COMMENCED
*SCHAEUBLE SAYS `HELLISH DIFFICULT TASK’ ON GREECE
*NOONAN: I HAVE SYMPATHY FOR THE GREEK PEOPLE
“Financial arrangement with Greece, without immediate prospects of a follow-up arrangement, will require measures by the Greek authorities, with the technical assistance of the institutions, to safeguard the stability of the Greek financial system,” ministers from 18 euro area member-states say today.
“The Eurogroup will monitor very closely the economic and financial situation in Greece and the Eurogroup stands ready to reconvene to take appropriate decisions where needed, in the interest of Greece as euro area member” ministers say in statement after informal meeting in Brussels
Translation: you are on your own f##kers
* * *
But always remember, “Greece doesn’t matter,” which as Mohamed El-Erian explains, is somewhat true, since European leaders have two other existential issues to contend with also…
Via Project Syndicate,
Dark clouds are lowering over Europe’s economic future, as three distinct tempests gather: the Greek crisis, Russia’s incursion in Ukraine, and the rise of populist political parties. Though each poses a considerable threat, Europe, aided by the recent cyclical pickup, is in a position to address them individually, without risking more than a temporary set of disruptions. Should they converge into a kind of “perfect storm,” however, a return to sunny days will become extremely difficult to foresee any time soon.
As it stands, the three storms are at different stages of formation.
The Greek crisis, having been building for years, is blowing the hardest. Beyond the potential for the first eurozone exit, Greece could be at risk of becoming a failed state – an outcome that would pose a multi-dimensional threat to the rest of Europe. Mitigating the adverse humanitarian consequences (associated with cross-border migration), and geopolitical impact of this storm would be no easy feat.
The second storm, rolling in from the EU’s east, is the costly military conflict in Ukraine’s Donbas region. The crisis in eastern Ukraine has been contained only partly by the Minsk II ceasefire agreement, and reflects the deepest rupture in the West’s relationship with Russia since the Soviet Union’s collapse.
Further Russian interference in Ukraine – directly and/or through separatist proxies in Donbas – would present the West with a stark choice. It would either have to tighten sanctions on Russia, potentially tipping Western Europe into recession as Russia responds with counter-sanctions, or accommodate the Kremlin’s expansionist ambitions and jeopardize other countries with Russian-speaking minorities (including the EU’s Baltic members).
The third storm – political tumult brought about by the rise of populist political movements – poses yet another serious threat. Energized by broad voter dissatisfaction, particularly in struggling economies, these political movements tend to focus on a small handful of issues, opposing, say, immigrants, austerity, or the European Union – essentially whomever they can scapegoat for their countries’ troubles.
Already, Greek voters handed the far-left anti-austerity Syriza party a sweeping victory in January. France’s far-right National Front is currently second in opinion polls. The anti-immigration Danish People’s Party finished second in the country’s just-concluded general election, with 22% of the vote. And, in Spain, the leftist anti-austerity Podemos commands double-digit support.
These parties’ extremist tendencies and narrow platforms are limiting governments’ policy flexibility by driving relatively moderate parties and politicians to adopt more radical positions. It was concern about the United Kingdom Independence Party’s capacity to erode the Conservatives’ political base that pushed Prime Minister David Cameron to commit to a referendum on the country’s continued EU membership.
With three storms looming, Europe’s leaders must act fast to ensure that they can dissipate each before it merges with the others, and cope effectively with whatever disruptions they cause. The good news is that regional crisis-management tools have lately been strengthened considerably, especially since the summer of 2012, when the euro came very close to collapsing.
Indeed, not only are new institutional circuit breakers, such as the European Financial Stability Facility, in place; existing bodies have also been made more flexible and thus more effective. Moreover, the European Central Bank is engaged in a large-scale asset-purchasing initiative that could be easily and rapidly expanded. And countries like Ireland, Portugal, and Spain have, through hard and painful work, reduced their vulnerability to contagion from nearby crises.
But these buffers would be severely strained if the gathering storms converged into a single devastating gale. Given the EU’s fundamental interconnectedness – in economic, financial, geopolitical, and social terms – the disruptive impact of each shock would amplify the others, overwhelming the region’s circuit breakers, leading to recession, reviving financial instability, and creating pockets of social tension. This would increase already-high unemployment, expose excessive financial risk-taking, embolden Russia, and strengthen populist movements further, thereby impeding comprehensive policy responses.
Fortunately, the possibility of such a perfect storm is more a risk than a baseline at this point. Nonetheless, given the extent of its destructive potential, it warrants serious attention by policymakers.
Securing Europe’s economic future in this context will require, first and foremost, a renewed commitment to regional integration efforts – completing the banking union, advancing fiscal union, and moving forward on political union – that have been crowded out by a never-ending series of meetings and summits on Greece. Likewise, on the national level, pro-growth economic-reform initiatives – which seem to have lost some urgency in the face of overly complacent and excessively accommodating financial markets – need to be revitalized. This would ease the policy burden on the ECB, which is currently being forced to pursue multiple ambitious objectives that far exceed its capacity to deliver sustainably good outcomes regarding growth, employment, inflation, and financial stability.
The current focus on the downpour in Greece is understandable. But policymakers should not be so distracted by it that they fail to prepare for the other two possible storms – and, much more worrisome, the possibility that they merge into a single more devastating one. Europe’s leaders must act now to minimize the risks, lest they find their shelters inadequate to the extreme weather that could lie ahead.
* * *
It seems Goldman’s “conspiracy theory” was right all along as the ‘excuse’ for Draghi to unleash the biggest bazooka the world has ever seen is looming… whether or not the ‘market’ can withstand it…
and remember, what Goldman wants, its former employee at the ECB tends to deliver.
Greece may not topple the EU but Portugal, Spain, Italy and France will bankrupt it; the USA and Japan will topple from the money printing supporting Socialism. This could happen in a month!
Putin’s gotta be smiling wide as he enjoys his vodka this evening John
I imagine this Monday will come and go the way last Monday came and went.
Nothing happened, nothing will happen.
Greece is about to get a real taste of austerity. They will have to live with no budget surplus.
The Greeks are going to get a big helping of severe depression. The EU banks will lose most of their money.
A corrupt nation, whose people refuses to pay taxes, is bound to implode. If it does not get too dangerous, and when all the riots settle down, and it gets cheap as dirt to visit, maybe I will go see what is left.
Stupid is as stupid does. This whole thing was a clusterfuck from the minute they cooked the books in order to get into the Eu.
The Greeks weren’t smart enough or devious enough to cook their books well enough to get into the EU, so they hired the most devious evil organization on earth – Goldman Sachs – to cook their books for them. Goldman now has bets which will make millions if Greece defaults. Lloyd Blankfein – doing god’s work.
The Eurogroup says Fuck Off
Like all welfare recipients, they were smart enough to get all their “entitlements” before it all blew up. And were smart enough to hire Goldman Vader so as to access those entitlements. When the Death Star blows it is gonna be ugly.
Follow Iceland’s lead and flip off the Banksters. Worked for them.
Hard to flip off the banksters when you are dependent on them for your needs.
To be successful at it, you need to be producing more than you consume to start with.
Either that or be willing to do without.
I don’t see Greece in either condition.
Things could get crazy in Greece. Don’t think it will go as smooth as Cyprus. But then what do I know. Maybe they will just lay down whimpering and take what happens with out too much fuss.
I don’t think their new government will last very long if the Greeks figure out they are just as full of shit as the previous government. Maybe things will get so bad the EU calls on NATO to go in and take over. And that will be the end of Greece.
Anyway it doesn’t matter to us in America. We are blissfully ignorant, delusional, distracted, fat and stupid.
Llpoh, save your time and money. Been there. Food sucks, water is saltier than a McDonalds french fry, no surf, beer sucks and if you’re a female tourist you can’t walk 100 yards without being catcalled and oogled at by the lazy, unemployable males. Go someplace nicer, say, Tijuana.
Goofyfoot – that all? I was afraid you were gonna tell me they have fat, hairy women!
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bruce,
I’m thinking Greece will eventually become a Russian ally instead of a European one.
Europe will be happy since it gets to dump Greece that way, and Russia happy for the new ally and foothold in Europe.
On Monday, It’s China Versus Greece
by John Rubino
Fear and greed are both getting a serious workout lately, but Monday will be even more fun than usual because of two big stories that hit over the weekend. First, Greece decided to put the draconian demands of its European creditors to a popular vote, to which the creditors responded by cutting Greece off from new bailout money. Greek citizens, now staring down the barrel of capital controls and/or bank failures, are busily emptying their bank accounts:
Greeks Line Up at Banks and Drain ATMs as Tsipras Calls Vote
Greece’s banks may need an injection of fresh emergency funds to operate Monday as people rushed to pull out money after Prime Minister Alexis Tsipras called a referendum that could decide his country’s fate in the euro.
Two senior Greek retail bank executives said as many as 500 of the country’s more than 7,000 ATMs had run out of cash as of Saturday morning, and that some lenders may not be able to open on Monday unless there was an emergency liquidity injection from the Bank of Greece. An official with Greece’s Capital Markets Commission, the markets’ regulator, also warned that the Athens Stock Exchange may be unable to operate on Monday without a cash injection into the banking system. A Greek central bank spokesman said it was making efforts to supply money.
The European Central Bank’s governing council was expected to hold a conference call on Sunday to review the banks’ liquidity condition, said a Greek official, who asked not to be named in line with policy. The Frankfurt-based central bank said in a twitter post that it’s closely monitoring developments and would review the situation “in due course.”
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Some banks were placing limits in daily cash transactions. Yiota Kardogianni, a manager at a branch of Piraeus Bank SA, said cash withdrawals were limited at 3,000 euros ($3,350) daily and ATM withdrawals at 600 euros. Alpha Bank AE had set a daily limit of 5,000 euros for most of its branches since last week.
After withdrawing more than 30 billion euros as the anti-austerity Coalition of the Radical Left, or Syriza, took power, depositors are now reacting to the latest twist in the five-month standoff with European leaders and creditors. One banker said 110 million euros had been withdrawn from his institution as of 11:30 a.m. Athens time on Saturday.
Capital Controls
“Greek legislation allows either the Bank of Greece governor or the finance ministry to impose capital restrictions,” George Saravelos, foreign exchange strategist at Deutsche Bank AG, wrote in a note to clients. “The extent to which this materializes will depend on the ECB decision over the next 48 hours as well as depositor behavior.”
Some branches of Alpha Bank in central Athens that normally open for business on Saturdays remained shut and one carried a sign that it wouldn’t open. Only a few banks near central shopping and tourist areas are usually open on Saturdays.
That’s the fear side of the story. China, meanwhile, has enjoyed an epic stock market bubble over the past few months which, inevitably, seems to be bursting. In response the government is cutting interest rates and lowering reserve requirements in an effort to support stock prices. Markets love easy money and usually respond to such policy changes with panic buying. This, then, is the greed:
China Cuts Interest Rates to a Record Low After Stocks Slump
China’s central bank cut its benchmark lending rate to a record low and lowered reserve-requirement ratios for some lenders after stocks plunged and local government bond sales drained liquidity.
In the fourth reduction since November, the one-year lending rate will be reduced by 25 basis points to 4.85 percent effective June 28, the People’s Bank of China said on its website Saturday. The one-year deposit rate will fall by 25 basis points to 2 percent, while reserve ratios for some lenders including city commercial and rural commercial banks will be cut by 50 basis points, according to the statement.
The easing follows the biggest two-week plunge in the stock market since December 1996 and a four-week rise in money-market rates as lenders hoard cash. While industrial production and retail sales stabilized in May, investment slowed further — a sign of weakness in infrastructure spending that policy makers are keen to reverse.
“The central bank doesn’t want a panic caused by the stock rout to spread,” said Shen Jianguang, chief Asia economist at Mizuho Securities Asia Ltd. in Hong Kong. “That would lead to financial instability.”
These stories are related in a number of ways, the most important being that they’re examples of governments messing with markets that they don’t understand and therefore have no business trying to manipulate. Greece would be fine (or what passes for fine for a Mediterranean country) if it had kept its own currency and managed its own affairs. Instead it joined a currency union dominated by Germany (!) and now, surprise, can’t function in that environment. But rather than letting market forces sort out the value of various pieces of sovereign debt, a bunch of bureaucrats in Brussels are making things up as they go along, piling mistake onto mistake and bringing the global markets to the brink of crisis over a country that could literally be bought out with a couple of years of ECB quantitative easing funds.
China, meanwhile, has spent the past couple of decades directing an infrastructure build-out that in retrospect was maybe twice as big as it should have been. Now it’s fiddling with all kinds of imperfectly-understood fiscal and monetary levers, trying to maintain a 7% growth rate that is looking more and more fictitious. Here again, the best way to deal with a bubble is to not let it happen in the first place. The second best way is to let it pop and allow the market to clean up the mess. The absolute wrong way to manage a bubble is to intervene from the top to keep it going. Look where that has gotten Japan and the US.
Anyhow, Monday will be interesting because Greece is scary and China is exciting, and traders will have to decide which to fixate on. This has meaning beyond the market open because most news can be interpreted in various ways. So the real story is not the event but how the markets respond to it. When investors and traders are optimistic they interpret everything as a reason to buy, and when they’re worried everything is a sell signal. Monday’s open will therefore say more about market psychology (and the direction of asset prices in the next few years) than about whether Greece or China are doing well or badly.
I think the instability in Europe and China will make money flow to perceived safe haven in USA. This will probably push US markets to new highs temporarily. It will eventually catch up to us.
Dow Futures Open Down 300 Points, 10Y Yield Tumbles 20bps As EURUSD Plunges Over 200 Pips
Submitted by Tyler Durden on 06/28/2015 18:01 -0400
Buy-The-Dipping, “Greece doesn’t matter”, Escape-velocity-forecasting, QE-front-running, Central-Bank-believing asset gatherers everywhere must be salivating at this ‘healthy correction’ opportunity…