Greek crisis: surrender fiscal sovereignty in return for bailout, Merkel tells Tsipras

Are you starting to see the bigger picture yet? Yesterday it was Cyprus, today it’s Greece. Tomorrow it could be France, Italy and Spain.

 

You have not anchored Germany to Europe,… You have anchored Europe to a newly dominant, unified Germany. In the end, my friends, you’ll find it will not work.

– Margaret Thatcher

The Fourth Reich has landed.

 

German and French leaders press Greek leader for guarantees over austerity measures in what an EU official describes as ‘extensive mental waterboarding’

European leaders have confronted the Greek government with a draconian package of austerity measures entailing a surrender of fiscal sovereignty as the price of avoiding financial collapse and being ejected from the single currency bloc.

A weekend of high tension that threatened to break Europe in two climaxed on Sunday night at a summit of eurozone leaders in Brussels where the German chancellor, Angela Merkel, and President François Hollande of France presented Greece’s radical prime minister, Alexis Tsipras, with an ultimatum. Continue reading

China Just Nationalized $6 Trillion of Stock Losses

China’s stock market had what traders call a “Dead Kitty” bounce on Thursday as the communist authorities dispatched police and security personnel to “encourage” insider-buying and to arrest short sellers. With the Chinese market still highly inflated even after falling $3 trillion in value, China took action last night to “nationalize” about $6 trillion in losses.

China is about to show its third straight quarter of negative real (after inflation) GDP growth. The nation had been relying on a stock market boom to play a “decisive role” in funding the nation’s “Silk Road” reforms to transition to a consumer economy.

But as Breitbart News warned in “China’s Lehman Brothers Weekend Begins,” the “Red Dragon” has suffered a financial collapse equivalent in degree to the U.S. stock crash in 2008-9. Unlike the U.S., which used a formal government bailout to stabilize markets, the Communist Party instructed the nation’s banks to use their own balance sheets to guarantee the current $8 trillion stated value of all of China’s 2800 listed stocks. Continue reading

Greece Contemplates Nuclear Options: May Print Euros, Launch Parallel Currency, Nationalize Banks

As we said earlier today, following today’s dramatic referendum result the Greeks may have burned all symbolic bridges with the Eurozone. However, there still is one key link: the insolvent Greek banks’ reliance on the ECB’s goodwill via the ELA. While we have explained countless times that even a modest ELA collateral haircut would lead to prompt depositor bail-ins, here is DB’s George Saravelos with a simplified version of the potential worst case for Greece in the coming days:

The ECB is scheduled to meet tomorrow morning to decide on ELA policy. An outright suspension would effectively put the banking system into immediate resolution and would be a step closer to Eurozone exit. All outstanding Greek bank ELA liquidity (and hence deposits) would become immediately due and payable to the Bank of Greece. The maintenance of ELA at the existing level is the most likely outcome, at least until the European political reaction has materialized. This will in any case materially increase the pressure on the economy in coming days.

All of which of course, is meant to suggest that there is no formal way to expel Greece from the Euro and only a slow (or not so slow) economic and financial collapse of Greece is what the Troika and ECB have left as a negotiating card.

Continue reading

IMF Humiliates Greece, Repeats It Will Keep Funding Ukraine Even If It Defaults

One week ago, we were stunned to learn just how low the political organization that is the mostly US-taxpayer funded IMF has stooped when, a day after its negotiators demonstratively stormed out of the Greek negotiations with “creditors”,  Hermes’ ambassador-at-large Christone Lagarde said that the IMF “could lend to Ukraine even if Ukraine determines it cannot service its debt.” Continue reading