Grexit: Remaining In The Eurozone Is No Longer ‘The Base Case’ For Greece

According to the Wall Street Journal, Greece staying in the eurozone is no longer “the base case” for European officials, and one even told the Journal that “literally nothing has been achieved” in negotiations with the new Greek government since the Greek election almost three months ago.  In other words, you can take all of that stuff you heard about how the Greek crisis was fixed and throw it out the window.  Over the next few months, a big chunk of Greek government bonds held by the IMF and the European Central Bank will mature.  Unless negotiations produce a load of new cash for Greece, there will be a default, and right now there is very little optimism that we will see an agreement any time soon.  In fact, as I wrote about the other day, behind the scenes banks all over Europe are quietly preparing for a Grexit.  European news sources are reporting that the Greek banking system is on the verge of collapse, and over the past couple of weeks Greek bond yields have shot through the roof.  Most of the things that we would expect to see in the lead up to a Greek exit from the eurozone are happening, and now we will wait and see if the Greeks actually have the guts to pull the trigger when push comes to shove. Continue reading

The Silk Superhighway

Five years old, but vindicated, still quite relevant and accurate:

 

Who is China’s largest trading partner?

If you guessed the United States, you’re wrong. It’s the European Union.

If you got the first one right, here is another question: Who are the biggest exporters in the world? First place goes to the European Union. Second goes to China. Third would then go to Germany if it wasn’t already included within the EU. America comes in at a distant fourth place, followed by Japan.

The world has changed. Not long ago, America was both the largest exporter of manufactured goods and the world’s most important economy.

Yes, a shift is occurring—and it is titanic. Today’s global power centers of manufacturing and trade have swung back to Europe and China. The most important and lucrative trade routes are once again between the old world’s East and West. The modern Silk Road is swarming with the new merchants.

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Shocking! The ECB Has Now Doubled Its Lending To Greece

It must be quite busy at the ECB’s headquarters in Frankfurt these days as not only did the ECB kick off its first (official) round of Quantitative Easing, it’s still front-running on Greece’s rescue. In its Q&A session with journalists, ECB president Mario Draghi confirmed the ECB has stepped up its efforts to keep Greece in the Eurozone, as it has roughly doubled its lending in just 6-8 weeks time. This means that since Syriza has won the Greek elections in January, the ECB had to step in to save the Greek economy and financial system from collapsing. Continue reading

Germany Rejects Loan Request Saying Greece Must Meet Conditions

The Greek proposal “doesn’t meet the criteria agreed upon in the Eurogroup on Monday,” German Finance Ministry spokesman Martin Jaeger said in an e-mailed statement. “In truth, it aims at bridge financing without meeting the requirements” of the rescue program. European Commission Spokesman Margaritis Schinas moments earlier had said the Greek letter could be the basis for a “reasonable compromise.”

With the Greek state and its banks shut out of financial markets and dependent on emergency aid to stay afloat, Prime Minister Alexis Tsipras is retreating from his pledges to end austerity as the country’s creditors tighten the financial vise. While he’s not yet gone far enough to satisfy Germany, Greek bonds held on to earlier gains as a spokeswoman said Finance Minister Wolfgang Schaeuble still plans to meet his euro-region counterparts in Brussels on Friday.

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ECB Pulls The Trigger: Blocks Funding To Greece Via Debt Collateral – Full Statement

Just what the market had hoped would not happen…

  • *ECB SAYS IT LIFTS WAIVER ON GREEK GOVERNMENT DEBT AS COLLATERAL
  • *ECB SAYS IT CAN’T ASSUME SUCCESSFUL CONCLUSION OF GREECE REVIEW

What this means simply is that since Greek banks are now unable to pledge Greek bonds as collateral and fund themselves, and liquidity is about to evaporate, the ECB has effectively just given a green light for Greek bank runs, as suddenly it has removed, both mathematically but worse politically, a key support pillar from underneath the already bailed out Greek banking system, (or merely a negotiating move to let Greece see just what kind of chaos this will create ahead of the big D-Day on Feb 25th when ELA could be withdrawn). Continue reading

Greece Changes Strategy: No Longer Demands Debt Write Off, Ask For Debt Exchange Instead

Guess who blinked first.

The ECB’s February 28th warning shot across the bow from the Troika, which is fully stacked with Germany’s Fourth Reich, sent a clear message to fall back in line. Apparently the current Communist Greek government wants to hold on to its power and not let the situation descend into utter chaos. What they’re probably waiting on is to see what options they have with their friends in Russia in hopes of throwing them a line.

Up until now, Berlin and Washington looked pretty solid as it overturned and took Ukraine away from Moscow’s sphere of influence. Now Russia struck back and has a piece of the EU.

 

Over a week after the new Greek government came to power, it has presented its first actual proposal of how it hopes to negotiate with Europe that does not involve the infamous “debt write off”, which as both Germany and the ECB have made clear, is a non-starter as it impairs the ECB’s balance sheet and leads to a loss of “faith” in the money printer, the legacy monetary system and so on. So instead of yet another debt restructuring, the FT reports that Yanis Varoufakis “would no longer call for a headline write-off of Greece’s €315bn foreign debt. Rather it would request a “menu of debt swaps” to ease the burden, including two types of new bonds.” Actually he still does, only he is not calling it as such. Continue reading

ECB Threatens Athens With Bank Funding Cutoff If No Deal In One Month: February 28 Is Now D-Day For Greece

As Deutsche Bank’s George Saravelos politely puts it, “Developments since the Greek election on Sunday have moved very fast.” And indeed, so far the new Tsipras cabinet, and here we focus on the words and deeds of the new finance minister Yanis Varoufakis, has shown that the market’s greatest hope – that the status quo in Greece will continue – has been crushed into a pulp (and so have Greek stock and bond prices) especially following yesterday’s most recent comments by the finmin in which he said that Greece “does not want the $7 billion” from the Troika agreement and that it wants to “rethink the whole program”, culminating with an epic exchange with Eurogroup chief Jeroen Dijsselbloem in which Greece made it clear that the “constructive talks” are over.

And suddenly the Eurozone is stunned, because what had until now been its greatest carrot when it comes to dealing with Greece, has become completely useless when the impoverished, insolvent nation itself says it no longer needs a bailout, seemingly blissfully unaware of the consequences. Continue reading