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Greece Gambles On “Catastrophic Armageddon” For Europe, Warns It “Only Has Weeks Of Cash Left”
Greece Gambles On “Catastrophic Armageddon” For Europe, Warns It “Only Has Weeks Of Cash Left”
One of the bigger problems facing the new, upstart Greek government, which has set before itself the lofty goal of overturning 6 years of oppressive European policies and countless generations of Greek cronyism, corruption and tax-evasion is not so much the concern about deposit outflows and bank runs – even though it most certainly will be in the next few days unless the Tsipras government finds some resolution to the dramatic standoff with Merkel and the ECB – but something far more trivial: running out of money.
Recall that two weeks into the Greek elections, Greece was rocked by a dire, if entirely underappreciated development, when its already “tax-paying challenged” population decided to completely hold off paying any taxes in advance hopes that the Tsipras government will “overturn” austerity. We wrote:
… while there will be no official confirmation whether Greece did or did not have a bank run for months, unless of course some bank keels over and dies in the interim, one thing is certain: with an increasing probability they may not have a “continuity-promoting” government in less than two weeks, Greeks tax remittances to the government, which were almost non-existent to begin with, have ground to a halt!According to a second Kathimerini report, budget revenues have slumped over the last few days as a result of the upcoming elections and taxpayers’ uncertainty about the future: “Most taxpayers have chosen to delay their payments, given that the positions of the two main parties leading the election polls are diametrically opposite: Poll leader SYRIZA promises to cancel the ENFIA and even write off bad loans, while ruling New Democracy acknowledges the difficulties but is avoiding raising issues that would generate problems and fiscal consequences.
The dwindling state revenues will not only hamper the next government’s fiscal moves, but, given that the fiscal gap will expand, also negotiations with the country’s creditors.
The tax collection mechanism appears to be largely out of action while expired debts are swelling due to taxpayers’ wait-and-see tactics and the reduction in inspections.
So for battered, depressed Europe “austerity” really meant “taxation” – it is no surprise then why so many in peripheral Europe, who for the past 7 years have not seen any benefits from Germany’s delay in reintroducing the Deutsche Mark (and keeping its export industry humming, and Deutsche Bank solvent, courtesy of the much lower Euro), hate “austerity” so much: after all there really should be no “austerity” without representation and most European voices hardly matter in a monetary “Union” where only bankers and unelected eurocrats are heard.
…click on the above link to read the rest of the article…
Greeks Spooked by Debt Clashes Put Cash Under Bathroom Tiles
Greeks Spooked by Debt Clashes Put Cash Under Bathroom Tiles
(Bloomberg) — Georgios Karavelas drives a taxi in Athens and for the past month has been a silent witness to what ordinary Greeks are doing with their cash.
One passenger, he said, told someone on his mobile phone that he’d withdrawn 25,000 euros from the bank, taken it home, worked loose a tile in the bathroom and stashed the money there. Another took the cash to his village and buried it in the garden. Yet another fashioned a small safe box in the air-conditioning unit on his balcony.
“I can’t fault these people,” said Karavelas, 37. “They were obviously people who had worked hard for their money, with families and jobs, not oligarchs.”
Withdrawals from Greek banks may have exceeded 15 billion euros ($17.2 billion) in the run-up to the elections that catapulted Alexis Tsipras and his anti-austerity Syriza party to power, including at least 11 billion euros in January, according to four bankers citing preliminary data. Tensions between the new government, which won on a platform of debt relief, and Greece’s creditors, including Germany, may keep up the pressure.
“Talks with the creditors is going to be a protracted process so you can’t rule out more pressure on deposits,” said Wolfango Piccoli, managing director at Teneo Intelligence in London. “There is plenty of uncertainty and that can make depositors nervous again.”
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Greece and the EU – Nothing But Political Theater?
Greece and the EU – Nothing But Political Theater?
Varoufakis’ Tour of Europe
Greece’s new finance minister Yanis Varoufakis has toured Europe, trying to drum up support for – actually, we’re not quite sure what for exactly, as the precise nature of the Greek government’s demands is currently in flux (this is a parallel to Syriza’s ever-changing pre-election statements). Essentially, he seems to be gauging what they can get away with.
Not surprisingly, France’s political leadership has announced its support for a “debt deal” in principle(whatever that means), as the spendthrift French government is so to speak an ideological partner-in-crime of Syriza. However, the French government stopped short of supporting a partial write-down of Greece’s debt (Michel Sapin: “No we will not annul, we can discuss, we can delay, we can reduce its weight, but not annul”). Similar noises have issued from Berlin and Madrid.
We have argued all along that no EU government can afford to accept such a write-down, as then the guarantees issued for Greek debt would come due and the losses would become “real” – and appear on everybody else’s budget. We imagine that every EU leader Mr. Varoufakis has spoken to so far has impressed the political necessity of “extend and pretend” on him in no uncertain terms; details may well be up for debate though.
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ECB Threatens Athens With Bank Funding Cutoff If No Deal In One Month: February 28 Is Now D-Day For Greece
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.
So earlier today the ECB’s Erikki Liikanen, tired of pleasantries and dealing with what to Europe is a completely incomprehensible and illogical stance, one which is essentially a massive defection by Greece in the European “prisoner’s dilemma”, and which while leading to a Greek financial collapse and Grexit – both prerequisites to a subsequent Greek economic recovery unburdened by the shackles of the Euro – would also unleash a European depression, came out and directly threatened Greece that it now has 1 month until the end of February to reach a deal with the Troika, or else the ECB would cut off lending to Greek banks, in the process destroying the otherwise insolvent Greek banking sector.
…click on the above link to read the rest of the article…
Draghi’s Dangerous Bet: The Perils of a Weak Euro
Draghi’s Dangerous Bet: The Perils of a Weak Euro
The recent decision by the European Central Bank to open the monetary floodgates has weakened the euro and is boosting the German economy. But the move increases the threat of turbulence on the financial markets and could trigger a currency war.
The concern could be felt everywhere at this year’s World Economic Forum in Davos, the annual meeting of the rich and powerful. Would the major central banks in the United States, Europe and Asia succeed in stabilizing the wobbling global economy? Or have the central bankers long since become risk factors themselves? The question was everywhere at the forum, being addressed by experts at the lecturns and by participants in the hallways.
Central banks, said Harvard University economics professor Kenneth Rogoff, are surely the greatest source of uncertainty in the eyes of the financial markets, a statement that was not disputed by others on the panel. The fact that monetary policies at central banks in the US, Europe, Japan and elsewhere are drifting apart poses a major risk for the stability of financial markets, he said.
“It’s important for the international community to work together to avoid currency wars which no one can win,” Min Zhu, deputy managing director of the IMF, told the conference.
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ECB Euro QE Won’t Succeed
ECB Euro QE Won’t Succeed
The European Central Bank (ECB) leaked the information beforehand to test the waters and this time followed through on their promise: Money printing galore in the form of 60 billion euros per month ($69 billion).
ECB president Mario Draghi has been talking about it since 2012 and now finally got the go ahead to boost the ECB’s balance sheet from a measly $2.6 trillion by at least another $1.15 trillion by September of 2016. The Fed’s balance sheet is $4.4 trillion.
What do they want to achieve with this? Inflation (ever hear anyone complain about falling prices?) and economic activity. The old argument for QE, which was to calm financial markets, is clearly not needed anymore as volatility for pretty much every asset class on the planet—apart from oil—is at an all-time low.
But are they going to succeed? And how are they going about it? Let’s look at the second question first.
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Huge Madrid march in support of anti-austerity party
Tens of thousands take to the streets of Spanish capital in support of Podemos.
Tens of thousands of people have marched in Madrid in support for anti-austerity party Podemos, whose surging popularity and policies have drawn comparisons with Greece’s new Syriza rulers.
On Saturday, protesters chanted “Yes we can!” as they made their way from Madrid city hall to the central Puerta del Sol square. Podemos and its anti-austerity message have been surging in polls ahead of local, regional and national elections this year.
Podemos (“We Can”) was formed just a year ago, but produced a major shock by winning five seats in elections for the European Parliament in May.
“People are fed up with the political class,” said Antonia Fernandez, a 69-year-old pensioner from Madrid who had come to the demonstration with her family.
One protester, Fernandez, who lives with her husband on a 700-euros-a-month combined pension cheque said she used to vote for the Socialist party but had lost faith in it because of its handling of the economic crisis and its austerity policies.
“If we want to have a future, we need jobs,” she said.
Greek leftist leader Alexis Tsipras promised that five years of austerity, “humiliation and suffering” imposed by international creditors were over after his Syriza party swept to victory in a snap election on January 25.
…click on the above link to read the rest of the article…
Operation Helicopter: Could Free Money Help the Euro Zone?
Operation Helicopter: Could Free Money Help the Euro Zone?
It sounds at first like a crazy thought experiment: One morning, every resident of the euro zone comes home to find a check in their mailbox worth over €500 euros ($597) and possibly as much as €3,000. A gift, just like that, sent by the European Central Bank (ECB) in Frankfurt.
The scenario is less absurd than it may sound. Indeed, many serious academics and financial experts are demanding exactly that. They want ECB chief Mario Draghi to fire up the printing presses and hand out money directly to the people.
The logic behind the idea is that recipients of the money will head to the shops, helping to turn around a paralyzed economy in the common currency area. In response, companies would have to increase production and hire more workers, leading to both economic growth and a needed increase in prices because of the surge in demand.
ECB Has Lost Control
Currently, the inflation rate is barely above zero and fears of a horror deflation scenario of the kind seen during the Great Depression in the United States are haunting the euro zone. The ECB, whose main task is euro stability, has lost control.
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The Gloves Come Off: Germany Says Grexit “Manageable” As Tsipras Demands Greek Debt Writeoff | Zero Hedge
With just three weeks until the Greek snap elections on January 25 in which Tsipras’ Syriza is virtually assured of victory (unless somehow G-Pap’s “new and improved” political party manages to steal enough votes to prevent this, although one wonders what his political campaign will be: “vote for us because this time we know how to avoid a sovereign bankruptcy”), Germany takes yet another opportunity to remind the Greeks that it won’t be blackmailed (spoiler: it will) into another year of funding the insolvent Greek state which in turn will pretend to engage in another year of “reforms” (spoiler: it won’t). Recall it was on New Year’s Eve when Merkel’s chief advisor Michael Fuchs explicitly used the “blackmail” word saying:
“If Alexis Tsipras of the Greek left party Syriza thinks he can cut back the reform efforts and austerity measures, then the troika will have to cut back the credits for Greece,” he said.
“The times where we had to rescue Greece are over. There is no potential for political blackmail anymore. Greece is no longer of systemic importance for the euro.”
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Euro Forecasters See Pain After Worst Year Since 2005
Euro Forecasters See Pain After Worst Year Since 2005
Midway through European Central Bank President Mario Draghi’s May press conference in Brussels, the euro rose to its strongest level during his tenure. Then he said the ECB was ready to introduce more stimulus measures, sending it into a slide that strategists say will extend into 2015.
Europe’s common currency, which appreciated to $1.3993 that May day, ended last year down 12 percent against the dollar, its biggest loss since 2005. Strategists, who were too timid with their call for a decline in 2014 to $1.28, now see a slump to $1.18 by the end of this year. The euro set a four-year low of $1.2004 today.
A weaker euro is key for Draghi as he tries to spur the region’s struggling economy and ward off deflation. He started this year by telling German newspaper Handelsblatt that the risk of deflation in the region cannot be excluded, bolstering speculation policy makers will soon start actions such as buying bonds that tend to weigh on a currency.
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Peak Irony in No-Exit Union: As Grexit Chaos Resurges, Lithuania Joins
Peak Irony in No-Exit Union: As Grexit Chaos Resurges, Lithuania Joins
On January 1, 2015, the Eurozone quietly welcomed a new member, Lithuania, to its fold. The former Soviet satellite became the 19th EU Member State to have joined the increasingly beleaguered currency union.
According to an opinion poll conducted by Berent Research Baltic on behalf of the Bank of Lithuania, 53% of the Lithuanian population support euro adoption. And who wouldn’t trust a central bank to conduct an honest and fair survey of public approval of something as insignificant as the adoption of a new currency?
One group that clearly didn’t was the eurosceptic Europeans United for Democracy (EUD) party which commissioned a poll of its own via Baltics Survey. The results could not have diverged more from the Bank of Lithuania’s poll, with only 26% of respondents approving of the government’s decision while 49% disapproved of it.
Who’s to say which is right? Or at least righter? In the end the point is moot since, in time-honored EU fashion, no public referendum was held on the matter. Instead the final decision was taken in parliament while the Supreme Administrative Court blocked any attempts to call a referendum. After all, one can never be too careful these days: voters might have voted NO, just as French, Dutch and Irish voters did in their respective referendums on the Nice Accord, to no avail.
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Stability and Prosperity in Monetary Union by Mario Draghi – Project Syndicate
Stability and Prosperity in Monetary Union by Mario Draghi – Project Syndicate.
FRANKFURT – There is a common misconception that the euro area is a monetary union without a political union. But this reflects a deep misunderstanding of what monetary union means. Monetary union is possible only because of the substantial integration already achieved among European Union countries – and sharing a single currency deepens that integration.
If European monetary union has proved more resilient than many thought, it is only because those who doubted it misjudged this political dimension. They underestimated the ties among its members, how much they had collectively invested, and their willingness to come together to solve common problems when it mattered most.
Yet it is also clear that our monetary union is still incomplete. This was the diagnosis offered two years ago by the so-called “Four Presidents” (the European council president in close collaboration with the presidents of the European Commission, the European Central Bank, and the Eurogroup). And, though important progress has been made in some areas, unfinished business remains in others.
Read more at http://www.project-syndicate.org/commentary/ecb-eurozone-economic-union-by-mario-draghi-2015-1#xhi0fOW003jg7kTI.99
Why Greece’s Spillover Across Euro Area Will Probably Be Contained This Time – Bloomberg
Why Greece’s Spillover Across Euro Area Will Probably Be Contained This Time – Bloomberg.
Greece’s flirtation with an exit from the euro in 2011 and two cliffhanger elections in 2012 prompted the darkest days of the debt crisis, halted only by the European Central Bank’s pledge to save the currency come what may.
Now, with the collapse of another Greek government, Europe’s leaders, its more vulnerable economies and financial markets are better prepared. While euro in-or-out threats will echo through the Greek election campaign, the spillover across Europe this time is likely to be contained.
“We’re looking at a Greece problem — the euro crisis is over,” Holger Schmieding, chief economist at Berenberg Bank inLondon, said by phone. “The euro crisis was all about contagion risk. I do not expect markets to seriously contest the contagion defenses of Europe.”
Investor reaction to the Greek parliament’s failure to pick a president traced the familiar north-south divide. Greek stocks and bonds plunged and markets were buffeted in Italy, Portugal and Spain, while funds flowed into Germany, Europe’s biggest economy and hard-money bastion.
BBC News – Europe in 2015: A year of insecurity
BBC News – Europe in 2015: A year of insecurity.
For Europe, 2015 will witness another attempt to reach a place of safety. For the past two years European officials and leaders have declared the economic crisis over. In the past six months a sense of foreboding has returned.
The dangers are not the same as 2012. There is no danger of countries being unable to fund their debts. The threat now is of stagnation and deflation.
European officials have warned time and again that the failure to create growth and new jobs risks not just social tension but support for the European project. Currently the economy will not return to its 2007 level until 2020.
In 2015 economic recovery will be uneven. Demand is chronically weak. Germany will remain the engine room of the European economy but will not be the powerhouse it was two years ago. Growth in France will be around 0.7%. Italy should edge away from recession but the eurozone is not expected to achieve growth of more than 1% and that will not be enough to dent an unemployment rate that remains at 11.7%.
