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Capital Controls Arrive: Greece Begins Confiscating Deposits Of “Small Debtors”
Capital Controls Arrive: Greece Begins Confiscating Deposits Of “Small Debtors”
Last week, the Greek government issued a decree which called for local governments to transfer excess cash to the central bank so that Athens would be able to pay pensions, salaries, and the IMF. The move is expected to raise as much as €2 billion to help keep the country afloat while the country’s “amateurish, time-wasting gambler” of a FinMin feebly attempts to find some kind of middle ground with his EU counterparts and as PM Tsipras pulls out all the stops including the old EU Summit sideline end-around with Merkel and the wild card energy gas pipeline advance from Gazprom (which may portend the dreaded “Russian pivot”).
If the “temporary” local government reserve sweep constitutes what we have branded “soft” capital controls, we now have the first evidence that the “hard” variety may have arrived because as Kathimerini reports, Greek debtors are having their deposits seized in lieu of payment. Here’s more:
As the country’s finances reach a critical point, tax authorities have started seizing the deposits of small debtors, Kathimerini understands.No figures were available regarding the new crackdown but cases of debtors targeted included a citizen with a debt of just 200 euros.
The bank account of the man in question was frozen and then reopened once it was established that he had paid his dues. In several cases, including that of a citizen with a debt of 24,000 euros, bailiffs are said to have used threats to secure the cash. The initiative comes as efforts to crack down on rich Greeks with tax debts make slow progress.
…click on the above link to read the rest of the article…
Is Greece About To “Lose” Its Gold Again?
Is Greece About To “Lose” Its Gold Again?
When it comes to the topic of Greece, most pundits focus on two items: i) when will Greece finally run out ofconfiscated cash, and ii) will Greece fold to the Troika (and agree to another bailout(s) with even more austerity) or to Russia (and agree to the passage of the Russian Turkish Stream pipeline, potentially exiting NATO and becoming the most important European satellite of the USSR 2.0) once that moment arrives.
And yet what everyone appears to be forgetting is a nuanced clause buried deep in the term sheet of the second Greek bailout: a bailout whose terms will be ultimately reneged upon if and when Greece defaults on its debt to the Troika (either in or out of the Eurozone). Recall that as per our report from February 2012, in addition to losing its sovereignty years ago, Greece also lost something far more important. It’s gold:
To wit:
Ms. Katseli, an economist who was labor minister in the government of George Papandreou until she left in a cabinet reshuffle last June, was also upset that Greece’s lenders will have the right to seize the gold reserves in the Bank of Greece under the terms of the new deal.
The “new deal”referred to is the Second Greek Bailout, which either will be extended and lead to a third (and fourth, and fifth bailout, each with every more draconian terms until finally Greece does default), or will collapse at which point the Troika will indeed have the right to seize the Greek gold reserves.
What makes this case particularly curious, however, is that it won’t be the first time Greece will have “lost” its gold. In The Tower of Basel, citing the BIS archive from Febriary 9, 1931, Adam LeBor writes:
…click on the above link to read the rest of the article…
Germany Prepares For “Plan B”, Says Greece Would “Need Not Only A Third Bailout, But Fourth, Fifth Or Even More”
Germany Prepares For “Plan B”, Says Greece Would “Need Not Only A Third Bailout, But Fourth, Fifth Or Even More”
It has been a very disturbing 24 hours for Greece.
It all started during yesterday’s surprisingly short, just one hour long Eurozone finmin meeting in Riga, where Yanis Varoufakis not only got the most “hostile” reception yet being called “a time-waster, gambler, and amateur“, but for the first time one minister openly said that maybe it was time governments prepared for the plan B of a Greek default. This happened after Jeroen Dijsselbloem slammed the door on Varoufakis’ proposal for early cash after partial reforms.
“A comprehensive and detailed list of reforms is needed,” Dijsselbloem told a news conference following a meeting in Riga. “A comprehensive deal is necessary before any disbursement can take place … We are all aware that time is running out.”
And so, what was once anathema, namely the official hints that a Grexit is being contemplated at the highest ranks, has now become almost commonplace, courtesy of the backstop provided by the ECB’s QE, which has lulled everyone into a sense of calm because somehow the hope has been kindled that the ECB (which is rapidly running out of government bonds to buy) can offset the realization that what was once an “unbreakable union” is suddenly not only breakable, but no longer a union. As such the trillions in deposit outflows that will sweep the periphery are somehow to be ignored because, well, “Draghi.”
This continued earlier today, when none other than German Finance Minister Schaeuble hintedthat Berlin was preparing for a possible Greek default, drawing a parallel with the secrecy of German reunification plans in 1989.
…click on the above link to read the rest of the article…
11 Signs That We Are Entering The Next Phase Of The Global Economic Crisis
11 Signs That We Are Entering The Next Phase Of The Global Economic Crisis
Well, the Nasdaq finally did it. It has climbed all the way back to where it was at the peak of the dotcom bubble. Back in March 2000, the Nasdaq set an all-time record high of 5,048.62. On Thursday, after all these years, that all-time record was finally eclipsed. The Nasdaq closed at 5056.06, and Wall Street greatly rejoiced. So if you invested in the Nasdaq at the peak of the dotcom bubble, you are just finally breaking even 15 years later. Unfortunately, the truth is that stocks have not been soaring because the U.S. economy is fundamentally strong. Just like the last two times, what we are witnessing is an irrational financial bubble. Sometimes these irrational bubbles can last for a surprisingly long time, but in the end they always burst. And even now there are signs of economic trouble bubbling to the surface all around us. The following are 11 signs that we are entering the next phase of the global economic crisis…
#1 It is being projected that half of all fracking companies in the United States will be “dead or sold” by the end of this year.
#2 The rig count just continues to fall as the U.S. oil industry implodes. Incredibly, the number of rigs in operation in the United States has fallen for 19 weeks in a row.
#3 McDonald’s has announced that it will be closing 700 “poor performing” restaurants in 2015. Why would McDonald’s be doing this if the economy was actually getting better?
#4 As I wrote about the other day, we could be right on the verge of a Greek debt default. In fact, we learned on Thursday that the Greek government has been “running on empty” for months…
…click on the above link to read the rest of the article…
The Greek People Just Destroyed Syriza’s Strategy
The Greek People Just Destroyed Syriza’s Strategy
Greek stocks ventured deeper into purgatory. The ASE index dove below 700 intraday on Wednesday for the first time since the crisis days of June 2012. Then word spread that the ECB had raised the cap on the Emergency Liquidity Assistance for Greek banks by €1.5 billion to €75.5 billion. It’s the oxygen line for Greek banks. Without it, they’re toast.
The ELA provides the liquidity so that the Greeks can continue yanking their beloved euros out of their banks to stash them elsewhere before their desperate government confiscates them.
The government, under the cool leadership of Prime Minister Alexis Tsipras and Finance Minister Yanis Varoufakis, is already confiscating €2.5 billion in “idle” cash that state agencies, state-owned enterprises, and local governments kept at commercial banks, the same banks that the ELA is propping up and that the Greeks are fleeing. Now these entities have to transfer the money to the central bank so that the government can “borrow” it for other purposes.
When word got out that ELA money could continue to flow to the banks for a little while longer, the dreadfully beaten-down FTSE Athens Banks index jumped over 11%. It remains 74% below where it was last June. The overall ASE index recovered to settle above 700. It remains a mere shadow of its former self, down 87% from its cheap-euro-debt peak in 2007.
Greek 2-year yields and 3-year yields, unlike their Eurozone brethren that are blissfully bathing in the negative, jumped to nearly 30%. The 5-year default probability is approaching 90%. In short, the Greek financial markets are kissing the euro goodbye.
…click on the above link to read the rest of the article…
Grexit: Remaining In The Eurozone Is No Longer ‘The Base Case’ For Greece
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 aboutthe 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.
At this point, many top European officials are quietly admitting that it is more likely than not that Greece will leave the euro by the end of this year. The following is an excerpt from the Wall Street Journal article that I mentioned above…
…click on the above link to read the rest of the article…
ECB Prepares To Sacrifice Greek Banks With 50% Collateral Haircut
ECB Prepares To Sacrifice Greek Banks With 50% Collateral Haircut
In what seems like a coincidental retaliation for Greece’s pivot to Russia (and following Greece’s initiation of capital controls), the supposedly independent European Central Bank has decided suddenly that – after dishing out €74 billion of emergency liquidity to the Greek National Bank to fund its banks – as The NY Times reports, the value of the collateral that Greek banks post at their own central bank to secure these loans be reduced by as much as 50%, and the haircut scould increase if negotiations with Europe remain at an impasse. As we detailed earlier, this isabout as worst-case-scenario for Greece as is ‘diplomatically’ possible currently, and highlights an increasingly hard line by The ECB toward The Greeks as the move will leave banks hard-pressed to survive.
As we laid out earlier, according to Bloomberg, the ECB staff proposal lays out three options to reduce central-bank risk: “the scenarios envisage returning haircuts to the level before late last year, when the ECB eased its collateral requirements for Greece; to set them at 75 percent; or to set them at 90 percent. The latter two options could be applied if Greece is in an “orderly default” under a formal ECB program or a “disorderly default,” CNBC said, without further elaborating on those terms.”
Any reduction in ELA availability would be devastating to Greece, where depositors continue to pull cash from banks accounts to the tune of several hundred million euro every week, and 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.”
…click on the above link to read the rest of the article…
Stunned Greeks React To Initial Capital Controls And The “Decree To Confiscate Reserves”, And They Are Not Happy
Stunned Greeks React To Initial Capital Controls And The “Decree To Confiscate Reserves”, And They Are Not Happy
Earlier today, following weeks of speculation, Greece finally launched the first shot across the bow of capital controls, when it decreed that due to an “extremely urgent and unforeseen need” (ironically the need was quite foreseen since about 2010, but that is a different story), it would be “obliged” to transfer – as in confiscate – “idle cash reserves” located across the country’s local governments (i.e., various cities and municipalities) to the Greek central bank.
Several hours later the decree which was posted in the government gazette has finally percolated among the population, and the response to what even ordinary Greeks realize is now the endgame, is less than exuberant.
Bloomberg reports, that “as Greece struggles to find cash to stay afloat, local authorities say they oppose a government decision to use their reserves for short-term financing.”
“The government’s decision to seize our reserves not only raises legal and constitutional issues, but also a moral one,” said George Papanikolaou, mayor of Glyfada, the third-largest municipality in the metropolitan region of Attica after Athens and Piraeus. “We have a responsibility to serve our citizens,” Papanikolaou said by phone on Monday. Glyfada has about 16 million euros in cash reserves, he said.
George is unhappy because as recently as tomorrow, he will find there is precisely zero euros in his public bank account, as all the money has now been forcibly sequestered by the government in order to repay future Troika, pardon, IMF obligations.
Sadly for Greece, this is the only option left as the money has now fully run out: Greek Prime Minister Alexis Tsipras ordered local governments and central government entities to move their cash balances to the central bank for investment in short-term state debt.
…click on the above link to read the rest of the article…
The Greek “White Knight” Emerges: Putin To Give Athens €5 Billion For Advance Gas Pipeline Fees
The Greek “White Knight” Emerges: Putin To Give Athens €5 Billion For Advance Gas Pipeline Fees
With Greece teetering on the edge of insolvency and forced to raid pension and most other public funds, ahead of another month of heavy IMF repayments which has prompted even the ECB to speculate Greece should introduce a parallel “IOU” currency, a white knight has appeared out of nowhere for Greece, one who may offer $5 billion in urgently needed cash. The white knight is none other than Vladimir Putin. “Just because Greece is debt-ridden, this does not mean it is bound hand
and foot, and has no independent foreign policy,” Putin said previously.
According to Spiegel, citing a senior figure in the ruling Syriza party, Greece is poised to sign a gas deal with Russia as early as Tuesday which could bring up to €5 billion into the depleted Greek coffers.
The move could now “turn the tide” for the debt-stricken country according to a senior Greek official.
As Reuters adds, during a visit to Moscow earlier this month, Greek Prime Minister Alexis Tsipras expressed interest in participating in a pipeline that would bring Russian gas to Europe via Turkey and Greece.
Under the proposed deal, Greece would receive advance funds from Russia based on expected future profits linked to the pipeline. The Greek energy minister said last week that Athens would repay Moscow after 2019, when the pipeline is expected to start operating.Greek government officials were not immediately available to comment on the Spiegel report.
Of course, this being Greece, the probability of actual repayment is negligible: after all the likelihood of a Greek default is astronomical, and €5 billion will do little to change the mechanics of Greek debt sustainability. And Putin very well knows this.
…click on the above link to read the rest of the article…
Is May 9 The Grexit Date?
Is May 9 The Grexit Date?
Yes, more Greece, ever more Greece. Well, the focus is still very much there. It’s not the only topic, obviously, China warrants interest too, certainly with things like Tyler Durden quoting Cornerstone Macro as saying China’s true economic growth rate was just 1.6% in Q1 2015, not the official government number of 7%. Never trust anyone, especially a government, that consistently meets or beats its predictions. With housing prices falling the way they have, -6% or thereabouts, and over 70% of Chinese private investment in real estate, it’s hard to see how a 7% GDP growth number could pass scrutiny. Sure, there’s the stock market bubble, but even then.
But for now back to Athens. Or Washington, actually, where Yanis Varoufakis finds himself. From what we can gather on his schedule, Varoufakis has (or has had) meetings with Obama and Lagarde on Thursday, and with Mario Draghi, Jack Lew and Wolfgang Schaeuble on Friday.
Also on Friday, he’s meeting sovereign debt lawyer Lee Buchheit, who’s a partner at New York law firm Cleary Gottlieb [..Steen & Hamilton], and has helped restructure debt for various countries. The Guardian, back in 2013 (how times have changed!), portrayed Buchheit as the ‘fairy godmother to finance ministers in distress’:
This is the man who stands up to the vulture funds – so named because they buy up the debt of desperately poor countries in order to chase them through the courts for repayment. So it is something of a surprise to meet a slight, mild-mannered lawyer, with more than a whiff of academia about him.
…click on the above link to read the rest of the article…
Huge Trouble Is Percolating Just Under The Surface Of The Global Economy
Huge Trouble Is Percolating Just Under The Surface Of The Global Economy
Did you know that the number of publicly traded companies declaring bankruptcy has reached a five year high? And did you know that Chinese exports are absolutely collapsing and that Chinese economic growth in 2014 was the weakest in over 20 years? Even though things may seem to be okay on the surface for the global economy at the moment, that does not mean that big trouble is not percolating just under the surface. On Wednesday, investors cheered as stocks soared to new highs, but almost all of the economic news coming in from around the planet has been bad. The credit rating on Greek debt has been slashed again, global economic trade is really slowing down, and many of the exact same financial patterns that we saw just before the crash of 2008 are repeating once again. All of this reminds me of the months leading up to the implosion of Lehman Brothers. Most people were feeling really good about things, but huge trouble was brewing just underneath the surface. Finally, one day we learned that Lehman Brothers had “suddenly” collapsed, and then all hell broke loose.
If the economy is actually “getting better” like we are being told by the establishment media, then why are so many big companies declaring bankruptcy? According to CNBC, the number of publicly traded companies declaring bankruptcy has hit a five year high…
…click on the above link to read the rest of the article…
The Weak Suffer What They Must: Yanis and the End of Europe
The Weak Suffer What They Must: Yanis and the End of Europe
From southern Europe to the far north, matters are shifting, sometimes slowly, sometimes faster. There are moments when it seems all that goes on is the negotiations over the Greek dire financial situation and its bailout conditions, but even there nothing stands still. The Financial Times ran a story claiming Greece is about to default on is debt(s), and many a pundit jumped on that, but there was nothing new there. Of course they are considering such options, but they are looking at many others as well. That doesn’t prove anything, though.
Yanis Varoufakis’ publisher, Public Affairs Books, posted a promo for an upcoming book by the Greek Finance Minister, due out only in 2016, mind you, that reveals a few things that haven’t gotten much attention to date. It’s good to keep in mind that most of the book will have been written before Yanis joined the new Greek government on January 26, and not see it as a reaction to the negotiations that have played out after that date.
Varoufakis simply analyzes the structure of the EU and the eurozone, as well as the peculiar place the ECB has in both. Some may find what he writes provocative, but that’s beside the point. It’s not as if Europe is beyond analysis; indeed, such analysis is long overdue.
Indeed, it may well be the lack of it, and the idea in Brussels that it is exempt from scrutiny, even as institutions such as the ECB build billion dollar edifices as the Greek population goes hungry, that could be its downfall. It may be better to be critical and make necessary changes than to be hardheaded and precipitate your own downfall. Here’s the blurb for the book:
…click on the above link to read the rest of the article…
Hope on the Horizon and It Comes from Greece
Hope on the Horizon and It Comes from Greece
Washington in its arrogance, seeing itself as “indispensable,” poses a continuing threat to the lives of hundreds of millions of people. The extraordinary number of dead that Washington has murdered in the 21st century–”The American Century”–is dismissed as “collateral damage” in the “war on terror.”
The war on terror is a hoax. It is a creation of the evil neoconservatives who intend Washington’s world hegemony and Israel’s hegemony from the Nile to the Euphrates. The rest of mankind has realized that Washington’s drive for world hegemony means the entire human race will be dismissed as “collateral damage” as Washington establishes itself as the “exceptional, indispensable country.” The country whose will is above the rule of law and whose morality is non-existent.
The stark reality is that America, which wore the White Hat during the Cold War, now wears the Black Hat, and Russia and China have traded the Black Hat for the White Hat. The hope for mankind no longer resides in the West, which has entered a militarized gestapo existence conducting war against its own citizens and the world at large.
Aggression is the hallmark of 21st century Washington and its captive European vassal states. There has not been a 21st century year without slaughter of innocents by “Western civilization.”
…click on the above link to read the rest of the article…
No Longer Quiet on the Eastern Front (Part 3)
No Longer Quiet on the Eastern Front (Part 3)
Writing a short series of articles about geopolitics carries some risks – namely, that current events can unfold faster than I can hit the ‘send’ button on my next edition. It appears that I am releasing this missive in the nick of time, as the coming days promise more dramatic developments in the Greek economic crisis and, of particular interest, that country’s growing closeness with Russia.
Let us quickly review what has been covered thus far in this series. In part one, we focused on economic tensions between the European Union and Greece, and how the past five years of austerity and hardship may compel the new Greek government to seek stronger ties with Russia. Part two reviewed last year’s disintegration of Ukraine, and the chain of events that sparked its ongoing civil war.
Civil unrest in Kiev. Photo courtesy: The Times of London
In this final segment, we will attempt to view both of these conflicts from the Russian perspective, and to provide some insight into (if not a defense of) the Greek point of view. I do not consider myself to be a “Kremlinologist”, or even an expert on Russian political affairs. That being said, I do believe that I can offer a relatively informed perspective that comes from living in both Athens and Moscow over the past ten years, at times when both countries were facing economic crises. I also believe that mainstream Western media outlets have thoroughly and utterly failed in their duty to provide a balanced perspective on the causes behind the growing chasm between Russia and the West.
…click on the above link to read the rest of the article…
“Odious Debt” Has Finally Arrived: Greece To Write Off “Illegal” Debt
“Odious Debt” Has Finally Arrived: Greece To Write Off “Illegal” Debt
It was back in June 2011 when we first hinted that the time of Odious Debt is rapidly approaching.
As a reminder, this is what Odious Debt is: In international law, odious debt is a legal theory which holds that the national debt incurred by a regime for purposes that do not serve the best interests of the nation, should not be enforceable. Such debts are thus considered by this doctrine to be personal debts of the regime that incurred them and not debts of the state. In some respects, the concept is analogous to the invalidity of contracts signed under coercion.
Today, nearly four years later, Odious Debt is now a reality in Greece, where Zoi Konstantopoulou, the head of the Greek parliament and a SYRIZA member, released two videos which have promptly gone viral, designed to promote the investigative parliamentary committee to look into the circumstances surrounding the signing of the country’s two bailout agreements that led Greece to implement its austerity measures.
The short video spots, shown below, end with the message “Check it, Erase it” referring to the country’s 320 billion-euro debt.
That this concept emerges now is perhaps confusing: it was just a few days ago when the Greek FinMin promised to the IMF that Greece would honor all of its debt commitments. Should Greece decide that some (or all) of its debt was illegal and unenforceable, this will clearly not happen. Then again, this is the same political party that made pre-election promises whose execution would require about €30 billion according to German calculation, so the relentless flipflopping is not very surprising.
…click on the above link to read the rest of the article…
