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The Greek People Just Destroyed Syriza’s Strategy

April 23, 2015

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.

 

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Olduvai IV: Courage
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Olduvai II: Exodus
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