EGFEY - Eurobank

[SharperDingaan]

We went to PWT, and got a little unexpected help from China.

End of the month PWT reports Q2 earnings, & we already know what the average oil price has been over the entire quarter.

 

SD

[VersaillesinNY]

These Siriza clowns want to leave the Euro currency and the Eurogroup doesn't trust their ability to implement reforms. Greek banks mergers & recapitalization are on the negotiation table. The Greek tragedy continues.

 

"Exiting a common currency is nothing like severing a peg, as Britain did in 1992, when Norman Lamont famously sang in the shower the morning sterling quit the European exchange rate mechanism (ERM). Alas, Greece does not have a currency whose peg with the euro can be cut. It has the euro – a foreign currency fully administered by a creditor inimical to restructuring our nation’s unsustainable debt.

 

To exit, we would have to create a new currency from scratch. In occupied Iraq, the introduction of new paper money took almost a year, 20 or so Boeing 747s, the mobilisation of the US military’s might, three printing firms and hundreds of trucks. In the absence of such support, Grexit would be the equivalent of announcing a large devaluation more than 18 months in advance: a recipe for liquidating all Greek capital stock and transferring it abroad by any means available."

 

Varoufakis' op-ed: http://www.theguardian.com/commentisfree/2015/jul/10/germany-greek-pain-debt-relief-grexit

 

"It will be high drama, I really don't know how this movie ends, and I try not to go to movies like that."

Warren Buffett on the Greek debt crisis - 2010 Berkshire annual meeting

[muscleman]

http://www.wsj.com/articles/greek-debt-crisis-europe-pushes-athens-to-brink-with-bailout-ultimatum-1436745387

 

This is the first time I saw Mr. Tsipras not smiling on the media. Looks like the development is completely out of his plan. I bet he originally thought the worst case is that he will just agree with everything EU demanded before and he will get the deal on Sunday.

 

Now EU wants all reforms to be implemented before they can even talk about the deal? That's very surprising to me as well.

[randomep]

I am actually surprised by his about-face. Greece held all of the cards - when you owe someone hundreds of billions, it's their problem and not yours. I don't understand why he caved so quickly after the referendum.

 

Surely it doesn't take a rocket scientist to see that if you could print your own money, the currency devaluation would help Greece tremendously. So you wave that in front of the Euro-group leaders and threaten that your success will bring Spain and Italy with you and you demand haircuts on your debt to make it reasonably serviceable and for reasonable fiscal targets and boom...solved.

 

Instead, he folds....

 

I also thought the fear of Grexit would help drive a much stronger deal for Greece. The turmoil in the EU would be huge.....but here is an interesting commentary on his actions

 

http://www.bloombergview.com/articles/2015-07-10/el-erian-is-greece-s-tsipras-a-political-genius-or-lucky-

 

cheers

Zorro

 

Well it looks like there is a conception that Greece holds all the cards. Well, we'll find out because this week, because they will have a 2nd chance to Grexit.

 

As Graham always says the future is unknowable, and we tend to always have more confidence in our predictions than we should.  If they Grexit, there will be rioting on the streets. And that will be bad for Europe? I am not so sure. Who knows what will happen. Maybe the other PIIGs will see what can happen and work harder to stay within eurozone.

 

But watching this unfold I can see that Merkels got um.... balls....

 

[muscleman]

http://www.wsj.com/articles/eurozone-leaders-reach-unanimous-agreement-on-greece-says-eus-tusk-1436771076?mod=trending_now_5

 

Looks like the events didn't unfold as SD predicted. Tsipras isn't that smart.  :)

He could have done this deal 5 months ago with better terms and harm the Greek economy less.

[TwoCitiesCapital]

I am actually surprised by his about-face. Greece held all of the cards - when you owe someone hundreds of billions, it's their problem and not yours. I don't understand why he caved so quickly after the referendum.

 

Surely it doesn't take a rocket scientist to see that if you could print your own money, the currency devaluation would help Greece tremendously. So you wave that in front of the Euro-group leaders and threaten that your success will bring Spain and Italy with you and you demand haircuts on your debt to make it reasonably serviceable and for reasonable fiscal targets and boom...solved.

 

Instead, he folds....

 

I also thought the fear of Grexit would help drive a much stronger deal for Greece. The turmoil in the EU would be huge.....but here is an interesting commentary on his actions

 

http://www.bloombergview.com/articles/2015-07-10/el-erian-is-greece-s-tsipras-a-political-genius-or-lucky-

 

cheers

Zorro

 

Well it looks like there is a conception that Greece holds all the cards. Well, we'll find out because this week, because they will have a 2nd chance to Grexit.

 

As Graham always says the future is unknowable, and we tend to always have more confidence in our predictions than we should.  If they Grexit, there will be rioting on the streets. And that will be bad for Europe? I am not so sure. Who knows what will happen. Maybe the other PIIGs will see what can happen and work harder to stay within eurozone.

 

But watching this unfold I can see that Merkels got um.... balls....

 

Yea. Maybe there is aspect to this that I'm missing. There's not attractive way forward for Greece, but at least a Grexit would bring with it the ability to devalue the currency and make Greece competitive again. I'm really surprised that Greece gave up so easily and would have expected them to have a better deal after the referendum. Europe has more potential loss from a Grexit than does Greece so you would've thought that Greece could've played hardball and won. Who knows what happened behind closed doors, but I'm floored by the result.

[S2S]

For those who still think Greece held/holds all the cards, here is the transcript from Varoufaki's most recent interview:

http://www.newstatesman.com/world-affairs/2015/07/yanis-varoufakis-full-transcript-our-battle-save-greece

[Jurgis]

For those who still think Greece held/holds all the cards, here is the transcript from Varoufaki's most recent interview:

http://www.newstatesman.com/world-affairs/2015/07/yanis-varoufakis-full-transcript-our-battle-save-greece

 

Greece lost all the cards as soon as Eurocrats realized that Greece is not prepared to Grexit.

 

They could only negotiate from position of strength if they were prepared to Grexit.

 

Not that the winners will be happy for long. It a Pyrrhic victory.

[SharperDingaan]

This is where dumb and dumber get their heads handed to them.

 

They have effectively tried to stage a German coup d’état of the Greek government https://en.wikipedia.org/wiki/Coup_d%27%C3%A9tat

as the penalty for a EU member state not doing what it is told - when it is told. The only difference between this and 1938 German annexation of Austria http://www.history.com/this-day-in-history/germany-annexes-austria would seem to be no troops on the ground, and only the Germans are cheering. A new government in Germany, as soon as practicable, would very much seem to be in the long term health of all Europe.

 

Apparently trust only works one way; we take your collateral, and seize it if you do not pay. Of course, the other side of it is that we don’t service ANY of the 345B+ that we owe, until you let us back in. You threaten our banks, and we threaten yours. More importantly, we can PROVE that a Euro nation CAN go bankrupt, and walk away from its debts. And under Basel III all EU nation bonds will suddenly require more of a collateral haircut, and the amount will depend on the sovereign debt/GDP ratio. Congratulations to dumber for just reducing the capital ratios of most of the major European banks.

 

Greece is also a NATO member https://en.wikipedia.org/wiki/Member_states_of_NATO, but just exactly how are they supposed to now contribute -  as they cannot. Furthermore, they need the hard currency Putin is offering for putting the pipeline through http://rt.com/business/273223-russia-greece-energy-supplies/. Congratulations to dumber for threatening the common security interest of Europe. It is also highly unlikely the current Greek government can survive; and highly likely that its replacement will be more radical than what they have today. Another round to dumb and dumber for destabilizing Europe even more than it is currently.

 

The whole world, the IMF, and even the ECB recognize that Greece cannot possibly pay off its current debts, and that its people have given their Government the option to walk away - but apparently, not dumb and dumber. Nothing says a Grexit has to managed, and many would argue that it would be better if Greece just did an Iceland and told dumber to PFO. Mr Varoufakis http://www.newstatesman.com/world-affairs/2015/07/exclusive-yanis-varoufakis-opens-about-his-five-month-battle-save-greece might even be persuaded to take the job back for a day – just to enjoy himself!

 

The euro experiment is over.

 

SD

 

 

[randomep]

This is where dumb and dumber get their heads handed to them.

 

They have effectively tried to stage a German coup d’état of the Greek government https://en.wikipedia.org/wiki/Coup_d%27%C3%A9tat

as the penalty for a EU member state not doing what it is told - when it is told. The only difference between this and 1938 German annexation of Austria http://www.history.com/this-day-in-history/germany-annexes-austria would seem to be no troops on the ground, and only the Germans are cheering. A new government in Germany, as soon as practicable, would very much seem to be in the long term health of all Europe.

 

 

...................

 

The euro experiment is over.

 

SD

 

Comon SD, don't relate this WWII, this is still not slaughter of millions of lives.......

 

Financial occupation has happened before, in fact, it has happened to Greece. I repeat, if the troika occupies Athens it is not the first time. And I am not talking about WWII.  In 1897 Germans did occupy Greece financially. But that is loooong forgotten and is nothing of the severity of WWII.

Why, then, would Greece not simply go down the same path today? The country has spent about a half of its history in a formal state of default. It defaulted on its first independence war loans in the 1830s, along with the Latin American countries. It defaulted again in 1843, in 1860 and in 1893. After the latter episode, German bondholders demanded international control over Greek finances — which they obtained with the establishment of the International Committee for Greek Debt Management following the Greco-Turkish war of 1897. Still, Greece managed to default again during the 1930s. None of these defaults occurred under radical governments.

And regarding your statement about euro being over..... comon, your predictions have been wrong..... and you still want to stick your neck out and make more predictions?

[meiroy]

 

 

The euro experiment is over.

 

SD

 

It could continue if Germany exists... Cough.

 

Within a year we will have a clearer picture, just need to see how much the Front National, Podemas and friends increase in coming elections.

 

Once it gets close to the tipping point, I wonder if the Germans will finally get sense and change internally or they will simply choose their own extreme political party.

 

 

 

[influx]

Greece economy was growing the 2nd fastest right before Tsipras came into power. And he interrupted that growth and throw the country into recession again.

EU's austerity measures worked in Ireland and Cyprus, and it seems working right before Tsipras came. Who should be blamed?

 

if this was true and growing 2nd fastest, and people felt that, then he would not be voted in power, no?

[SharperDingaan]

We are just off in the timing of the unraveling.

 

The deal has to pass the Greek parliament. And not be overturned by a future Greek government. Still to be determined.

Greek banks are going to have to open at some point. What they pay out, & how much, still to be agreed.

Euro scapegoats to wear the mess. More ruthless and much uglier political plays.

Containment. No longer a manageable problem.

 

Agreed that 1 year out it will look very different from what it looks like today. Unfortunately, almost assuredly worse.

There will be some new players, and very ugly removal of old ones.

 

Our own view is that Greece will do an Iceland, if not this round - then sometime in the reasonably foreseeable future.

How much help they get, depends on how inflexible some parties choose to be.

 

Agreed that on this board, there is no place for the German references. But in the real world they are going to be deliberately used to smear and target specific individuals, and the time-honoured approach is to stir the radical elements on all sides. World over, what cannot get resolved politically - typically gets resolved violently.

 

Disciplining is one thing, but most people recognize that beating the sh1t out of the errant is actually abuse.

We all have a responsibility to call it when we see it.

 

SD

 

[influx]

http://www.telegraph.co.uk/finance/economics/11736779/Greece-is-being-treated-like-a-hostile-occupied-state.html

And let us not forget that these primary surpluses never made any sense in the first place. They were not drawn up on the basis of macro-economic analysis. They were written into prior agreements because that is what would be needed – ceteris paribus – to pretend that debt is sustainable, and therefore that the IMF could sign off on the accords. What a charade.

...

Yet that is only half the story. We have also watched the EMU creditor powers bring a country to knees by cutting off the emergency liquidity (ELA) to the banking system.

...

Let there be no doubt, it was the decision by the European Central Bank to freeze ELA at €89bn two weeks ago that precipitated the final crisis and broke Syriza’s will to resist. The lines of authority on this episode are blurred. Personally, I do not blame the ECB’s Mario Draghi for this abuse of power. It was in essence a political decision by the Eurogroup.

But however you dress it up, the fact remains that the ECB is by its acts dictating a political settlement, and serving as the enforcement arm of the creditors rather than upholding EU treaty law.

It took a stand that further destabilised the financial system of an EMU member state that was already in grave trouble, and arguably did so in breach of its primary treaty duty to uphold financial stability. It is a watershed moment.

...

The summit document asserts with self-serving dishonesty that Greece’s debt has come off the rails due to the failure of Greek governments to stick to the Memorandum over the last year. Had this not occurred, the debt would still be sustainable.

This is a lie. Public debt ballooned to 180pc late last year – long before Syriza was elected – and even though the New Democracy government had complied with most Troika demands.

The truth is that Greece was already bankrupt in 2010. EMU creditors refused to allow a normal debt restructuring to take place because it would have led to instant contagion to Portugal, Spain, and Italy at a time when the eurozone had no lender-of-last resort or defences.

[influx]

Disciplining is one thing, but most people recognize that beating the sh1t out of the errant is actually abuse.

We all have a responsibility to call it when we see it.

 

SD

 

creditors should be disciplined too, no? :) the errant includes the creditor too..the creditor relied on the political force behind the eur project to credit such laid back country

[TwoCitiesCapital]

The truth is that Greece was already bankrupt in 2010. EMU creditors refused to allow a normal debt restructuring to take place because it would have led to instant contagion to Portugal, Spain, and Italy at a time when the eurozone had no lender-of-last resort or defences.

 

This is true. I never really understood all of the drama around the potential Greek default. Greek needs a bailout from the EMU and IMF so it can afford to repay loans to the EMU and the IMF....it's a circular flow. Greece has been bankrupt for the past several years and will continue to be bankrupt for the foreseeable future. There is no debate about this - you can't argue with the numbers.

 

And yet....everyone freaks out if we threaten the charade that everyone knows is fake to begin with. I'll just never understand things like how this "default" would give us any new information about the risk of lending to Greece at the moment or how things like the implicit default through inflation is more palatable than an explicit default. None of it makes sense to me but everyone else seems to look at the statement A=B=C and somehow determine that C is more valuable than A.

[Txvestor]

This euro project is a joke. All it needs to completely unravel is one brave/bold leader to make preparations for exit and make a stink and leave and it will be over very quickly.

After observing the events of this weekend, I was left to conclude that the EU is a pretty raw deal for peripheral countries. To be sure they need to reform their societies as the world is a lot more competitive nowadays. However the attitude of the Germans towards their neighbours and trade partners and debtors also needs to change, otherwise they will gradually isolate themselves.

There was a punitive streak evident to me in the agreement.

[constructive]

http://www.telegraph.co.uk/finance/economics/11736779/Greece-is-being-treated-like-a-hostile-occupied-state.html

We have also watched the EMU creditor powers bring a country to knees by cutting off the emergency liquidity (ELA) to the banking system.

...

Let there be no doubt, it was the decision by the European Central Bank to freeze ELA at €89bn two weeks ago that precipitated the final crisis and broke Syriza’s will to resist.

 

So the ECB should just throw good money after bad indefinitely? Even if the greek banks look like they are on the edge of insolvency, and the government looks like it is about to default and possibly leave the Euro, the ECB should be forced to shovel bags of money into the furnace?

 

Borrowing money is not a right but a privilege. If the Greek government wanted emergency funding to continue, they should have behaved differently.

[Rainforesthiker]

http://www.telegraph.co.uk/finance/economics/11736779/Greece-is-being-treated-like-a-hostile-occupied-state.html

We have also watched the EMU creditor powers bring a country to knees by cutting off the emergency liquidity (ELA) to the banking system.

...

Let there be no doubt, it was the decision by the European Central Bank to freeze ELA at €89bn two weeks ago that precipitated the final crisis and broke Syriza’s will to resist.

 

So the ECB should just throw good money after bad indefinitely? Even if the greek banks look like they are on the edge of insolvency, and the government looks like it is about to default and possibly leave the Euro, the ECB should be forced to shovel bags of money into the furnace?

 

Borrowing money is not a right but a privilege. If the Greek government wanted emergency funding to continue, they should have behaved differently.

 

Agreed.  The crisis was going to come to a head at some point regardless; it probably should have happened years ago.  Here we have a country (Greece) that is relatively unproductive (or more generously less productive) and living well above their means while taking from more productive (or more hard working / less corrupt) citizens from neighboring countries to subsidize their lifestyle.  When after 3 bailouts the productive hard-working countries (such as Germany) decide they don't want their citizens subsidizing a country like Greece any further, all of a sudden they are the villain?  I really don't get it.  Charlie Munger is right about Greece.  These types of things are always cast as "rich vs. poor" but in reality this a a situation of productive / responsible vs. nonproductive / irresponsible.

[Charlie]

"We all have a responsibility to call it when we see it."

 

Munger on Euro strains: "You shouldn't create a partnership with your drunken, shiftless brother in law."  ;)

[Jurgis]

These types of things are always cast as "rich vs. poor" but in reality this a a situation of productive / responsible vs. nonproductive / irresponsible.

 

Ah, yes, the "productive / responsible" Germans who irresponsibly lent to Greece, but when the loans soured, they shifted them from German banks to EU taxpayers. Hey, that's really productive and responsible. NOT.

[Rainforesthiker]

"We all have a responsibility to call it when we see it."

 

Munger on Euro strains: "You shouldn't create a partnership with your drunken, shiftless brother in law."  ;)

 

Or if you do lend money to your brother in law out of kindness, and then realize he is drunken and shiftless, you owe it yourself to extricate yourself from the situation and stop lending more money.

[Rainforesthiker]

These types of things are always cast as "rich vs. poor" but in reality this a a situation of productive / responsible vs. nonproductive / irresponsible.

 

Ah, yes, the "productive / responsible" Germans who irresponsibly lent to Greece, but when the loans soured, they shifted them from German banks to EU taxpayers. Hey, that's really productive and responsible. NOT.

 

The German taxpayers will take a big hit if and when Greece defaults, to the tune of $80 or $90 billion or so. 

 

Lending to a neighboring country who needs money turns out in hindsight to have been a bad decision obviously.  But IMO when a loan default occurs the irresponsibility largely lies with the entity that does not pay back the money loaned to them.  I suspect that some of the young posters on this board have never stood in the shoes of a creditor, but you think about things a little differently when it is your hard earned money on the line that is not being paid back. 

[SharperDingaan]

creditors should be disciplined too, no? :)

 

 

We think they will be http://www.spiegel.de/international/business/banks-in-europe-concerned-about-upcoming-ecb-run-stress-tests-a-956668.html

 

The ECB administers these stress tests; yet dumber choose to publicly dress down the head of the ECB over the weekend. The stress tests will haircut all euro-debt, & refusing to address the credit risk (when even the IMF says Greek debt levels are not sustainable) - just made those haircuts bigger, & further stressed the capital ratios. Way to go there buddy!

 

The article indicates German banks were vulnerable to shipping losses, and that many German banks were borderline. Pushing the Greek shipping lines closer to the wall just made everything worse, and those additional haircuts just brought everybody back to this time last year. On a roll there, buddy.

 

Deutsche Bank passes because ECB approves the bespoke methodology. And Deutsche Bank have just demonstrated that they were one on the more corrupt players in the recent LIBOR scandal. Dumber just raised the odds that the ECB takes a less forgiving view this time around - & will require another capital raise from all German banks this year. With friends like dumber .. who needs enemies!

 

Most would think that if you are a German banker, perhaps it is time for a new finance minister. Simply fire, and let new people, and new dynamics take you to a better place

 

Change the minister, or lose a good chunk of the party funding  ;)

 

SD

 

 

[Jurgis]

The German taxpayers will take a big hit if and when Greece defaults, to the tune of $80 or $90 billion or so. 

 

Ah, but the banks won't. Such a nice play.

 

Lending to a neighboring country who needs money turns out in hindsight to have been a bad decision obviously.  But IMO when a loan default occurs the irresponsibility largely lies with the entity that does not pay back the money loaned to them.  I suspect that some of the young posters on this board have never stood in the shoes of a creditor, but you think about things a little differently when it is your hard earned money on the line that is not being paid back.

 

You make the classic mistake of equating a loan from person to person to Greece situation. It is not the same. A country is not a person. You cannot resolve recession with permanent austerity. You cannot take country's sovereignty just because it owes you (try it with Argentina or Venezuela, good luck). To get out of the perma depression, country has to default and devalue instead of extend and pretend. And BTW, if Eurocrats allowed Greece to default and then provided help to it, it might cost less than the whole extending and pretending charade.

 

But actually even for person there are BK rules that might be less onerous than what Germany is trying to impose on Greece.

 

And BTW, do you think that, for example, Detroit should have been cut off the USD when it said that it was BK? Perhaps that was the right thing to do, no? That would have taught it a lesson: "If you default, no dollars for you, make your Detroit-drachma currency!".