Reposted from: SHFT-Plan | by Mac Slavo
Chaos and economic disaster are still stirring up in Greece, with a sharp rejection of foreign control of their troubled affairs.More austerity and new rounds of loans? Voters in Greece’s emergency referendum were overwhelmingly against it. Whatever happens next, they stood up to the authoritarian tactics of the European Union. Hurrah.
Greeks voted overwhelmingly to reject creditors’ proposal of more austerity measures in return for rescue loans, in the country’s first referendum in 41 years Sunday.The referendum “will stay in history as a unique moment when a small European nation rose up against debt-bondage,” Varoufakis said. (source)
Now signal the panic. Collapse may be impending. Then doom. Contagion could spread to America, too, and trigger global market implosion and derivatives meltdown.This weekend brought not only the “no” vote but the resignation of Greek finance minister Yanis Varoufakis, who angrily pointed the finger at predatory creditor banks who he said are using “terrorism” against the angry, defiant people of Greece.
Yanis Varoufakis, Greece’s finance minister, on Saturday accused the country’s creditors of trying to “terrorise” Greeks into accepting austerity.“What they’re doing with Greece has a name: terrorism,” he told Spanish newspaper El Mundo. “Why have they forced us to close the banks? To frighten people.” (source)
As things stand, the banks are still closed, ATM withdrawals are very limited and strict capital controls have imposed to avoid a full on bank run… but now they are looking to take deposit funds to cover the emergency as well.
With the very near possibility of collapse, amid a shortage of cash and short term money, banks in Greece are poising themselves to “bail in” during financial emergencies by seizing customers bank accounts.
Greek banks prepare plan to raid deposits to avert collapseGreek banks are preparing contingency plans for a possible “bail-in” of depositors amid fears the country is heading for financial collapse…The plans, which call for a “haircut” of at least 30 per cent on deposits above €8,000…
So that could be coming next.
European finance figures expressed woe over the Greek rebellion, and deep upset at the threat to the Euro, decrying:
“a path of bitter austerity and hopelessness.”“What we certainly don’t want to do is to take decisions that will threaten the monetary union.”
It should be a stark reminder who will carry the costs of failure – the people. Once again, it is the public who bears the losses, and the private clubs who enjoy the profits.Americans may remember the episode with MF Global – where the company lost big in derivatives and stole customers funds to cover their losses.Well, that one taught everyone what to expect… be sure, there is more coming.
Greece is Just the Beginning… Again: “This Kind of Carnage Can Happen All Over Europe”
Greece Today, America Tomorrow: This Picture and Video Explain Exactly Why Doomsday Preppers Are Getting Ready For An Imminent Collapse
Coming To America: The Hoarding Begins: Greeks Rush To Grocery Stores, Gas Stations and ATMs In Anticipation of Collapse
Greece Contemplates Nuclear Options: May Print Euros, Launch Parallel Currency, Nationalize Banks
As we said earlier today, following today’s dramatic referendum result the Greeks may have burned all symbolic bridges with the Eurozone. However, there still is one key link: the insolvent Greek banks’ reliance on the ECB’s goodwill via the ELA. While we have explained countless times that even a modest ELA collateral haircut would lead to prompt depositor bail-ins, here is DB’s George Saravelos with a simplified version of the potential worst case for Greece in the coming days:
The ECB is scheduled to meet tomorrow morning to decide on ELA policy. An outright suspension would effectively put the banking system into immediate resolution and would be a step closer to Eurozone exit. All outstanding Greek bank ELA liquidity (and hence deposits) would become immediately due and payable to the Bank of Greece. The maintenance of ELA at the existing level is the most likely outcome, at least until the European political reaction has materialized. This will in any case materially increase the pressure on the economy in coming days.
All of which of course, is meant to suggest that there is no formal way to expel Greece from the Euro and only a slow (or not so slow) economic and financial collapse of Greece is what the Troika and ECB have left as a negotiating card.
However, this cuts both ways, because while Greece and the ECB may be on the verge of a terminal fall out, Greece still has something of great value: a Euro printing press.
It may not get to there: according to Telegraph’s Ambrose Evans Pritchard who quotes what appears to be a direct quote to him from Yanis Varoufakis, Greece will, “If necessary… issue parallel liquidity and California-style IOU’s, in an electronic form. We should have done it a week ago.”
California issued temporary coupons to pay bills to contractors when liquidity seized up after the Lehman crisis in 2008. Mr Varoufakis insists that this is not be a prelude to Grexit but a legal action within the inviolable sanctity of monetary union.
In other words: part of the Eurozone… but not really using the Euro.
That’s not all, because depending just how aggressively the ECB escalates events with Athens, Greece may take it two even more “nuclear” steps further, first in the form of nationalizing the banks and second, by engaging in the terminal taboo of “irreversibility” printing the currency of which it is no longer a member!
Syriza sources say the Greek ministry of finance is examining options to take direct control of the banking system if need be rather than accept a draconian seizure of depositor savings – reportedly a ‘bail-in’ above a threshhold of €8,000 – and to prevent any banks being shut down on the orders of the ECB.
Government officials recognize that this would lead to an unprecedented rift with the EU authorities. But Syriza’s attitude at this stage is that their only defence against a hegemonic power is to fight guerrilla warfare.
Hardliners within the party – though not Mr Varoufakis – are demanding the head of governor Stournaras, a holdover appointee from the past conservative government.
They want a new team installed, one that is willing to draw on the central bank’s secret reserves, and to take the provocative step in extremis of creating euros.
“The first thing we must do is take away the keys to his office. We have to restore stability to the system, with or without the help of the ECB. We have the capacity to print €20 notes,” said one.
Such action would require invoking national emergency powers – by decree – and “requisitioning” the Bank of Greece for several months. Officials say these steps would have to be accompanied by an appeal to the European Court: both to assert legality under crisis provisions of the Lisbon Treaty, and to sue the ECB for alleged “dereliction” of its treaty duty to maintain financial stability.
And who “unwittingly” unleashed all of this?
Mr Tsakalotos told the Telegraph that the creditors will find themselves be in a morally indefensible position if they refuse to listen to the voice of the Greek people, especially since the International Monetary Fund last week validated Syriza’s core claim that Greece’s debt cannot be repaid.
Recall last week we asked “Did The IMF Just Open Pandora’s Box?” We just got the answer. Our advice to Mme Lagarde: avoid stays at the Sofitel NYC for the next few weeks.
As for Europe: welcome to your own personal Lehman weekend. We hope you too enjoy making it all up as you go along, because you have officially entered the heart of monetary darkness.