(Bloomberg) — Greece will begin debating measures to boost liquidity as the cash-starved country braces for more than 2 billion euros ($2.12 billion) in debt payments Friday.Unable to access bailout funding and locked out of capital markets, the government will outline emergency plans to parliament Tuesday to increase funding. Payments due March 20 include interest on a swap originally arranged by Goldman Sachs Group Inc., said a person familiar with the matter who asked not to be identified publicly discussing the derivative.Prime Minister Alexis Tsipras’s government is burning through cash while trying to get its creditors — euro area member states, the European Central Bank and the International Monetary Fund — to release more money from its 240 billion-euro bailout program. European governments have said they won’t disburse any more emergency loans unless the government in Athens implements a set of economic overhauls agreed last month, including pension and sales tax reform.

“As days go by, room for maneuver becomes ever smaller,” said Theodore Pelagidis, an Athens-based senior fellow at the Brookings Institution. “The impression given is that there’s no plan A or plan B. There’s nothing.”

The government’s plan includes eliminating fines on those who submit overdue taxes by March 27 to encourage payment, helping cover salaries and pensions due at the end of the month. The bill also requires pension funds and public entities to invest reserves held at the Bank of Greece in government securities and repurchase agreements, and transfers 556 million euros from the country’s bank recapitalization fund to the state. A vote on the measures is scheduled for Wednesday.

Ending Austerity

The government said March 14 it has a plan to “enhance its liquidity” and won’t have problems meeting payments for civil servants and retirees due just one week after the March 20th debt payments. Tsipras has pledged to meet the country’s obligations while at the same time ending austerity measures.

“None of my colleagues, or anyone in the international institutions, can tell me how this is supposed to work,” German Finance Minister Wolfgang Schaeuble said in Berlin Monday. Greek leaders are “lying to the population,” he said.

The government plans to auction 1 billion euros of treasury bills on March 18. As much as 60 percent of the auctioned amount can be tapped on top of that in non-competitive and second-day bids. The money will be used to roll over 1.6 billion euros of short-term notes due March 20.

The same day, Europe’s most indebted state is scheduled to repay about 350 million euros to the IMF, while interest due on four bonds held by the ECB total about 110 million euros.

Goldman Swap

The Goldman Sachs derivative, now held by the National Bank of Greece, masked the country’s growing debt when it was agreed in 2001, helping it meet European Union rules for entering the euro area. The interest payment adds to the country’s funding woes as the government misses budget targets and the ECB refuses to allow Greek banks to keep the country afloat with additional short-term debt.

Spokesmen for the National Bank of Greece and Goldman Sachs declined to comment on the amount due for the swap, and the government didn’t respond to calls and text messages seeking comment.

Greece’s 2014 primary budget surplus was just 0.3 percent of gross domestic product, missing a target of 1.5 percent, according to preliminary data released Monday by the finance ministry.

Euclid Tsakalotos, Greece’s deputy foreign minister, said Monday that the ECB is partly to blame for Greece’s cash crunch. Tsipras and Finance Minister Yanis Varoufakis have asked on several occasions for creditors to allow more short-term notes to be issued and bought by Greek lenders to help the country meet obligations in the next weeks.

ECB Review

ECB President Mario Draghi has poured cold water on Greek demands, saying emergency funding facilities, which are keeping the country’s lenders afloat after a massive deposit outflow, can’t be used to tide over the government.

The ECB will review the liquidity position of Greek banks on March 19, the same day European Union leaders convene in Brussels. Tsipras may raise the issue of the country’s cash-flow problem in his first bilateral meeting with German Chancellor Angela Merkel on March 23.

“Vagueness from the Greek side continues and so does pressure from the euro area counterparts,” said Aristides Hatzis, associate professor of law and economics at the University of Athens. “The cat-and-mouse game is expected to continue until June.”

To contact the reporters on this story: Nikos Chrysoloras in Athens atnchrysoloras@bloomberg.net; Vassilis Karamanis in Athens atvkaramanis1@bloomberg.net; Christos Ziotis in Athens at cziotis@bloomberg.net

To contact the editors responsible for this story: Vidya Root at vroot@bloomberg.netChad Thomas, Celeste Perri




Zero hedge weighs in on the above story:


(courtesy zero hedge)


Greece Faces Cash Crunch This Friday Without “Plan A Or Plan B”: What Happens Next


Greece’s day of reckoning may be fast approaching. Athens will have to pony up more than €2 billion in debt payments this Friday to the ECB, the IMF, and (get this) Goldman Sachs, for an interest payment on a derivative and it’s not entirely clear where the money will come from. On Wednesday, the government will vote on a “plan” to boost liquidity which includes tapping public funds and diverting bank bailout money. Here’sBloomberg:

Greece will begin debating measures to boost liquidity as the cash-starved country braces for more than 2 billion euros ($2.12 billion) in debt payments Friday…


The government’s revenue-boosting plan includes eliminating fines on those who submit overdue taxes by March 27 to encourage payment, helping cover salaries and pensions due at the end of the month. The bill also requires pension funds and public entities to invest reserves held at the Bank of Greece in government securities and repurchase agreements, and transfers 556 million euros from the country’s bank recapitalization fund to the state. A vote on the measures is scheduled for Wednesday…


The Goldman Sachs derivative, now held by the National Bank of Greece, masked the country’s growing debt when it was agreed in 2001, helping it meet European Union rules for entering the euro area. The interest payment adds to the country’s funding woes as the government misses budget targets and the ECB refuses to allow Greek banks to keep the country afloat with additional short-term debt.

Despite government claims that it can meet its obligations, outside observers aren’t so sure. German FinMin Wolfgang Schaeuble for instance, can’t find anyone who can explain it:

“None of my colleagues, or anyone in the international institutions, can tell me how this is supposed to work.” 

Meanwhile, one senior fellow at the Brookings Institution suggests Athens is winging it entirely at this point:

“The impression given is that there’s no plan A or plan B. There’s nothing.”

With the situation deteriorating rapidly, the sell side is back to drawing up Grexit plans. For their part, Morgan Stanley sees a 60% chance of either a euro exit or what the bank is calling a “staycation,” which basically means that the situation is so convoluted that no one can figure it out leading to the imposition of capital controls and a painful prolonging of the inevitable. Here’s more from MS:

Grexit – what’s the probability? 


We recap the three alternative scenarios worth exploring: 


1. Euro stay (40% probability): This scenario would be the result of political compromise. Basically, of the ‘impossible trinity’ that Syriza wants (stay in the euro; be in power; and undo the bailout programme), what gives is that the Greek government doesn’t undo the bailout programme. We assume that it recommits to implementing a slightly less demanding package of measures in agreement with the official lenders, and prospects of somewhat less austerity, extra maturity extensions and interest rate reductions on the EU loans, as well as ECB QE, help find a compromise (see here). This is still our base case but, compared to our previous assessment of 55%, we think that the chances of this outcome have diminished, given the inherent difficulties in finding a middle-ground solution, mostly given Greece’s political constraints domestically, and Europe has little appetite for further slippages. 


2. Euro exit (25% probability): This would happen if the lack of a Greece-Troika compromise led to bitter negotiations, then a worsening in market reaction, negotiations ultimately failing and Greek banks being cut off from ECB funding. It could also happen if the EU perceived low contagion risk and/or viewed the political precedent of a Greek euro exit as not that bad – in which case Greece would be ‘let go’. The chances of this outcome playing out have not increased, in our view; yet they haven’t diminished either. While this is not our base case, we believe that the probability of a misstep remains substantial – given an unstable economic, bank deposit and sovereign funding situation – and may well lead to an exit. 


3. Euro staycation (35% probability): This is an intermediate scenario where no

compromise is reached over a 3-6-month horizon. We presume capital controls would be introduced to limit money outflows, and Greece, like Cyprus, would effectively no longer be a full member of the eurozone, even though formally it would stay within the currency union. Full euro membership would eventually be restored once/if all capital controls were lifted. This scenario, after some time, could evolve into either of the other two. Should this happen, we’d see a 60% probability that an exit might follow, taking a 12-18 month view, and a 40% probability that capital controls get lifted. Further damage to the economy, banking system and confidence may well lead to this outcome, especially if accompanied by policy mistakes. 


Endgame probabilities: Even though it’s beyond the scope of this note, the ‘fully computed’ probabilities – i.e., taking into account that staycation, in the end, either becomes exit or stay in the medium term – suggest that the chances of the euro stay scenario are just slightly more than even. As such, the outlook really is binary, with considerable downside risks – should capital controls be introduced. Besides economic developments, deposit flows and sovereign funding, what’s worth monitoring is the negotiations on the measures that Greece is supposed to implement by the end of April, and whether a more durable solution can be found before the expiration of the four-month extension at the end of June.

…and here’s a bit on systemic risk…

But wouldn’t Grexit make the euro a riskier proposition? Yes, we think that Grexit could conceivably affect market participants’ reaction function – perhaps for a long time. It’s probably fair to say that, if it’s just one of the smaller countries leaving, the overall impact of a euro exit scenario may well be more manageable for the rest of the region and the contagion effects rather limited if the policy response is strong enough. Yet even that would likely change the dynamics of EMU and negate the concept of irrevocability. So Grexit has the potential to leave the impression that the eurozone is no longer a monetary union, but more akin to a collection of fixed exchange rates. From a logical standpoint, if one country leaves, market participants may think that, in a subsequent crisis, others could follow, which may make bond markets in the EU periphery respond much more negatively to a future shock.

…followed by projections for the euro…

Exit (25% probability) => EURUSD to decline to 0.82

A Greek exit is still the most bearish scenario for EUR, in our view. A country leaving the eurozone, even one of the smaller countries in the periphery, will have a major negative impact on EUR. We believe that this may change the dynamics of EUR, implying that the eurozone is no longer a monetary union, but rather a collection of fixed exchange rates. Under the scenario of a Greek exit, we now project EURUSD at 0.82, especially if a Greek exit starts to increase the probability of other countries leaving.


Staycation (35% probability) => EURUSD to decline to 0.90 However, where we believe the risks have increased the most is for our staycation scenario. The potential for a staycation, where Greece stays in the euro but only with the assistance of additional measures, has increased with a probability of 35%, in our view, up from the 20% we assumed previously. This implies that the probability of the EUR decline exceeding our 1.05 base case projection (euro stay scenario) has also increased significantly. One of most significant measures, as far as EUR is concerned, could be the introduction of capital controls for Greece. While not as severe as an exit from the euro, it would once again call into question the eurozone as a monetary union. This, we believe, would expose EUR to increased downward pressure. Under our staycation scenario, we would now expect EURUSD to achieve 0.90 by year-end.

…and ending in a rather dire outlook for the Greek banking sector…

We’ve been here before: As the chart below shows, at the peak in 2012, one-third of Greek balance sheets were funded by the ECB, mostly via ELA. This coincided with the height of deposit outflows at 20%Y in June 2012 – when a Greek euro exit was most anticipated – and had remained c.30% below its peak before this latest round of outflows. 


Eurosystem funds withdrawal in event of a euro exit leaves €82bn loans unfunded: Should deposit outflows further accelerate against fears of potential euro exit, at which point the ECB would stop funding Greek banks, the system would be faced with a large and arguably unmanageable funding gap. We estimate that a 20% decline in deposits – the highest percentage we have seen in a single year (2012) – would result in a funding gap equal to about €82bn, > 40% of GDP.

*  *  *

The bottom line here is that the supposedly “indissoluble” monetary union is looking more dissoluble by the day and if there’s anything the ECB does not need a week into PSPP it’s for sovereign spreads to blow out as the market begins to price in redenomination risk.





The west is not happy with this development:


(courtesy zero hedge)



Greek PM To Meet With Putin Amid Cash Crunch


With Greece digging around in the couch cushions to try and scrape up €2 billion by Friday in order to make payments to the IMF, the ECB, and Goldman, and with celebrity FinMin Yanis Varoufakis doing his absolute best to sink the entire ship with a series of epic PR faux pas, one is left to wonder just where Athens will turn when Berlin and Brussels finally reach the end of their ropes with what increasingly looks like gross incompetence in the Aegean. We may have gotten the answer to that question today via Reuters:

Greek Prime Minister Alexis Tsipras will visit Moscow on April 8 after being invited to talks by Russian President Vladimir Putin, a Greek government official said on Tuesday.


Greece’s government has previously said Putin had invited Tsipras to visit Moscow on May 9 and it was not immediately clear if that trip had been changed. It would be Tsipras’s first official visit to Moscow since being elected in January.

There you have it. As Syriza faces the unenviable proposition of either completely giving up on its campaign promises or plunging the Greek economy and banking system into a drachma death spiral, it appears as though Athens is playing the one card it has left, which is threatening to effectively surrender itself to the Kremlin. As Reuters notes, this wouldn’t be the first time Greece has (maybe) inadvertently created speculation around the possibility that Moscow could end up being the White (or Red) Knight:

Tsipras’s left-wing government ruffled feathers among European partners in its initial days in power with comments suggesting Greece might not support EU policy on Russia.


That prompted speculation that Greece might look to Moscow for financial aid to stave off bankruptcy, though Athens rejects the idea.

It’s also worth noting that Tsipras is calling for a high level huddle with Angela Merkel, Francois Hollande, and Mario Draghi on the sidelines of this week’s EU summit. Here’s Reuters again:

The Greek official said Tsipras had personally made his appeal for a meeting this week in a phone call to Donald Tusk, president of the European Council, who organizes EU summitsand coordinates business between the EU’s 28 national governments.


Tusk’s spokesman Preben Aamann confirmed on Tuesday that Tusk was in contact with Tsipras and other EU leaders about organizing a meeting on the margins of the summit.


Merkel spoke with Tsipras on Monday amid simmering tensions between Berlin and Athens over his government’s economic plans and invited him for talks in the German capital on March 23.


At that meeting Tsipras plans to reiterate Greece’s commitment to implementing reforms and to raise Athens’ cash problems, the Greek government spokesman said.

In other words, the Greek PM may be employing the always effective “negotiate or I might talk to Putin” ruse in order to secure some leverage at a time when Germany and France are already under pressure to deal more forcefully with the Russian presence in Ukraine. This is all made especially ironic by the fact that Tsipras is now “borrowing” from the public purse in order to pay back the IMF who will promptly channel the funds to bailout Kiev.

Oh, the geopolitical ironies.







The fun begins in Spain:


(courtesy JJones/the local.com/and special thanks to Robert H for getting this for us)




Breaking: Banco Madrid files for bankruptcy

Banco Madrid is to enter insolvency proceedings, announced administrators on Monday, just days after the striken bank was taken over by Banco de España

Banco Madrid will enter insolvency proceedings and suspend all activity, after significant deposit withdrawals, the country’s central bank announced in a statement on Monday.

The news came days after the entire board of Banco Madrid resigned and handed management over to the Bank of Spain on Thursday, March 12th.

The change of management came after the central bank launched an investigation into accounts at the lender for suspected money laundering activities.

This came about after legal action was taken by US law enforcement authorites on Tuesday against the parent company of Banco Madrid, Banca Privada de Andorra (BPA).

“This decision comes in response to the sharp deterioration of Banco Madrid’s financial situation as a consequence of the important withdrawals from client funds after the latest events which have affected its capacity to meet its obligations,” Banco de España said in a statement, released on Monday morning.

Deposits were protected by the Spanish deposit guarantee fund of up to €100,000 ($105,350) per client, the bank said.




And now the Wall Street Journal on this big story of Banco Madrid’s bankruptcy:


(courtesy Wall Street Journal)



Banco de Madrid Files for Bankruptcy After Parent Accused of Money Laundering

Spanish unit of Banca Privada d’Andorra hit by client withdrawals


Updated March 16, 2015 8:28 a.m. ET

MADRID—Banco de Madrid SA, the Spanish unit of an Andorran lender accused of laundering money for organized-crime groups, has filed for protection from its creditors, Spain’s central bank said Monday.

Banco de Madrid has been hit by substantial client withdrawals, the central bank said, which has impacted the ability of the lender to “meet its obligations in a timely matter.”

The move comes less than a week after the Bank of Spain hastily took control of the tiny Madrid-based private banking unit, after The Treasury Department’s Financial Crimes Enforcement Network named Banco de Madrid’s parent company—Banca Privada d’Andorra, or BPA—a “primary money-laundering concern.”

Filing for creditor protection will allow depositors and other creditors “equal treatment.” The filing must still be approved by a judge, the Bank of Spain said in a statement published Monday morning.

Separately, Spain’s stock market supervisor, the CNMV, said it had temporarily suspended reimbursements from all investment funds managed by Banco de Madrid.


Deposits of up to €100,000 ($104,970) a client are protected by Spain’s deposit-guarantee fund, the central bank said. Banco de Madrid held €674.7 million in customer deposits as of September 2014, according to data from Spain’s banking association AEB.
Banco de Madrid confirmed it was filing for bankruptcy in a separate statement. The Spanish lender said it had undergone a “sharp deterioration in its economic and financial situation” in recent days after its parent company was named a “primary laundering concern” by the U.S. government. Banco de Madrid had over €6 billion in assets under management before the intervention, according to news releases published by the bank in recent months.

The U.S. alleged that BPA’s managers knowingly facilitated transactions by money launderers working for organized crime groups for years. The lender is a private bank based in Andorra, a tiny principality perched between Spain and France that has a thriving banking industry catering to wealthy individuals. BPA has been taken over by Andorra’s authorities.

BPA said last week that it “has worked and is working with the Andorran financial regulator to uncover any wrongdoing,” adding that any doubts about the bank’s behavior “will quickly disappear.”

Monday’s move by Spain’s central bank is likely to add to liquidity pressures at BPA. On Friday, Fitch Ratings cut its debt rating for BPA to B+ from BB+, and warned further downgrades may come, saying that BPA’s reputation will be “significantly damaged” by the money-laundering accusations. Fitch said the lender’s liquidity position and access to funding sources are under pressure, and that it may seek to access central bank funding through units such as Banco de Madrid. A Bank of Spain official said Banco de Madrid won’t have access to central bank funding following the bankruptcy filing.

BPA also has a unit in Panama, that was taken over by the Panama banking regulator last week.

Banco de Madrid is a small bank in Spain’s banking sector. The lender had 15,000 clients and 21 offices in major cities such as Madrid and Barcelona as of March 11, a spokeswoman said Monday. The bank targeted high-net worth clients with deposits above €500,000, she added.

Write to Jeannette Neumann at jeannette.neumann@wsj.com and Christopher Bjork at christopher.bjork@wsj.com

Corrections & Amplifications:
Deposits of up to €100,000, or $104,970, a client are protected by Spain’s deposit-guarantee fund. An earlier version of this article incorrectly stated the currency conversion as $95,265. March 16.




Russia continues to escalate tensions:


(courtesy zero hedge)


Russia Escalates Military Posture: Deploys Strategic Bombers To Crimea, Launches Massive Drills Across Nation


ll those who were wondering where Putin had “disappeared” to, and spreading rumors whether it was more likely his girlfriend had given birth in Switzerland or aliens had abducted him, will probably be satisfied if he were to promptly disappear once more following news that not only yesterday had he put 40,000 troops on full alert as part of “snap-readiness exercises”, but less than 24 hours followed this up with even more demonstrative military “drills” after Sputnik reported that Russian strategic Tu-22M3 (Backfire) strike bombers have been deployed to the Crimean Peninsula to hold snap combat readiness drills, a source in the Russian Defense Ministry said Tuesday, in addition to further massive troops and equipment deployment tests in the western part of the nation as well as around the Arctic circle.

As a reminder, Crimea was recently in the news following a weekend report citing Putin that he was ready to use nukes to secure the recently repossessed peninsula. So one can perhaps look at this as de-escalation.

“During the snap combat readiness drills by the Armed Forces, strategic Tu-22M3s will be deployed to Crimea,” the source said.

Then, perhaps to counter the build of NATO troops in the Baltics, Russia also deployed fighters and bombers to the country’s western exclave of Kaliningrad for snap combat readiness exercises, a source in the Russian Defense Ministry said Tuesday.

“Fighter and bomber aviation is to be redeployed to the Kaliningrad Region, and ground troops on the Baltic will be reinforced with Iskander missile complexes in the Western Military District that will be delivered on large landing ships from the Baltic Fleet,” the source said.

On Monday, President Vladimir Putin gave the order to bring Russia’s Northern Fleet, separate units of the Western Military District and the Airborne Troops to full alert in snap combat readiness exercises. The drills involve a total of 38,000 troops, 3,360 military vehicles, 110 aircraft and helicopters, 41 ships and 15 submarines.

Snap military exercises will be held in the sea, as well as on the ground and in the air until March 21. Their ultimate goal is to improve the military capabilities of the Russian Armed Forces, according to the Defense Ministry.

And then completing the trifecta, in addition to Crimea and Kaliningrad, as many as 30 army air force crews of Russia’s Western Military District are being redeployed from airfields in the Leningrad and Smolensk regions to a military airfield near the Arctic Circle as part of surprise combat readiness drills being held in the Northern Fleet and the Western Military District, according to an Interfax report.

“Army air force crews, which make up routine squadrons, are being redeployed. During the flight, the crews are practicing their pilot skills flying in units and near ground level,” the Russian Defense Ministry has reported.

As a further reminder, Russia has been particularly interested in weaponizing the Arctic in recent months, the location of countless energy deposits, announcing late in 2014 it would build 13 airfields and 10 radar stations to meet “unwelcome guests.” This is just a preview

The crews operating Mil Mi-24 and Mi-8 helicopters will have to cover more than 1,500 kilometers with a refueling stopover in the Republic of Karelia.

“Upon arrival, the army air force crews from the Western Military Districts will join a simulated operation to drop a landing force at a military training range, as well as will practice providing support for the Land Forces from the air, will conduct an air strike simulation against ground targets using missile and ballistic weapons, and will take part in simulated search and rescue operations,” the ministry said.

Earlier, Russian President Vladimir Putin ordered the Northern Fleet, Armed Forces units in the Western Military District and the Airborne Troops to conduct combat readiness exercises, involving 38,000 servicemen, 3,360 units of military hardware, 41 combat ships, 15 submarines, as well as 110 airplanes and helicopters.

As Sputnik adds, military transport aviation crews of the Russian Air Force were redeployed from the Pskov region to the Severny airfield in the city of Ivanovo for further moving of personnel and equipment to a northern airfield, the press office of the Defense Ministry said in a statement Tuesday.

“Military transport aviation crews will deliver paratroop units to a military airfield in Russia’s polar region under a snap combat readiness exercise. More than 10 Il-76 aircraft will be used for the redeployment. The aircraft will fly over 3,000 kilometers in 24 hours. The redeployment will take place in the daytime and in the nighttime,” according to the statement.

According to the Defense Ministry, the exercises will continue until March 21

Many more are coming: the Russian Defense Ministry announced in December 2014 it planned to hold at least 4,000 military drills across the country in 2015.

And with the US now deploying tanks, armors and various other vehicles literally just across the Russian western border and soon, the Arctic as well, the possibility of an unexpected and unwelcome escalation in hostilities rises with every new military drill.







As we illustrated above in the London’s financial times, the move of Australia to join the China led, Asian development bank is a huge defeat for the Obama administration and a huge dagger into the heart of the USA dollar:


(courtesy zero hedge)




“Colossal Defeat” For Obama As Australia Joins China’s Regional Bank