July 13.2015/Greece caves in as the EU sticks it to Greece/Finland will not support the Greek bailout/ Tomorrow a big Samurai Greek bond comes due–if they fail to pay, then cross default/Part of the deal with the EU is that Greece must sell assets the equivalent of of GDP/ This has failed before !!/ Also Greece must give the keys to the ECB of their entire banks/ That means that they also lose the 120 billion euros and thus a bail in totally destroys the poor Greek depositors/ Just sickening to watch this!!

Good evening Ladies and Gentlemen:

We had a huge power failure this afternoon and I was out of the loop for 3 hours.  So please forgive me for being late and also I did not proof read my report.

 

Here are the following closes for gold and silver today:

Gold:  $1155.20 down $2.50  (comex closing time)

Silver $15.43 down 4 cents.

In the access market 5:15 pm

Gold $1157.45

Silver: $15.48

First, here is an outline of what will be discussed tonight:

At the gold comex today, we had a poor delivery day, registering 0 notices for nil ounces . Silver saw 24 notices filed for 120,000 oz.

Several months ago the comex had 303 tonnes of total gold. Today, the total inventory rests at 245.96.17 tonnes for a loss of 57 tonnes over that period.

In silver, the open interest fell by a considerable 1421 contracts despite the fact that Friday’s price was up by 12 cents.  The total silver OI continues to remain extremely high, with today’s reading at 187,302 contracts now at decade highs despite a record low price.  In ounces, the OI is represented by .937 billion oz or 133% of annual global silver production (ex Russia ex China). This dichotomy has been happening now for quite a while and defies logic. There is no doubt that the silver situation is scaring our bankers to no end as they continue to raid as basically they have no other alternative. Today again, we had banker shortcovering.

In silver we had 24 notices served upon for 120,000 oz.

In gold, the total comex gold OI rests tonight at 446,028 for a loss of 2,842 contracts as gold was down $5.20 on Friday. We had 2 notices filed for 200 oz  today.

We had a huge deposit of 1.49 tonnes of gold in tonnage  at the GLD to  thus the inventory rests tonight at 709.07 tonnes. The appetite for gold coming from China is depleting not only gold from the LBMA and GLD but also the comex is bleeding gold. I am sure that 700 tonnes is the rock bottom inventory in gold.  Anything below this level is just paper and the bankers know that they cannot retrieve “paper gold” to send it onwards to China . In silver, we had a huge gain in inventory at the SLV pf 1.051 million oz/ Inventory now rests at 327.593 million oz.

We have a few important stories to bring to your attention today…

1. Today, we had the open interest in silver fall by 1421 contracts to 186,302 despite the fact that silver was up by 12 cents on Friday. We must have had considerable shortcovering by the bankers as they feared something was brewing in the silver arena. The OI for gold fell by another 2,842 contracts down to 446,028 contracts as the price of gold was down by $5.20 on Friday.

(report Harvey)

3 Today, 20 important commentaries on Greece

(zero hedge, BloombergReuters/)

4. One commentary on the crisis in the stock market in China

(zero hedge)

 

5.  Bill Holter’s commentary tonight:

“If we build it …We will have it!”

6. Gold trading overnight

(Goldcore/Mark O’Byrne/)

7. Trading from Asia and Europe overnight

(zero hedge)

8. Trading of equities/ New York

(zero hedge)

9.  Huge build up in car inventories in China and just about everywhere

(zero hedge)

plus other important topics….

let us now head over to the comex and assess trading over there today.

Here are today’s comex results:

The total gold comex open interest fell by 2,842 contracts from 448,870  down to 446,028 as gold was down $5.20 in price on Friday (at the comex close).  We are now in the next contract month of July and here the OI surprisingly rose by 8 contracts to 157 contracts. We had 2 notices filed yesterday and thus we gained 10 contracts or an additional 1000 ounces will stand in this non active delivery month of July. The next big delivery month is August and here the OI fell by 10,777 contracts down to 248,104 as the players start to roll into October or December. The estimated volume today (which is just comex sales during regular business hours of 8:20 until 1:30 pm est) was poor at 136,530. The confirmed volume yesterday (which includes the volume during regular business hours + access market sales the previous day was poor at 142,044 contracts. Today we had 0 notices filed for nil oz.

And now for the wild silver comex results. Silver OI fell by a huge 1,421 contracts from 188,723 down to 187,302 despite the fact that the price of silver was up by 12 cents in price with respect to Friday’s trading. We continue to have our bankers pulling their hair out with respect to the continued high silver OI as today we have in all probability a huge shortcovering by the bankers as they sensed something was brewing in the silver arena. The next delivery month is July and here the OI fell by 181 contracts down to 390. We had 178 notices served upon yesterday and thus we lost 3 contracts or an additional 15,000 ounces of silver will not stand for delivery in this active month of July. This is the first time in quite some time that we have not lost any silver ounces standing immediately after first day notice. The August contract month saw it’s OI rise by 77 contracts up to 207. The next major active delivery month is September and here the OI fall by 1,886 contracts to 127,534. The estimated volume today was very good at 42,869 contracts (just comex sales during regular business hours). The confirmed volume yesterday (regular plus access market) came in at 32,824 contracts which is fair  in volume.  We had 24 notices filed for 120,000 oz

July initial standing

July 13.2015

Gold

Ounces

Withdrawals from Dealers Inventory in oz    nil
Withdrawals from Customer Inventory in oz 135,520.128  (HSBC,JPM,Manfra)
Deposits to the Dealer Inventory in oz nil
Deposits to the Customer Inventory, in oz 1,611.98 oz (Brinks)
No of oz served (contracts) today 0 contracts (nil oz)
No of oz to be served (notices) 157 contracts 15,700 oz
Total monthly oz gold served (contracts) so far this month 412 contracts(41,200 oz)
Total accumulative withdrawals  of gold from the Dealers inventory this month   nil oz
Total accumulative withdrawal of gold from the Customer inventory this month 217,968.6   oz

Today, we had 0 dealer transactions

we had zero dealer withdrawals

total Dealer withdrawals: nil  oz

 

we had 0 dealer deposits

total dealer deposit: zero
we had 3 customer withdrawals

i) Out of Manfra; 321.500 oz (10 kilobars)

ii) out of JPMorgan 39,204.954 oz

iii) Out of HSBC: 95,993.674 oz

total customer withdrawal: 135,520.128 oz

We had 0 customer deposits:

Total customer deposit: 0 ounces

We had 0 adjustment.

 

Today, 0 notices was issued from JPMorgan dealer account and 0 notices were issued from their client or customer account. The total of all issuance by all participants equates to 0 contracts of which 0 notices were stopped (received) by JPMorgan dealer and 0 notices were stopped (received) by JPMorgan customer account

To calculate the total number of gold ounces standing for the July contract month, we take the total number of notices filed so far for the month (412) x 100 oz  or 41,200 oz , to which we add the difference between the open interest for the front month of July (157) and the number of notices served upon today (0) x 100 oz equals the number of ounces standing.

Thus the initial standings for gold for the July contract month:

No of notices served so far (412) x 100 oz  or ounces + {OI for the front month (157) – the number of  notices served upon today (0) x 100 oz which equals 56,900  oz standing so far in this month of July (1.7698 tonnes of gold).

we gained an additional 1,000 oz of gold standing in this non active delivery month of July. somebody was badly in need of physical gold today.

Total dealer inventory 483,078.788 or 15.025 tonnes

Total gold inventory (dealer and customer) = 7,943,431.320 oz  or 243.96 tonnes

Several months ago the comex had 303 tonnes of total gold. Today the total inventory rests at 245.96 tonnes for a loss of 57 tonnes over that period.

end

And now for silver

July silver initial standings

July 13 2015:

Silver

Ounces

Withdrawals from Dealers Inventory nil
Withdrawals from Customer Inventory 52,067.300  oz (Brinks)
Deposits to the Dealer Inventory  nil
Deposits to the Customer Inventory 599,485.600 oz (JPMorgan)
No of oz served (contracts) 24 contracts  (120,000 oz)
No of oz to be served (notices) 366 contracts (1,830,000 oz)
Total monthly oz silver served (contracts) 2947 contracts (14,735,000 oz)
Total accumulative withdrawal of silver from the Dealers inventory this month nil
Total accumulative withdrawal  of silver from the Customer inventory this month 3,541,515.4 oz

Today, we had 0 deposits into the dealer account:

total dealer deposit: nil   oz

 

we had 0 dealer withdrawal:

total dealer withdrawal: nil  oz

 

We had 1 customer deposit:

i) Into JPMorgan: 599,485.600 oz

total customer deposit: 599,485.600  oz

We had 1 customer withdrawals:

i)Out of Brinks:  52,067.300 oz

total withdrawals from customer:  52,067.300  oz

we had 0  adjustments

 

Total dealer inventory: 58.96 million oz

Total of all silver inventory (dealer and customer) 180.743 million oz

The total number of notices filed today for the July contract month is represented by 24 contracts for 120,000 oz. To calculate the number of silver ounces that will stand for delivery in July, we take the total number of notices filed for the month so far at (2923) x 5,000 oz  = 14,715,000 oz to which we add the difference between the open interest for the front month of July (390) and the number of notices served upon today (24) x 5000 oz equals the number of ounces standing.

Thus the initial standings for silver for the July contract month:

2947 (notices served so far) + { OI for front month of July (390) -number of notices served upon today (24} x 5000 oz ,= 16,565,000 oz of silver standing for the July contract month.

We lost  15,000 ounces standing in this active delivery month of July. Somebody, again, was in great need of physical silver today.

for those wishing to see the rest of data today see:

http://www.harveyorgan.wordpress.comorhttp://www.harveyorganblog.com

end

The two ETF’s that I follow are the GLD and SLV. You must be very careful in trading these vehicles as these funds do not have any beneficial gold or silver behind them. They probably have only paper claims and when the dust settles, on a collapse, there will be countless class action lawsuits trying to recover your lost investment.

There is now evidence that the GLD and SLV are paper settling on the comex.

***I do not think that the GLD will head to zero as we still have some GLD shareholders who think that gold is the right vehicle to be in even though they do not understand the difference between paper gold and physical gold. I can visualize demand coming to the buyers side:

i) demand from paper gold shareholders

ii) demand from the bankers who then redeem for gold to send this gold onto China

vs no sellers of GLD paper.

And now the Gold inventory at the GLD:

July 13.2015: a big inventory gain of 1.49 tonnes/Inventory rests tonight at 709.07 tonnes

July 10/ we had a big withdrawal of 2.07 tonnes of gold from the GLD/Inventory rests this weekend at 707.58 tonnes

July 9/ no change in gold inventory at the GLD/Inventory at 709.65 tonnes

July 8/no change in gold inventory at the GLD/Inventory at 709.65 tonnes

July 7/ no change in gold inventory at the GLD/Inventory at 709.65 tonnes

July 6/no change in gold inventory at the GLD/Inventory at 709.65 tonnes

July 2/we had a huge withdrawal of inventory to the tune of 1.79 tonnes/rests tonight at 709.65 tonnes

July 1.2015; no change in inventory/rests tonight at 711.44 tonnes

June 30/no change in inventory/rests tonight at 711.44 tonnes

June 29/no change in inventory/rests tonight at 711.44 tonnes

June 26./it did not take our bankers long to raid the GLD. Yesterday they added 6.86 tonnes and today, 1.75 tonnes of that was withdrawn/Inventory tonight rests at 711.44 tonnes.

June 25/a huge addition of 6.86 tones of  inventory at the GLD/Inventory rests tonight at 713..23 tonnes

June 24/ a good addition of.900 tonnes of gold into the GLD/Inventory rests at 706.37 tonnes

June 23/no change in gold inventory/rests tonight at 705.47 tonnes

June 22/ a huge increase of 3.27 tonnes of gold into GLD/Inventory tonight: 705.47 tonnes

July 13 GLD : 709.07 tonnes

end

 

And now for silver (SLV)

July 13./an inventory gain of 1.051 million oz/Inventory rests at 327.593 million oz

july 10/no change in silver inventory at the SLV tonight/inventory 326.542 million oz/

July 9/ a huge increase in inventory at the SLV of 1.337 million oz. Inventory rests tonight at 326.542 million oz

July 8/no change in inventory at the SLV/rests at 325.205

July 7/no change in inventory at the SLV/rests at 325.205 tonnes

July 6/we have a slight inventory withdrawal which no doubt paid fees. we lost 137,000 oz/Inventory rests tonight at 325.205 million oz

July 2/ no change in inventory at the SLV/rests tonight at 325.342 million oz

July 1/ we had an addition of 1,624,000 oz into the SLV inventory/rests tonight at 325.342 million oz

June 30/we lost another 621,000 oz of silver from the SLV/Inventory rests at 323.718 oz (somebody must be in great need of physical silver)

June 29/ a monstrous loss of 4.777 million oz of silver from the SLV/Inventory rests tonight at 324.339 million oz

June 26/today we had another addition of 198,000 of silver/Inventory rests at 329.116 million oz

June 25/ a huge increase of 1.242 million oz of silver into the SLV inventory/Inventory rests at 128.918 million oz

June 24/no change in inventory/rests tonight at 326.918 million oz

June 23/we had a small withdrawal of 956,000 oz/Inventory tonight rests at 326.918 million oz

July 13/2015:  tonight inventory rests at 327.593 million oz

end

And now for our premiums to NAV for the funds I follow:

Sprott and Central Fund of Canada.
(both of these funds have 100% physical metal behind them and unencumbered and I can vouch for that)

1. Central Fund of Canada: traded at Negative 8.9 percent to NAV usa funds and Negative 9.4% to NAV for Cdn funds!!!!!!!

Percentage of fund in gold 62.0%

Percentage of fund in silver:37.7%

cash .3%

( July 13/2015)

2. Sprott silver fund (PSLV): Premium to NAV falls to 1.72%!!!! NAV (July 13/2015) (silver must be in short supply)

3. Sprott gold fund (PHYS): premium to NAV rises to – .67% toNAV(July 13/2015

Note: Sprott silver trust back  into positive territory at +1.72%

Sprott physical gold trust is back into negative territory at -.67%

Central fund of Canada’s is still in jail.

Sprott formally launches its offer for Central Trust gold and Silver Bullion trust:

SII.CN Sprott formally launches previously announced offers to CentralGoldTrust (GTU.UT.CN) and Silver Bullion Trust (SBT.UT.CN) unitholders (C$2.64)
Sprott Asset Management has formally commenced its offers to acquire all of the outstanding units of Central GoldTrust and Silver Bullion Trust, respectively, on a NAV to NAV exchange basis.
Note company announced its intent to make the offer on 23-Apr-15 Based on the NAV per unit of Sprott Physical Gold Trust $9.98 and Central GoldTrust $44.36 on 22-May, a unitholder would receive 4.45 Sprott Physical Gold Trust units for each Central GoldTrust unit tendered in the Offer.
Based on the NAV per unit of Sprott Physical Silver Trust $6.66 and Silver Bullion Trust $10.00 on 22-May, a unitholder would receive 1.50 Sprott Physical Silver Trust units for each Silver Bullion Trust unit tendered in the Offer.
* * * * *

end

And now for your overnight trading in gold and silver plus stories

on gold and silver issues:

 

(courtesy/Mark O’Byrne/Goldcore)

 

Silver Bullion Demand High – Price Falls and Premiums Surge

– Silver imports into U.S. surge 33%
– Silver Eagle demand very robust
– Silver Eagles and Maples see 25% surge in premiums and shortages
– Silver price falls over 3.8% on same day as U.S. Mint runs out of silver eagles
– Total ETF Silver holdings remain robust – over 500 million ounces
– Increase in demand seems to becoming from large entities buying bars
– Silver is great value sub $20 per ounce

 
Demand for silver has been surging this year as seen in U.S. silver imports, while silver eagles coin sales and silver ETF holdings remain robust. Despite this, silver has again under performed other assets and has seen price falls again this year to multi year lows at $15 per ounce.

Pic 1 - Chart
Silver in USD – YTD 2015

Silver imports into the U.S. have been substantially higher in every month so far this year compared to the same months last year according to the USGS data. So far, 2,035 metric tonnes have been imported into the U.S.  this year – 33% more than the same period last year.

In the same period, industrial usage of silver has been fairly flat, the build-up in Comex inventories has been negligible and sales of U.S. Silver Eagles has been flat – partly because the U.S. Mint lacked the stock to meet demand.

Given that the three sources of demand listed above – which are typically the main sources of demand in the U.S. – have not contributed to the rise in silver imports it would appear that there may be new sources of demand in the silver market with large buyers – private or institutional – buying significant volumes of large silver bars

Pic 2 - Chart2
SRSRoccoreport.com

There is also significant demand for silver in India and indeed in Turkey:
Pic 3 - Chart3

Pic 4 - Chart4

There is a clearly a major disconnect between the price of silver as traded on exchanges and the supply and demand fundamentals. Since the end of January silver prices have declined by nearly 20% – from $18.28 to $15.40 even as demand rises.

Demand for Silver Eagles spiked in the first week of this month leading the U.S. Mint to run out of its entire August inventory of coins. This coincided with a counter-intuitive 3.8% plunge in price last Monday.

It would appear that prices are being forced down. This is likely being done to scare investors away in order to protect some large banks who are net short silver – and for whom a surge in price would be damaging – and possibly to facilitate large unknown entities to accumulate large volumes of silver at a knockdown prices.

Pic 5 - Chart5

Total Silver ETF Holdings – 2006 to July 13, 2015

Whoever these large buyers of physical silver  may be it seems likely that they are well connected and well informed. It is speculated that JP Morgan may be among them or at least is acting on behalf of their clients.

It would appear that something significant is again happening under the surface of the silver market. Indeed, premiums for silver eagles and maples have surged 25% in recent days and there are increasing delays in getting delivery of silver bullion coins.

Silver is down 1.5% in 2015 (year to date) and by 35% over a one year period (July 13, 2014). It remains great value vis a vis most risk assets today. Equities, bonds and indeed many property markets look increasingly overvalued and ripe for serious corrections and potential severe bear markets and even crashes.

An allocation to physical silver will again provide essential insurance against financial instability and systemic risk.

Must Read Guide:  7 Key Gold & Silver Must Haves        

 

MARKET UPDATE

Today’s AM LBMA Gold Price was USD 1,154.95, EUR 1,043.13 and GBP 741.59 per ounce.
Friday’s AM LBMA Gold Price was USD 1,162.40, EUR 1,041.20 and GBP 750.30 per ounce.

 Gold rose $1.60 or 0.14 percent Friday to $1,163.00 an ounce. Silver also grew $0.12 or 0.78 percent to $15.58 an ounce. Gold for immediate delivery fell for the first time in four sessions, declining 0.7 percent to $1,157.07 an ounce at late morning trading in London.

Pic 6 - Chart6
Bitcoin in USD – YTD, 2015

Gold retreated overnight despite considerable uncertainty regarding the outlook for a deal between Greece and its increasingly aggressive creditors. Gold fell prior to Greece securing a deal and a potential path to a new bailout

Gold had a third weekly drop last week, after falling to $1,147.36 on Wednesday, the lowest level since March 18.

This morning, the increasingly compromised Greek PM Tsipras, has agreed with creditors the reforms needed to start formal negotiations over a third bailout program in five years and remain in the euro.

Concerns about a possible fracturing of the common currency has added to gold’s safe haven appeal this year, but the price has remained tethered to the $1,200 price level despite many risks which would have been expected to see gold rise in price.

Bitcoin has collapsed 10% this morning – showing it may not be the “safe haven” asset that some have recently claimed.

As ever, it pays to keep an open mind but until bitcoin can display the long term and historical store of value characteristics that gold has done over the centuries and in recent times, it remains prudent to err on the side of caution and favour an allocation to gold bullion and indeed silver bullion over cryptocurrencies.

Breaking News and Research Here

end

(courtesy Ben Davies/GATA)

 

Ben Davies: Acropolis now, again

Section:

3:40p ET Saturday, July 11, 2015

Dear Friend of GATA and Gold:

Hinde Capital CEO Ben Davies writes this week that whatever happens in the current negotiations, Greece eventually will default on its debt and the euro generally will fail simply because Europe is not a country but a collection of countries with profoundly contradictory interests.

Turning to gold, Davies notes that it has performed well for those whose national currencies are under the greatest stress. As for gold’s price in other currencies, Davies adds that central banks can’t want the monetary metal acting as the proverbial canary in the coal mine. “God forbid the canary sings and gold reacts violently higher,” Davies writes. “Then the state monopoly on debt and money really would be up.”

Davies’ analysis is headlined “Acropolis Now, Again” and it’s posted at Hinde Capital’s Internet site here:

https://hindesightletters.com/blog/acropolis-now-again-ben-davies/

CHRIS POWELL, Secretary/Treasurer
Gold Anti-Trust Action Committee Inc.

 

end

(courtesy Kitco/GATA)

Gold, silver market analysis that overlooks govt. intervention is a waste of time

Section:

11:14a ET Sunday, July 12, 2015

Dear Friend of GATA and Gold:

Our friend R.B. wrote yesterday:

“What do reckon about this guy who was interviewed by Kitco News last week and predicted $10 silver in 2015?:

http://www.kitco.com/news/video/show/Kitco-News/1019/2015-07-10/Theres-S…

http://www.kitco.com/news/2015-07-10/When-it-Comes-to-Gold-It-s-Not-Just…

“Sincerely, R.B.”

Your secretary/treasurer replied, for whatever it might have been worth:

1) In the short term — say, a year out — government trading in the futures markets can put prices of any commodity and financial instrument wherever government wants to put them.

2) Anyone who purports to analyze commodity and monetary metals markets without reference to intervention by central banks, the biggest players in the markets, is wasting everyone’s time or else is a government tool.

3) The same goes for any financial journalist who reports on markets without reference to government intervention.

But maybe there is still hope for Kitco News, as last week it also interviewed Rosa Abrantes-Metz, the New York University business school professor who has developed and publicized evidence of manipulation of the gold and silver markets, though her evidence does not seem to have directly cited central banks. That interview is six minutes long and can be viewed at Kitco’s Internet site here:

http://www.kitco.com/news/video/show/Kitco-News/1018/2015-07-09/First-Go…

CHRIS POWELL, Secretary/Treasurer
Gold Anti-Trust Action Committee Inc.

 

end

(courtesy GATA)

Central banks’ comprehensive rigging holds gold down, Celente tells Goldbroker’s Popescu

Section:

10:45a ET Saturday, July 11, 2015

Dear Friend of GATA and Gold:

Trends Journal publisher Gerald Celente, interviewed by Goldbroker.com’s Dan Popescu, says the gold price is not responding to the vast increase of money and credit because of comprehensive manipulation of markets by central banks and their investment bank agents — and he gets suitably indignant about it. The interview is 20 minutes long, gets into the gold issue right away, and is posted at You Tube here:

https://www.youtube.com/watch?v=EZu44rPpLFw&feature=youtu.be&t=6m40s

CHRIS POWELL, Secretary/Treasurer
Gold Anti-Trust Action Committee Inc.

 

end

(courtesy TFMetals/Keith Neumeyer/GATA)

 

TF Metals Report interviews First Majestic Silver’s Keith Neumeyer

Section:

1:10p ET Monday, July 13, 2015

Dear Friend of GATA and Gold:

The TF Metals Report’s Turd Ferguson today interviews First Majestic Silver CEO Keith Neumeyer, founder and sole member of the International Association of Monetary Metals Mining Company Executives Who Are Not Clueless. (Anyway, he might as well be.) Along with developments at First Majestic, Neumeyer discusses a mine finance company he has started with Eric Sprott, Rick Rule, and others; his call for silver miners to withhold production to combat price suppression by derivatives mongers; his recent appeal to the U.S. Commodity Futures Trading Commission; and changes in the derivatives system that would be necessary to restore free markets.

The interview is 28 minutes long and can be heard at the TF Metals Report’s Internet site here:

http://www.tfmetalsreport.com/podcast/6992/conversation-keith-neumeyer-f…

CHRIS POWELL, Secretary/Treasurer
Gold Anti-Trust Action Committee Inc.

end

 

(courtesy Ambrose Evans Pritchard/UKTelegraph/GATA)

Greece surrenders its sovereignty — but should it have expected otherwise?

Section:

Greece Is Being Treated Like a Hostile Occupied State

By Ambrose Evans-Pritchard
The Telegraph, London
Monday, July 13, 2015

Like the Neapolitan Bourbons — benign by comparison — the leaders of the eurozone have learned nothing, and forgotten nothing.

The cruel capitulation forced upon Greece after 31 hours on the diplomatic rack offers no conceivable way out the country’s perpetual crisis. The terms are harsher by a full order of magnitude than those rejected by Greek voters in a landslide referendum a week ago, and therefore can never command democratic assent.

They must be carried through by a Greek parliament still dominated by MPs from Left and Right who loathe every line of the summit statement, the infamous SN 4070/15, and have agreed — if they have agreed — only with a knife to their throats.

EMU inspectors can veto legislation. The emasculation of the Greek parliament has been slipped into the text. All that is missing is a unit of EMU gendarmes.

Such terms are unenforceable. The creditors have sought to nail down the new memorandum by transferring E50 billion of Greek assets to “an independent fund that will monetise the assets through privatisations and other means.” It will be used in part to pay off debts.

This fund will be under EU “supervision.” The cosmetic niceties of sovereignty will be preserved by letting the Greek authorities manage its day-to-day affairs. Nobody is fooled. …

… For the remainder of the commentary:

http://www.telegraph.co.uk/finance/economics/11736779/Greece-is-being-tr…

end

Greece remains broke and world debt is still unsupportable, Embry tells KWN

Section:

1p ET Monday, July 13, 2015

Dear Friend of GATA and Gold:

Greece’s apparent capitulation to its European creditors changes nothing about the country’s inability to pay its debts, Sprott Asset Management’s John Embry tells King World News today, adding that debt is unsupportable all around the world. An excerpt from the interview is posted at the KWN blog here:

http://kingworldnews.com/greece-caves-but-whats-happening-in-china-will-…

CHRIS POWELL, Secretary/Treasurer
Gold Anti-Trust Action Committee Inc.

 

end

 

as we indicated to you on several occasions, the Indians will not fall for paper gold.

(courtesy Reuters/GATA)

For Indians, paper gold can’t beat the real thing

Section:

By Rajendra Jadhav
Reuters
Monday, July 13, 2015

MUMBAI, India — India is meeting stiff resistance in its drive to make the buying of gold jewellery more transparent and to channel demand into paper gold to stop the metal being used to hide billions of dollars of undeclared “black money.”

The jewellery trade says the Narendra Modi government’s plans to trace gold deals is unworkable and won’t deter holders of black money, or hundreds of millions of Indians outside the tax net, from buying gold to keep their wealth away from the prying eyes of the authorities.

If the proposals fail, gold inflows will continue unabated in a country that accounts for nearly a fifth of global demand and stymie Modi’s effort to create a new asset class that could lure savers and back investments.

To track larger gold deals, this year’s budget declared that, from June 1, customers would have to disclose their tax code, or Permanent Account Number (PAN), for purchases above 100,000 Indian rupees ($1,580). But jewellers — many of whom voted for Modi — have protested, delaying the new rule.

“No jeweller will refuse to sell just because the customer doesn’t have a PAN card. He will find a way to ensure the customer leaves the store with jewellery,” said Bachhraj Bamalwa of the All India Gems and Jewellery Trade Federation. …

Two-thirds of gold demand comes from rural areas where jewellery is a traditional store of wealth. Under Modi, India has opened 160 million new bank accounts but half are idle, suggesting old habits die hard.

And, in a country of 1.25 billion people, only 140 million have PAN cards. …

Though the formal notification to enforce the PAN card rule has yet to be issued, jewellers have already found ways to beat it, by issuing many small invoices or writing informal receipts. …

… For the complete report:

http://www.reuters.com/article/2015/07/12/india-gold-idUSL3N0ZN3Z7201507…

 

end

(courtesy Bill Holter/Holter Sinclair Collaboration)

 If we build it …We will have it!

In the last article “An indication of PPT failure”, many readers wrote in and either asked what the various acronyms were or admonished me for using so many without explaining them.  I will try in the future to assume the reader does not know what we’re talking about and at least spell out any acronym used.  As for the last article;  “PPT” = plunge protection team,  “ROW” = rest of world

  Today, let’s look at China and their recent efforts at preventing their equity markets from collapsing.  First, it should be understood they are “too late”.  I can say this because their PE (price to earnings) ratio even after the collapse of
25%-40% (with some stocks not even trading Friday), the Shanghai Exchange still trades at over 60 times earnings.  In other words, at today’s rate of earnings it will take 60 years worth of earnings to equal what investors are willing to pay now.  They have allowed and even fostered a bubble of epic proportions to form, no amount of effort can stop this bubble from collapsing.
  This past week, China took the crazy steps of making it “illegal” for institutional accounts to sell …for the next six months!  How will pension plans make promised payments?  Will they send out IOU’s until it’s “legal” to sell again?  There were also reports of brokers refusing to accept sell orders at all.  Let’s say this, the harder China works at closing the exit doors and not allow sales will only work to put more pressure on the world’s other equity markets.   This was one of the points I was trying to make when I wrote about the crisis “crossing borders” last week.
  Think of it this way, what would you personally do if you were locked into the market here in the U.S.?  What if our markets were closed, yet the Canadian or other European bourses were open?  Would you consider selling something short elsewhere as a hedge because you are trapped long in the U.S.?  Even if it is not the same company exactly, would you sell let’s say Fiat or Mercedes short as a hedge against being long shares of Ford Motor?  Or forget even being industry specific, would you at least try to sell another bourse short and do it in dollars?
Do you see my point?  China closing her markets will put pressure on other markets because being trapped can make for some “desperate people” …and you know what they say desperate people do!
  Another reason the Chinese market will not recover is that speculation has run rampant and a cleansing is coming.  Forget about opening four million retail accounts per day or hairdressers quitting their jobs to “day trade”, the amount of margin built up and being used is staggering.

 If you look at the margin debt on the Shanghai Exchange, you will see it was a very similar percentage to that of the U.S. and double that of Japan just three years ago.  Since then, margin debt rose NINEFOLD to 18%!  Just in the last month during their crash, this number has dropped nearly 4 percentage points but is still as unsustainable as is a PE ratio of 60 times earnings.  The huge margin debt suggests that selling will “FORCE” more selling because of margin calls.  China’s equity market is a wildfire already burning!
  Skipping backwards as mentioned above, selling pressure from China is going to bleed over and into foreign markets.  This is how the advent of plunge protection teams will fail as “borders” will be crossed.  Today’s world is one where everything financial is truly global.  We see this and know this simply by looking at balance sheets and counterparties.  We will see this and also feel it shortly as sovereign PPTs become pressured from outside bourses.  This is no different than in trade where one nation devalues its currency to steal market share in a “beggar thy neighbor” fashion.  By the way, our “glitch” of last week in my opinion was the first surge of selling across borders, with MUCH MORE to come.
  A recent article was penned comparing China to a “Field of Dreams” where
ghost cities were built in a huge miscalculation.  It was said they built these cities with the expectation of rural farmers moving in and buying up all of the overcapacity.  I highly disagree with this thought process.  For well over three years it has been my belief the Chinese knew exactly what they were doing by building roads to empty cities that had their own runways and airports, sewage, drainage and complete utility systems at the “ready”.
  Why would they have done this?  It is such a waste of capital right?  Well yes, if it was “real capital” this would be correct.  It is my belief the Chinese already knew “how” this was all going to end.  They knew the financial system was a Ponzi scheme that could ONLY CONTINUE with new and more debt being added.  They also knew the credit system will ultimately collapse in a heap upon itself.  No, this is no Field of Dreams, “if we build it they will come”, on the contrary … their thought process is “If we build it we will have it”!  They also have accumulated the world’s largest hoard of gold with this thought process.
  Look at what China has done?  They have overcapacity everywhere.  They have unused plant, equipment, machining capability, housing and infrastructure …but guess what?  IT IS ALL NEW!!!  Now let’s make a comparison to the U.S., the only thing we have that’s new are a bunch of McMansions built all over the place.  We have little capacity to produce anything.  Our roads, bridges and mass transit systems are all old and in many cases in disrepair.  Our “grid” is a century old and at risk of being taken down by an EMP.
  Moving along to the “end game”, if a financial collapse is coming and credit everywhere is defaulting, then what exactly is left?  Financial assets of all sorts will be rendered valueless, but physical “structures” will still remain.  They may (will) change ownership via default but they will still remain and be “usable”.  China has played the game and used credit to build real things for the future.  We invented the game and used credit to “eat” for the here and now.  The global “game of credit” will mathematically end, and it will end badly.  The U.S. will be beaten badly in the very game we created!
  China has known for many years where and how this would end. It is one of the reasons they have accumulated the largest hoard of gold in the world and are also the largest gold producer.  The credit bubble will pop and yes China will be hurt but they will be left with new infrastructure and more gold than anyone else in the world.  A pretty good position to be in if we all have to start over!
Standing Watch,
Bill Holter
Holter-Sinclair collaboration
Comments welcome!  bholter@hotmail.com

 

And now your overnight trading in bourses, currencies, and interest rates from Europe and Asia:

1 Chinese yuan vs USA dollar/yuan strengthens to 6.2083/Shanghai bourse green and Hang Sang: green

2 Nikkei closed up by 309.94  points or 1.57%

3. Europe stocks all in the green /USA dollar index down to 96.40/Euro down to 1.1168

3b Japan 10 year bond yield: rises to  45% !!!!(Japan buying 100% of bond issuance)/Japanese yen vs usa cross now at 123.39

3c Nikkei still just above 20,000

3d USA/Yen rate now just above the 122 barrier this morning

3e WTI 52.26 and Brent:  58.11

3f Gold down /Yen up

3gJapan is to buy the equivalent of 108 billion uSA dollars worth of bond per month or $1.3 trillion. Japan’s GDP equals 5 trillion usa.

Japan to buy 100% of all new Japanese debt and by 2018 they will have 25% of all Japanese debt. Fifty percent of Japanese budget financed with debt.

3h Oil down for WTI and down for Brent this morning

3i European bond buying continues to push yields lower on all fronts in the EMU. German 10 yr bund rises to .89 per cent. German bunds in negative yields from 3 years out.

Except Greece which sees its 2 year rate fall to 25.14%/Greek stocks this morning: stock exchange closed again/ still expect continual bank runs on Greek banks /Greek default to the IMF in full force/

3j Greek 10 year bond yield falls to: 12.02%

3k Gold at 1156.00 dollars/silver $15.50

3l USA vs Russian rouble; (Russian rouble down 1/5 in  roubles/dollar in value) 56.68,

3m oil into the 52 dollar handle for WTI and 58 handle for Brent/Saudi Arabia increases production to drive out competition.

3n Higher foreign deposits out of China sees huge risk of outflows and a currency depreciation. This can spell financial disaster for the rest of the world/China may be forced to do QE!!

30 SNB (Swiss National Bank) still intervening again in the markets driving down the SF. It is not working: USA/SF this morning .9454 as the Swiss Franc is still rising against most currencies. Euro vs SF is 1.0485 well below the floor set by the Swiss Finance Minister. Thomas Jordan, chief of the Swiss National Bank continues to purchase euros trying to lower value of the Swiss Franc.

3p Britain’s serious fraud squad investigating the Bank of England/

3r the 4 year German bund remains in negative territory with the 10 year moving further away from negativity at +.88%

3s The ELA is frozen now at 88.6 billion euros.  The bank withdrawals were causing massive hardship to the Greek bank. the Greek referendum voted overwhelming “NO”. Greece agrees to more austerity even though 79% of the populace are against.

4. USA 10 year treasury bond at 2.46% early this morning. Thirty year rate above 3% at 3.24% / yield curve flatten/foreshadowing recession.

5. Details Ransquawk, Bloomberg, Deutsche bank/Jim Reid.

(courtesy Jim Reid/Bloomberg/Deutsche bank/zero hedge)

end

Market Wrap: Global Stocks, Futures Jump In Kneejerk Relief Rally; Safe-Haven Assets Drop

For once the Chinese stock market rollercoaster (where the Shanghai Composite closed up 2.4% after another day of early selling) was fully upstaged by events in Europe.

Asian equities rose as participants shrugged off the Greek developments which were fairly pessimistic during the Asia Pacific session. Shanghai Comp (+2.4%) and Hang Seng (+1.3%) continued their recovery as margin trading rose for the first time in 15 sessions, while additional Chinese stocks resumed trading. Nikkei 225 (+1.6%) reclaimed the 20,000 level , whereas the ASX 200 (+0.7%) fluctuated between gains and losses. JGBs fell as strength in Japanese equities pressured prices, while the BoJ also refrained conducting its large buying of JGB’s as expected.

But the real action was in Europe, where the German stock market sprang higher by 1.7% on the “deal” news, taking its 4 day gain to an impressive 7.7%:

Other bourses were just as exited with France’s CAC 40 up 2.2% and UK’s FTSE 100 up 0.7% so far.

This is because the Greek saga appears once again to be at the final stages (at least until we find what the official and unofficial Greek response will be) after an overnight 17 hour Eurogroup meeting culminated in a provisional agreement between Greece and their creditors . This provisional agreement has been in focus for European participants, with equities firmly in the green (EuroStoxx: +1.8%) and financials among the best performing sector.

Elsewhere, bunds have also reacted to the news of a deal, moving lower by around 35 ticks this morning. Of note, while a deal has bolstered sentiment in the market, a Greek deal had been on the cards over the past couple of days, with similar price action being observed on Thursday and Friday. Also, any potential deal would still need to be passed through Greek parliament, followed by the German, Austrian, Dutch, Estonian, Slovakian and Finnish parliaments. Also of note, sources have suggested that the ECB will maintain the current level of ELA funding in today’s discussions.

In FX, EUR price action altered from that of equities as news filtered out regarding a Greek deal, initially moving higher, before then retracing this move to trade lower by around 80 pips. Some desks have attributed the weakness to the aforementioned hurdles still to come, with the FT noting that some trades had been looking to sell EUR heading into the rally.

Elsewhere, other desks are playing credence to the possibility that with a Greek deal in place, attention will now return to Fed lift-off with Fed Chair Yellen on Friday saying that the FOMC remain on track to hike rates at some point in 2015 and on June 23rd, FT’s Short View noted that on a purely technical level negative rates have led to carry trades (borrowing to fund leveraged bets elsewhere). So when markets have assimilated bad news over the last few weeks EUR moves higher as traders cut their exposure and cover the carry trade loans (ie buying EUR) and good news actually means traders can borrow more EUR for more carry trades which pushes EUR lower.

JPY initially saw safe haven bids following the ongoing Greek impasse however, pared its earlier strength amid short covering in USD/JPY to break above its 50 DMA. This combined with EUR weakness to filter through the USD, with the USD index currently higher by 0.4%, further bolstered by comments over the weekend from Fed’s Mester (no n-voter, soft hawk) stating the US economy is ready for lift-off.

The commodity market has seen weakness this morning, with precious metals lower as a result of the Greek deal, while the energy complex has also seen a leg lower today as an Iran nuclear deal appears closer, seeing WTI trade below the USD 52.00 handle. Of note today sees the option expiry of Brent Aug’15 futures at 1930BST/1330CDT.

In summary: European shares remain higher, close to intraday highs, with the bank and retail sectors outperforming and food & beverage, autos underperforming. Euro summit reached agreement on Greece, ECB to discuss their liquidity aid for Greek lenders. China’s exports rose for first time in 4-months, above ests. The French and Spanish markets are the best-performing larger bourses, U.K. the worst. The euro is weaker against the dollar. Greek 10yr bond yields fall; U.K. yields increase. Commodities decline, with Brent crude, WTI crude underperforming and nickel outperforming. U.S. monthly budget statement,  due later.

Markt Wrap

  • S&P 500 futures up 0.7% to 2083.5
  • Stoxx 600 up 1.6% to 395.1
  • US 10Yr yield up 5bps to 2.45%
  • German 10Yr yield up 3bps to 0.93%
  • MSCI Asia Pacific up 1.1% to 142.6
  • Gold spot down 0.6% to $1156.4/oz
  • All 19 Stoxx 600 sectors rise; bank, retail outperform, food & beverage, autos underperform
  • Asian stocks rise with the Shanghai Composite outperforming and the ASX underperforming; MSCI Asia Pacific up 1.1% to 142.6
  • Nikkei 225 up 1.6%, Hang Seng up 1.3%, Kospi up 1.5%, Shanghai Composite up 2.4%, ASX down 0.3%, Sensex up 1.1%
    Euro down 0.73% to $1.108
  • Dollar Index up 0.27% to 96.28
  • Italian 10Yr yield up 1bps to 2.15%
  • Spanish 10Yr yield up 3bps to 2.16%
  • French 10Yr yield up 3bps to 1.31%
    S&P GSCI Index down 0.7% to 412.6
  • Brent Futures down 1.6% to $57.8/bbl, WTI Futures down 1.2% to $52.1/bbl
  • LME 3m Copper up 0.7% to $5626.5/MT
  • LME 3m Nickel up 2.4% to $11535/MT
  • Wheat futures down 0.1% to 575.5 USd/bu

Bulletin Headline Summary From Bloomberg and RanSquawk

  • A preliminary Greek deal has been agreed overnight to bolster European equities and weighs on Bunds.
  • Meanwhile EUR has weakened as focus shifts to policy divergence between ECB and Fed.
  • The energy complex has seen weakness this morning, with markets pricing in an Iran nuclear deal which appears close to being agreed.
  • Treasuries fall as Greece’s Tsipras capitulated to creditor demands for immediate action to qualify for up to EU86b in aid Greece needs to stay in euro.
  • There was no face-saving compromise on offer for Tsipras at a rancorous summit that ran for more than 17 hours and only established basis for negotiations on aid package which includes EU25b recapitalize banking system
  • Conditions that Tsipras swallowed comprised a laundry list of unfinished business from Greece’s two previous bailouts, new demand for govt to transfer EU50b of state assets to a holdco that will seek to either sell or generate cash from them
  • Dijsselbloem says proposed fund could include “airplanes, airports, infrastructure and most certainly banks”
  • Greek parliament has until Wednesday to pass into key creditor demands into law, including broadening the tax base, streamlining VAT, curbing pension costs
  • Two officials who observed Tsipras at the Brussels showdown independently described him as a “beaten dog”; Tsipras fretted privately about the reception that awaits him in Athens
  • U.S. and Iranian diplomats are digging in over the last remaining issues holding up a nuclear deal, casting doubt on earlier optimism that an accord could be announced as early as Monday
  • China’s small-cap CSI 500 Index rallied 6.2% for its best gain since November 2008; the number of halted companies fell by 408 from Friday to 1,045, or 36% of overall listings on mainland exchanges
  • Yellen last week maintained her call for a rate hike this year as the U.S. economy improves; Humphrey-Hawkins testimony begins Wednesday
  • Sovereign 10Y bond yields higher; Greek 10Y yield -163bp to 11.948%. Asian and European stocks, U.S. equity-index futures rise. Crude oil and gold fall, copper higher

end

 

Overnight in China, stocks mainly up as regulators bust those nassty short sellers and just about anybody that sells stocks.  They unhalt 400 securities.

(courtesy zero hedge)

China Stocks Mixed After Regulators “Bust Illicit Stock Sellers” And Unhalt Over 400 Securities

modestly positive open in China quickly turned negative as regulators un-halted 408 more stocks, reducing the number suspended to just 36% of all stocks. Along with disappointing trade data (and expectations of “extreme pressure in the next 2-3 months”) and regulators cracking down on investors with multiple illegally-obtained margin trading accounts, early strength has faded (for now). Unsurprisingly, the three regions with the most exposure to the crash in stocks are Shanghai, Shenzhen, and Guangdong and, as Bloomberg notes,Chinese police have found their scapegoat some trading companies may have manipulated stock futures (lower we assume, as manipulating a price higher appears to be policy). Stocks are mixed with high beta ChiNext and Shenzhen higher and Shanghai and the CSI-300 lower (the latter having gone nowhere for the last 2 days).

 

The 24% explosion off the lows is stalling…

 

Shanghai, Shenzhen, and Guangdong dominate the nation’s equity maket exposure

Source: @KangHexin

 

Scapegoats are being lined up… (as Bloomberg reports)

China police investigation team led by Vice Minister of Public Security Meng Qingfengfound signs some trading cos. may have manipulated stock futures, Xinhua reported, without saying where it got the information.

 

The team visited China Securities Regulatory Commission head office Thursday morning toinvestigate what it called “malicious short-selling of stocks and stock indices”: Xinhua

 

The team arrived in Shanghai Friday to continue the probe

And regulators are attempting to manage the multiple margin accounts problems (as Xinhua reports)…

China’s securities watchdog announced on Sunday that it will crack down on illicit securities trading so that the market can recover steadily.

 

“Some institutional or individual investors hold ‘virtual’ securities accounts or trade with borrowed accounts. As real-name registration is required by the law, this illicit conduct may damage other investors’ legitimate interests,” said the China Securities Regulatory Commission (CSRC).

 

The commission asked local authorities toverify the authenticity of securities accounts and be more strict when supervising them.

 

Institutional and individual investors will be prohibited from lending their accounts to each other.

 

The CSRC said it will clamp down on any illicit conduct in accordance with the law, and will transfer violators to the police.

“Free” markets…

  • *NUMBER OF CHINA TRADING HALTS DROPS TO 36% OF OVERALL LISTINGS
  • *NUMBER OF CHINA TRADING HALTS DROPS BY 408 TO 1,045 VS FRIDAY

Trade data suggests extremely weak foreign and domestic demand…

  • *CHINA 1H EXPORTS RISE 0.9% Y/Y IN YUAN
  • *CHINA 1H IMPORTS FALL 15.5% Y/Y IN YUAN
  • *CHINA 1H TRADE SURPLUS 1.61T YUAN
  • *PRESSURE ON EXPORTS RELATIVELY SEVERE IN NEXT 2-3 MOS: HUANG

And perhaps hints of what is  to come…

  • *NOT EASY FOR CHINA EXPORTS TO KEEP RISING AS YUAN STRONG: HUANG

QE?

*  *  *

NOW  I will highlight the major headlines and stories out of Greece this weekend; I will try and put this in proper chronological order of events

Late Friday night/early Saturday morning.  The Greek government approves the first “deal” to negotiate a settlement with the Troika.

Check to Mrs Merkel et friends

(courtesy zero hedge)

 

Over To You Merkel: Greek Govt Approves Bill The Greek People Soundly Rejected

The Greek parliament has approved the proposal Alexis Tsipras submitted to creditors on Thursday. The ball is now in Europe’s court with a Eurogroup meeting scheduled for Saturday.

  • GREEK LAWMAKERS APPROVE GOVERNMENT’S BAILOUT PROPOSAL: TALLY

As expected, Energy Minister and Left Platform leader Panagiotis Lafazanis voted against the proposal as did Parliament speaker Zoi Konstantopoulou and Deputy Minister of Social Security Dimitris Stratoulis.

If new FinMin Euclid Tsakalotos can secure the support of his EU counterparts tomorrow, the path will be cleared for Greece to remain in the EU under a new program.

  • GREEK PM TSIPRAS SAYS GOVT AVERTING A POLITICAL GREXIT
  • GREEK PM TSIPRAS SAYS PEOPLE DIDN’T GIVE GOVT RUPTURE MANDATE
  • TSIPRAS: AGREEMENT WITH CREDITORS ISN’T CERTAIN, JUST POSSIBLE
  • CREDITORS MAKE POSITIVE EVALUATION OF GREEK DEBT PROPOSALS: AP
  • TSIPRAS: GREECE WILL MANAGE TO STAY IN EU, AS EQUAL PARTNER
  • GREECE BAILOUT TO BE 74B EUROS BASED ON CREDITORS’ EVAL: AFP

It remains to be seen how Greeks will respond to the decision. Given the similarities between the “new” proposal and the proposal that 61% of Greeks voted against last Sunday, there may well be pushback from voters and a generalized sense of betrayal among Syriza’s core constituency. 

end

 

Late Saturday night:  The Germans, the Finns and the Austrians do not like the deal proposed.  They initially cancel the EU summit.  Herman Sinn, adviser to Merkel proposes a 5 year “temporary” GREXIT.

(courtesy zero hedge)

“It’s Not Possible To Reach A Deal Today” – EU Summit Canceled As Leaders Scramble To Keep The Dr€am Alive

It was a weekend in which, according to traders, Greece facing an “absolutely final” was going to be saved. Instead, it may go down in history as the weekend in which the Eurozone finally split and its long-overdue disintegration began.

After yesterday’s dramatic report that Germany, together with 5 other nations, are contemplating a “temporary” 5 year Grexit, it started to become clear that Schauble does indeed want to make an example of Greece (perhaps for France and Madame Frexit, perhaps for the rest of the European periphery where the recovery is so “strong”, record youth unemployment still assures landslide anti-austerity and anti-Euro victories) and so he did, when the finmin meeting devolved into a total fiasco which ended in the most acrimonious manner yet, one where not even a statement was forthcoming.

The negotiation spilled over into today, where hours ago leader soundbites made it very clear that nothing would be resolve. Case in point, Finland’s FinMin Stubb who said that while he is still hopeful “I think we’re very far away from the types of conditionality that we need. If this was a negotiation from one to 10, I think we’re still standing somewhere between 3 and 4. So making progress but not there yet.  No one is blocking a deal, we’re all constructively trying to find a solution in a very difficult situation.”

And just as we warned on Friday, when we said the proposed Greek offer would be nowhere near enough, so it was again confirmed: “The conditionality that has been presented by the Greeks is simply not enough at this stage. We need to have clear commitments, clear conditionality and clear proof that those conditions will be implemented at the end of the day.”

Then it was Finland Prime Minister Juha Sipila who explained why Finland alongside many other nations including Germany, now are pushing for a Grexit: “proposals made by the Greek government on reforms it plans to undertake in return for a third bailout are not adequate as a starting point for negotiations with international creditors.”

And why Greek hatred, focusing on the Germans for so long, now may have a new target: the pragmatic, efficient country of Finland: We don’t consider the Greek proposal at all sufficient for starting negotiations. Much must happen in order to advance. The Finnish government is unanimous on its stance on Greece.

Or as we said yesterday…

Also it is now clear that Tsipras’ capitulation was all for nothing.

Even erstwhile Greek supporters Italy were dour: “We continue to work to establish the conditions to start negotiations, which is the real target – it’s not about closing a deal, it’s about starting negotiations,”Italian Finance Minister Pier Carlo Padoan tells reporters in Brussels. “We think that there are conditions to do that but let’s face it, the main obstacle to moving forward is lack of trust.

Italy’s conclusion of what is needed:I would like to see the Greek government to take concrete actions tomorrow in parliament to implement measures that are needed for Greece in the first place and then to rebuild trust and therefore allow concrete negotiations to move forward. We have lost so much time, we cannot afford to lose more time anymore. We’re talking about a very complicated program. ESM is complicated, it deals with structural reforms across the board, it deals with financing.”

The only problem is that Greece likely won’t have a government much longer, especially not when Tsipras is forced to tell his countrymen that the latest demands by the Eurogroup include at least one kidney. Assuming 79% of the Greeks were against the original Greek debt deal, at this point the only question is just how violent the government overthrow would be if and when Syriza tries to explain to the people just what is going on.

As for what happens today, well as Slovakia FinMin Peter Kazimir said quite simply earlier “it’s not possible to reach deal today.” What also happens is that all those EU-28members who had hope to meet in Brussels and savor some of that fine Belgium caterer product, were told to stay at home when European Council president Donald Tusk said that he had cancelled a planned meeting of EU heads of state and government this afternoon, even as a summit of euro zone leaders scheduled to continue until talks conclude on Greece. It may go on for a long, long time.

Tusk said in a tweet that the euro zone summit would start at 1600 CET (1400 GMT), an hour later than planned “and last until we conclude talks on Greece”. Euro zone leaders were due to meet on Sunday, either to endorse a decision to open talks on a new bailout or, along with other EU leaders, to take steps to contain the fallout from a looming Greek bankruptcy.

Basically, all Europe has left now is hope: hope that Germany will change its mind in the last second and will backtrack on its demands. It got so bad that Luxembourg’s foreign minister made a plea for Germany to avoid a Greek exit from the euro, warning Berlin of a catastrophic schism with France if it pushes for Athens to leave the currency union. The comments from Jean Asselborn, released on Sunday, came after Germany argued that Greece could take a five-year “time-out” from the euro zone and have some of its debts written off if Athens fails to improve proposals it has made for a bailout.

“It would be fatal for Germany’s reputation in the EU and the world if Berlin does not now seize the chance that there now is with the Greek reform offers,” Asselborn told Germany’s Sueddeutsche Zeitung newspaper.

“If Germany pushes for a Grexit, it will provoke a profound conflict with France. That would be a catastrophe for Europe,” he added in an advance release of an interview to run in the Sueddeutsche’s Monday edition.

So there is still hope, although if one looks at their faces…

… it is not much.

 

* * *

So where are we now? Sky News’ Ed Conway hasprepared a convenient list of “stream of consciousness” bullet points that effecttively summarize the situation:

Here are a few stream-of-consciousness thoughts about where we are, written at lunchtime on Sunday. They may be out-of-date by the time you read them. Then again, in the euro crisis, nothing ever seems to change all that much.

1. Today’s Absolutely Final deadline is no longer final.

There was lots of talk (from the President of the European Council among others) that Sunday’s leaders’ and EU leaders’ summit was the Very Last Opportunity to seal a deal or to throw Greece out of the euro. That seemed to make some sense?—?after all, not only are the Greek banks closed, the entire financial system seems to be about to run out of money. There’s only so long you can run an economy without a fully-functioning banking system.

However, at yesterdays’ eurogroup meeting (that’s the euro finance ministers) it emerged that the decision on a deal may be put off for another few days. Sources said that the financial outflows were not so bad last week, and that the Greek banking system could survive for another few days. Whether this is true or not remains to be seen.

2. One big problem is trust

This is both good news and bad. Good because it signifies that in terms of the proposals for a bailout deal, there is no longer much distance between the two sides. Having persuaded his people to vote in last weekend’s referendum against the deal proposed by the creditors, he has subsequently signed up to the vast majority of its strictures. So the two sides now, finally, largely agree on the kind of austerity that needs to be imposed (cuts to pension bills, liberalising monopolies and nationalised industries, raising VAT and removing exemptions, including on the islands etc). The problem is that no-one believes that Greece will actually go through with the reforms?—?especially after all the surprises, disappointments and broken promises of the past few weeks and months. That is why there is talk of waiting until the Greek parliament has actually passed some of these measures before giving the final go-ahead to new bailout talks.

3. The other big problem is domestic politics

Midway through yesterday’s finance minister’s meeting, it emerged that Finland’s government was close to collapse, as the second-biggest party, the True Finns, were dead set against handing any extra cash to Greece. There were also extremely hawkish comments coming from the German and Slovakian teams. It’s a reminder that around the Eurozone many countries are simply sick and tired of handing money to Greece. The largely centrist leaders in Spain and Italy, who face upsurgent anti-euro parties back home, are desperate to prove to the electorate that voting in a party like Syriza is the worst thing they could do. The more Greece suffers (preferably with wall-to-wall coverage across the European broadcast media) the more likely their voters are to think twice about voting for Podemos or Beppe Grillo.

To put it another way, in order to get a deal, politicians will have to risk losing at least some votes (maybe lots of them) back home. And no politicians like that.

4. Crazy ideas are now mainstream

A few years ago it was forbidden to talk about the possibility that a country could leave the euro. That taboo was overcome a few years ago at the Cannes G20. Now some finance ministers are openly discussing how it would be done. The big story out of yesterday’s eurogroup was that Germany has been throwing around an idea of a temporary Grexit?—?that Greece could leave the single currency for five years, restructure its debt and re-join when it is in better health. The problem with such an idea is that “temporary” changes in currency regimes almost always turn out to be permanent. Take the UK leaving the ERM in 1992, or leaving the gold standard in 1931, or the US closing the gold window in 1971. All were described as temporary. Many might have even believed that at the time. Ultimately, they were nothing of the sort.

Anyway, what seems more likely is that this plan is a mischievous attempt at brinksmanship. And, even if it never comes to pass, it is going down brilliantly back home with the German electorate [see point 3].

5. The cancellation of the full EU leaders’ summit is neither a good nor a bad thing

There was originally supposed to be a euro leaders and then a full EU summit today?—?the idea presumably being that if Grexit was indeed likely, the whole of the EU might need to sign off both on that and the consequent humanitarian aid that might be needed. Now the EU summit has been cancelled?—?mainly because after last night’s nine hour marathon of talks it is clear that there will be no straightforward conclusion from the eurogroup, and hence the leaders won’t simply be coming into town to sign a piece of paper and then leave.

6. Best-case scenario: eurofudge

Of course, the pie-in-the-sky best-case scenario involves Greece getting a deal immediately and going home and successfully implementing it. But a more realistic scenario is probably going to involve a characteristic euro fudge.

The euro finance ministers could agree to begin bailout talks on the pre-condition that Greece implements a number of austerity/reform proposals in the next few days. This would be endorsed by the leaders, unanimously. Then, the European Central Bank confirms that because talks are now ongoing (as opposed to frozen) it can loosen conditions on Greece’s banks (though they won’t open for some time either way). The eurogroup confirms the bailout talks are underway in yet another meeting or teleconference later on this week. Note that there is no longer any hope of getting a full bailout signed off?—?the best that can be done is to begin formal negotiations for another bailout. All because the last deal expired a couple of weeks ago.

7. Worst-case scenario: eurodisaster

The worst-case scenario for both sides involves Greece leaving the euro. Quite how this happens is anyone’s guess, though Germany’s eurosabbatical paper yesterday underlined that despite the fact that the EU Treaties don’t have a clause to allow it, Grexit is absolutely feasible. It would begin with a breakdown of today’s talks, with a complete split in the eurogroup and euro leaders’ meeting between those who believe Greece’s departure is good news for the euro (Germany, Finland etc) and those who think it would be a disaster (France, Italy etc).

Rather than coming out and waving a piece of paper saying Greece is heading back to the drachma, the process might be more subtle and imperceptible: Athens might be allowed to print its own euro-denominated instruments; it might be allowed to print scrip; it might simply not be allowed to get extra liquidity from the ECB and be forced to nationalise its banks.

But though it might not begin with one big moment of fanfare, a departure would be messy, would provoke a further default by Greece on its debts to the IMF, the ECB and other euro nations. They would be pursued in the courts for decades for some sort of payback. Questions would arise over the future of the single currency. If the remaining members do not commit to big-scale further integration (a single Treasury, fiscal union) they will leave the door open for further departures in the coming years. Markets would plunge, not just in the Eurozone but everywhere around the world. Greece would almost certainly be out of the euro forever, however much the move would be branded initially as temporary.

* * *

Good luck Europe, judging by the suddenly surging Bitcoin price, you need it now more than ever

end

 

Here is Herman Sinn proposing a “temporary” GREXIT.

(courtesy zero hedge)

Germany’s Most Noted Euroskeptic Is Now In Control

This weekend’s events in Europe have clarified who is really running the show across the ‘union’. Hans-Werner Sinn, Chairman of the Ifo Institute for Economic Research, vehemnt euroskeptic, and head of the so-called ‘five wise men’ advising the German government and specifically Angela Merkel, confirmed his call from 2012 for a “temporary grexit from the euro.” The right wingeconomist previously explained“Greece and Portugal have to become 30-40% less expensive to be competitive again. This is being attempted through excessive austerity measures within the euro zone, but it won’t work. It will drive these countries to the brink of civil war before it succeeds. Temporary exits would very quickly stabilize these countries, create new jobs and free the population from the yoke of the euro.”

 

It seems key given this to comprehend what Sinn’s thought process is. Here is Sinn explaining why a temporary exit from the euro is in everyone’s best interest and expressing his euoskepticism in 2012

If Greece exited the monetary union, the Greeks would purchase their own goods again, and wealthy Greeks would return to invest. And if Portugal leaves, it will have similar positive experiences. The Ifo Institute has studied some 70 currency devaluations and found that recovery begins after one to two years. We are, of course, also suggesting just a temporary exit. Greece and Portugal have to become 30 to 40 percent less expensive to be competitive again. This is being attempted through excessive austerity measures within the euro zone, but it won’t work. It will drive these countries to the brink of civil war before it succeeds. Temporary exits would very quickly stabilize these countries, create new jobs and free the population from the yoke of the euro.

 

 

We should stop proclaiming the end of the world in the event of an exit. Instead, we should shape the exit as an orderly process with relevant aid for the banks of the country in question and for the purchase of sensitive imports. What we are currently witnessing in Greece is a disaster — and it’s not a disaster caused by an exit, but rather by remaining in the euro zone.

 

 

Spain only has to devalue by 20 percent. That’s achievable within the euro zone. Greece and Portugal are in a separate category. These are the only two countries that consume more than they produce.

 

 

On the basis of sound analysis, I am pointing to a danger that that many do not perceive, and I am weighing things up. Euro-zone member states have made available €1,400 billion ($1,780 billion) in bailout loans, €700 billion of which has been contributed by the Bundesbank through its TARGET loans. On top of this, there is the ESM with €700 billion, which is to be leveraged to €2,000 billion with the help of private investors. This stabilizes the capital markets, but it also destabilizes the remaining stable European states and wipes out the savings of retirees and taxpayers. We are gradually sliding into a trap from which we will no longer be able to escape. This risk is, in my opinion, the greatest risk of all.

 

 

You can’t convince me that it makes sense to stand by idly and watch as we take on increasingly greater risks. We are destabilizing our political system with this excessive rescue policy…

 

I was too quick to endorse the euro because I thought it would liberate the continent from endlessly fluctuating exchange rates. My mistake was that I believed that the nations of Europe would adhere to the Maastricht Treaty and not socialize the debts of Southern European countries.Older colleagues had already pointed to this danger at the time.

And explaining that Q€ was never expected to help the southern nations of Europe and may lead to a messy end for the euro

I do expect QE to bring about some inflation. Given that an exchange rate is the relative price of a currency, as more euros come into circulation, their value has to fall substantially to establish a new equilibrium in the currency market. Experience with similar programs in the United States, the United Kingdom, and Japan has shown that QE unleashes powerful forces of depreciation. QE in the eurozone will thus bring about the inflation that Draghi wants via higher import and export prices.Whether this effect will be sufficient to revitalize southern Europe remains to be seen.

 

There is a risk that Japan, China, and the US will not sit on their hands while the euro loses value, with the world possibly even sliding into a currency war. Moreover, the southern EU countries, instead of leaving prices unchanged, could abandon austerity and issue an ever greater volume of new bonds to stimulate the economy.Competitiveness gains and rebalancing would fail to materialize, and, after an initial flash in the pan, the eurozone would return to permanent crisis. The euro, finally and fully discredited, would then meet a very messy end.

 

One can only hope that this scenario does not come to pass, and that the southern countries stay the course of austerity. This is their last chance.

And finally yesterday, reiterating the strategy that is now in place…

The temporary exit of Greece from the euro, with lure a potential “haircut” of the debt, suggests the Chairman of the Ifo Institute for Economic Research in Munich, Hans-Werner Sinn.

 

“A temporary exit from the euro would be the easiest way for Greece to get out of this mess”, says in an interview with the weekly magazine “Hot” the German professor, who has been insisting for years on the exit from the Eurozone of economically weaker countries-members.

 

As he says in his interview, “unfortunately, the euro has jeopardize the European integration project and if we do not find methods to restore the competitiveness of Southern Europe in a way that allows a temporary exit, there is the possibility to “kill” this plan”.

 

Professor Sinn, who has served for many years as head of the “five wise men” – advisors of the German government and Chancellor Angela Merkel, also appears contrary to the pursuit of countries like France and Italy, and the European Central Bank (ECB ) to relax the harsh financial policy imposed by Berlin in the Eurozone and defends the policy of strict austerity.

 

In regard to Greece, in fact, the president of Ifo believes that “it is absurd to accuse Germany, the greater austerity relief force in Greece, that it imposes austerity, because it does not intend to give unlimited guarantees and accept the unlimited accumulation of additional debt”.

*  *  *

Anyone positioning for more centrist union-supporting rhetoric, hope is no longer a strategy as the hardest conservatives are now in charge.

 

 

end

 

Saturday night:

The purge now begins inside the Syriza party as hard core left wingers are being forced out:

(courtesy zero hedge)

The Purge Begins: Tsipras To Expel Hard Core Left Wingers, Including Energy And Deputy Labor Ministers

In the first sellside reaction to the latest Greek tragicomedy, moments ago Citi’s Richard Cochinos, in a note titled “72 hours for Greece” said what our readers have already known for about 6 hours: namely that “Greece will have 72 hours to implement the changes” and goes straight to the bottom line: “If they are unable to get the package through parliament, then this ends the dialogue and the government collapses.

He adds that “the issue that Greece faces is it might not be possible – cracks in Syriza appeared already over the proposal sent to Brussels, what is coming back is even more stringent than the rejected referendum. There is a decent chance the Greek government will reshuffle next week, possibly fold on reforms. Domestically they can’t afford 3-4 weeks for new elections. The Economic Minister has suggested capital controls will remain in place for the next two-months (though they may be lightened). During the tourist season this is proving to be a death touch to the economy. RyanAir announced last week it is discounting flights to Greece by 30% due to low volumes.”

We had a more directed view: in light of his “mental waterboarding“, Tsipras who has already lost all his credibility with both his people and the Troika, should do the only possible thing he can at this point: preserve some integrity with his voters, and resign…

… knowing full well that it is very likely that Syriza would be re-elected in the next elections, but meanwhile throwing the ball in Europe’s court for the final time, forcing the Eurozone to make the Grexit decision instead of, as Merkel has done passive-aggressively, letting Greece to pick its own poison. Also, in doing so, the blame for the collapse of the Eurozone would fall on Germany, something Merkel’s ego would hardly be able to withstand.

And as if reading the collective’s mind, Tsipras did already begin the governmental reshuffling, only instead of quitting he has started the purge of the hard-core leftwingers still defending the anti-bailout platform, who are certain to make life a living hell for the premier once he returns to Athens from Brussels and has to explain his actions to both his party and to the population.

As Reuters reports, the first targets of Tsipras purge of “party rebels opposed to an austerity package that will have to go through parliament within days” include the most prominent rebels, Energy Minister Panagiotis Lafazanis, leader of the so-called “Left Platform” within Syriza and Deputy Labour Minister Dimitris Stratoulis, a former unionist and a fierce opponent of pension cuts.

Under a Syriza party agreement, deputies are supposed to resign their seats if they publicly disagree with government policy although there is nothing to stop them refusing to stand down and holding on to their seats as independents.

 

Terence Quick, a member of the rightwing Independent Greeks, the junior coalition partner in the government, said that any deputies who voted against the government should resign.

 

“I don’t think abstaining or being absent shows you are responsible or honorable in these particular circumstances. You either go in and say a forceful no and you leave or you say ‘Yes’ and you continue to fight,” he said

The next scalp Tsipras would love to have is that of the “uncompromising speaker of parliament, Zoe Constantopoulou, who also defied Tsipras and abstained from the vote” although she would require a no confidence vote to be replaced “but the other rebels would be expected to resign their seats, the same people say.”

And if not resign they will simply be among the first group of party leaders sacked, with many more to come as Tsipras effectively morphs into his predecessor Samaras.

According to Reuters, the 40-year-old prime minister “can not afford to wait”  because “a mini-rebellion of lawmakers on Friday laid bare tensions in the ruling Syriza party. The revolt saw 17 deputies from the government benches withhold support in a vote to authorise bailout negotiations, leaving Tsipras reliant on opposition parties to pass the measure.”

Dealing with the consequences of that revolt will provide a clear signal of how determined Tsipras will be in pushing through the reforms European partners are demanding.

 

Whether cooperation with opposition parties leads to a full-scale national unity government, with seats in the cabinet is still unclear but the change has left the future of the radical leftwing government in doubt. The government has 162 seats in the 300 seat parliament.

Then again after Friday’s vote, and following this weekend’s crushing blow by the Troika, it is almost certain that many Syriza loyalists will exit the party, either voluntarily or otherwise, leaving the ruling coalition with a minority vote, which in turn will likely result in a few round of government elections within 2-3 months.

However, the purge will be only the first of many hurdles now facing the morally and financially bankrupt government:

Clearing out the leftwingers still defending the anti-bailout platform on which Syriza won power in January would underline how seriously the situation has worsened for Greece in the past six months.

 

With the financial system on the brink of collapse and shuttered banks running short of cash, the six-year Greek crisis has escalated dangerously, forcing Tsipras to change course only a week after voters resoundingly rejected a milder package of bailout terms in a referendum.

 

There are also questions about how stable any such government would prove, given the deep ideological differences between Syriza and the centre-right New Democracy or Socialist Pasok parties.

But the biggest hurdle is not what Tsipras will do to the government, but rather what, if anything, the Greek people will do to Tsipras. If they have had enough, they may just shift from the “radical left” to the “radical right” as the only remaining political party that hasn’t promised the sun, moon and stars, or been terminally discredited.

Unless, of course, the population, so disenchanted by the endless game of political thrones, becomes the first social manifestation of “learned helplessness” and simply refuses to care, instead opting to go gentle into that good night and with it taking what was once the world’s oldest democracy.

end

 

Sunday morning:  The Greek choice to make:  Hand over your sovereignty or take a “temporary” 5 year GREXIT

(courtesy zero hedge)

The Greek “Choice”: Hand Over Sovereignty Or Take Five Year Euro “Time Out”

For those who missed today’s festivities in Brussels, here is the 30,000 foot summary: Europe has given Greece a “choice”: hand over sovereignty toGermany Europe or undergo a 5 year Grexit “time out”, which is a polite euphemism for get the hell out.

As noted earlier, here are the 12 conditions laid out as a result of the latest Eurogroup meeting, which are far more draconian than anything presented to Greece yet and which effectively require that Greece cede sovereignty to Europe, this time even without the implementation of a technocratic government.

  1. Streamlining VAT
  2. Broadening the tax base
  3. Sustainability of pension system
  4. Adopt a code of civil procedure
  5. Safeguarding of legal independence for Greece ELSTAT – the statistics office
  6. Full implementation of autmatic spending cuts
  7. Meet bank recovery and resolution directive
  8. Privatize electricity transmission grid
  9. Take decisive action on non-performing loans
  10. Ensure independence of privatization body TAIPED
  11. De-Politicize the Greek administration
  12. Return of the Troika to Athens (the paper calls them the institutions… for now)

One alternative, generously presented to Greece, is for the country to put some €50 billion of assets – the best ones – in escrow to creditors. A more polite was of putting would be a Greek secured loan. This is how the Luxembourg FinMin Pierre Gramegna laid it out:

“A few new ideas were added to the table, especially one which is very important for some member states, which is that Greece would put a portion of its assets into a company that would be more independent from Greece.”

“More independent” from Greece and “more dependent” to Berlin.

Greece would place about €50 billion of state assets into an independent company. Those assets could serve as collateral against aid loans, Gramegna says. “It would act as a kind of guarantee. There is great hesitation from the Greek side and now the heads of state and government have to choose.”

“It would be a company structure based in Luxembourg,which would be managed from Greece with supervision by the European Commission and by the European Investment Bank. It would remain in Greek hands but it would create more assurances if it was known that a lot of assets were in this company.”

“If one knows that the third bailout package would cost more than EU80B, one understands that countries are urging for some guarantees from Greece.”

In other words, Greece is told to set aside a quarter of its GDP for Europe to do as it sees fit, and which can be “seized” if Greece is seen as veering away from its third bailout promises again.

And since Greece has no option but to promise everything and the moon, it will surely comply hoping that it is once again allowed to promptly forget all the promises as soon as it pockets some of that €86 billion in new bailout funds just to unlock the €120 billion in deposits held hostage in Greek banks by the ECB, even if the resulting debt will push Greek debt/GDP well above 200%.

Why?

Because the alternative is, and we quote…

“In case no agreement could be reached,Greece should be offered swift negotiations on a time-out from the euro area, with possibly debt restructuring.”

… from the Eurogroup document:

No wonder Tsipras looks like this at the moment:

Somehow we think that if the only “alternative” is ceding sovereignty to Merkel and the rest of the northern European state, the vast majority of the population – which now clearly understands there is little further upside from remaining in Europe – may just opt for the aptly named “time out” from the most destructive experiment in Greek history. And even beg to make it permanent.

end
Monday morning:  Greece signs a “deal” to negotiate a bailout  for 86 billion euros.  We await the Greek populace reaction:
(courtesy zero hedge)

Deal Struck Following Total Capitulation By Tsipras: Market Awaits Greek Reaction To Draconian Deal Terms

Last night, when we concluded our overnight summarystate of affairs we said that “we expect some resolution around first light this morning, and while another Greek can kicking and some last-moment “hope” is surely in the cards, we know two things: Greece is officially finished – there is no way the Tsipras or any other government can politically recover after such a humiliating spectacle when half of Europe made a mockery of the Greek people; and perhaps better, we finally have seen the true face of Europe: visible only when things are finally falling apart.”

Sure enough, just around 9am CET, after a 17-hour mammoth all-night session, Greece did manage to cobble together a “deal” if one may call this latest embarrassing can-kicking that, which was nothing short of total capitulation by Tsipras: a prime minister who 8 days ago was victorious cheering the passage of a referendum that rejected a far less draconian deal.

As part of the deal, Greece “surrendered to European demands for immediate action to qualify for up to 86 billion euros ($95 billion) of aid Greece needs to stay in the euro” as Bloomberg politely put it.

We would put it as follows: Greece agreed, at the cost of ceding its sovereignty to Europe, to allow the Troika to repay itself. Even Greek prime minister Tsipras admitted as much saying “Greece will fight to return to growth and to reclaim its lost sovereignty.” He started the “fight” by being brave enough to put up a smile for the reporters. 

Worse, there is no actual deal term sheet on the table: while the summit agreement averted a worst-case outcome for Greece, it only established the basis for negotiations on an aid package, which would also include €25 billion euros to recapitalize its weakened financial system, money which would come from Greek asset sales.

The politicians were greatly relieved, perhaps most of all to be finally able to go to bed. Here is the statement by Euro president Donald Tusk:

Good morning. Today, we had only one objective: to reach an agreement. After 17 hours of negotiations, we have finally reached it. One can say that we have ‘agreekment’. Leaders have agreed in principle that they are ready to start negotiations on an ESM programme, which in other words means continued support for Greece.

There are strict conditions to be met. The approval of several national parliaments, including the Greek parliament, is now needed for negotiations on an ESM programme to formally begin.

Nevertheless, the decision gives Greece a chance to get back on track with the support of European partners. It also avoids the social, economic and political consequences that a negative outcome would have brought. I welcome the progress and the constructive position of Greece that helps to bring back trust among euro zone partners.

Following national procedures, the Eurogroup will work with the Institutions to swiftly take forward the negotiations. Finance ministers will also as a matter of urgency discuss how to help Greece meet her financial needs in the short term, so-called bridge-financing.

I would like to thank the President of the Commission Jean-Claude Juncker and the Eurogroup President Jeroen Dijsselbloem for their dedication and involvement in this progress. Without your work, today’s agreement wouldn’t be possible. Thank you.

One wonders just how effective leaders of a multi-trillion political and monetary block are at cobbling together deals at 4 am in the morning, when the biggest motivators is just to get a deal signed.

The terms of the deal are largely as had been agreed upon by the finance ministers previously, and contain numerous draconian clauses which make the much-hated “memorandum” from the second bailout tame in comparison. Furthermore, Greece also capitulated on the IMF remaining as a key part of the deal, as well as the formation of a €50 billion “escrow” fund which would receive proceeds from the liquidation of Greece assets, and where the first €25 billion of capital would be used to bailout the insolvent Greek banking system.

According to Reuters, “Tsipras finally accepted a compromise on German-led demands for the sequestration of Greek state assets worth 50 billion euros – including recapitalized banks – in a trust fund beyond government reach, to be sold off primarily to pay down debt. In a gesture to Greece, some 12.5 billion euros of the proceeds would go to investment in Greece, Merkel said. The Greek leader had to drop his resistance to a full role for the International Monetary Fund in a proposed 86 billion euro bailout, which Merkel has declared essential to win parliamentary backing in Berlin.”

Perhaps the toughest condition for Tsipras to swallow was Germany’s insistence that Greek state assets worth up to 50 billion euros be placed in a trust fund beyond government reach to be sold off with proceeds going directly to pay down debt.

Berlin initially wanted to use a structure in Luxembourg managed by its own national development bank, KfW, but diplomats said it was flexible on the location.

One diplomat said that was tantamount to turning Greece into a “German protectorate”, stripping it of more sovereignty.

But Merkel declared the matter a “red line” for Germany.

Bloomberg adds that “the agreement shifts the spotlight to the parliament in Athens, where lawmakers from Tsipras’s Syriza party mutinied when he sought their endorsement two days ago for spending cuts, pensions savings and tax increases. They have until Wednesday to pass into law key creditor demands, including streamling value-added taxes, broadening the tax base to increase revenue and curbing pension costs.”

The agreement cobbled together in the last minute “was billed as its last chance to stay in the euro… with Greece running out of money and its banks shut the past two weeks.”

The hope is that now that Greece may have a deal in place, the ECB will open up some ELA taps and allow Greeks to withdraw some more of their €120 billion or so of hijacked deposits. Assuming, of course, the Greek parliament passes the deal.

The politician comments were split as per the pre-bailout posture with many of the northern European nations less than thrilled:

First it was Merkel who said that “trust has to be rebuilt, the Greek authorities have to take on responsibility for what they agreed to politically here. It reflects the basic principles which we’ve followed in rescuing the euro. It now hinges on step-by-step implementation of what we agreed tonight.

Then it was Dutch Prime Minister Mark Rutte’s turn to talk to reporters saying that “only after the Greek parliament agrees
with all the measures that have been decided this week, is there a base to reopen negotiations for the ESM program, which could take weeks. The Greek proposals of two days ago were insufficient.  They needed to take measures, which they can translate into actions. The current measures are fierce, but necessary to heal the Greek economy and government.” Rutte added that he is unhappy with the fact that he has to break electoral promise to Dutch constituents on no further Greece aid “This summit was about the position of Greece in the euro zone, but it was also about the credibility of our coin, the euro.”

Tsirpas naturally tried to spin the total capitulation as at least some victory: “Greece will be able to stand on its own feet with agreement reached at EU summit, Greek PM Alexis Tsipras says in statement broadcast live on state-run ERT TV. Agreement with creditors “tough”, averted transfer of Greek assets abroad. Greece will keep fighting to return to growth. Greece has sent message of democracy, dignity across Europe. Measures included in the deal will inevitably cause recession to Greek economy. Agreement with creditors will put Grexit talks in the past.”

Well not really: only until the next government comes in power promising to undo the current memorandum just as Tsipras did.

But the punchline came from Malta’s Prime Minister Muscat who said that The Greek government has accepted practically everything… It accepted all the crucial and important points.”

Some more details: the conditions that Tsipras swallowed comprised a laundry list of unfinished business from Greece’s two previous bailouts and a new demand for the government to transfer 50 billion euros of state assets to a holding company that will seek to either sell or generate cash from them. His creditors rejected Tsipras’s pleas for a cut in the face value of Greek debt of about 310 billion euros.

* * *

And now comes the hard part: convincing both Greece, the Euroskeptics, and the market (after kneejerking higher the EUR is now down on the session), that the deal is viable.

Calling that vote “has turned into one of the most expensive economic policy mistakes in the European Union for a long time,” Holger Schmieding, chief economist at Berenberg Bank in London, said in a note to clients Monday. “The much bigger sums which creditors now need to offer and the tougher conditions Greece now has to meet make it harder for both sides to deliver on the bargain.

Rabobank adds that “implementation of Greece deal will remain subject to “considerable” risk given domestic political backdrop, Rabobank strategists write in client note. New governing arrangement likely necessary after Greek govt’s volte-face in accepting  deal and clearly flouting result of July 5 referendum. A new unity govt or an early election very possible. Further deteriorating macro backdrop raises odds that disappointing economic performance will drive Greece’s debt metrics to rapidly unwind benefits from any debt relief.” Rabo adds thatt Greece’s influence on mkts will remain limited, as long as any missed targets and delayed reforms occur within context of a bailout agreement.

It concludes that sustainability of Greece’s public debt likely to remain a threat in longer term. Which is true considering Greek debt/GDP is about to surpass 200%.

In fact, the sellside consensus is clear: Greece was “comprehensively routed” by German. Quote Demetrios Efstathiou of ICBC Standard Bank (via the Guardian):

  • Tsipras had to concede on almost every point; Merkel comes out as a winner, and should be able to get the deal though the German parliament.
  • Germany’s extremely tough position would serve as a warning to other Eurozone nations. There are arguments that she even pushed too far.
  • Varoufakis may have gambled, Tsipras and Syriza may have lost, but Greece may be the ultimate winner – Greece has a golden opportunity to implement in record time the drastic reforms that it desperately needed and which successive governments have been unwilling to commit to.
  • The formation of a national unity or special purpose government to pass the reforms in the tight time-frame is now required. Elections would have to follow at a later stage.
  • The debate will now move on to the reaction of the Greek people. There is no easy answer. Only time will tell. The way I see it is that the Greek people will be relieved to see their banks reopen, their pensions and savings to be still denominated in euros, and the tourist season not destroyed. They should also be celebrating the implementation of structural reforms, but I doubt that.
  • Greece must now push through parliament, by Wednesday, July 15th, a series of legislations that include the streamlining of the VAT system, and pension measures.

ADM’s Marc Ostwald also agrees that the measures in this bailout package are “infinitesimally worse” than the ones turned down in last Sunday’s referendum.  He adds that what is on the table as a deal highlights that: a) there is no long-term future for the Eurozone; b) the desire on the part of Eurozone creditor nations to completely destroy the Greek economy – it can certainly be asserted that this is indeed a worse deal than the 1919 Treaty of Versailles.

This is how he views next steps:

  • Tsipras will have to form a new government of national unity as soon as he gets back to Athens
  • By Wednesday 15th, Greece will have to pass laws including simplifying VAT rates, and applying VAT on a wider basis, cutbacks on pensions, and making its statistics agency independent.
  • Once these have been passed, ESM bail-out parliamentary process can commence, and this will require parliaments in Finland, Germany, Austria, Netherlands, Slovakia and Estonia to approve starting ESM talks
  • The Greek parliament will then have to rush through further laws to attain brige financing to pay the ECB on July 20th.

Others, such as Joerg Kraemer, chief economist at Commerzbank, sees elections as imminent, saying Greek parliament will presumably pass the required reform laws partly with votes from big opposition parties; Tsipras will find no majority of his own in parliament and new elections are likely after a possible agreement on 3rd bailout program. In other words, a new Greek political party is set to take over with promises of undoing what Tsipras just “achieved.”

  • Heads of state and government kicked the ball back to Athens as the country has to pass numerous and unexpectedly tough reform laws before talks about 3rd bailout program can start
  • Eurogroup will clarify how Greek government is to be financed until 3rd bailout program enters into effect
  • As long as negotiations are ongoing and not officially declared to have failed, ECB will probably keep ELA ceiling for Greek banks stable; may even raise it if Greek banks are about to become illiquid

Most importantly, as we said yesterday, the Summit over weekend has shown once again how deeply divided euro zone is politically.

ABN’s Nick Kounis piles on saying the agreement reached this morning in Brussels averts Grexit possibility only in near term, reduces risk of bank collapse as ECB likely to increase ELA, Nick Kounis.

  • Greece made all the concessions, accepted very tough measures; more to come as this only opens door to ESM negotiations
  • EU50B in asset sales isn’t realistic; parliamentary processes in Greece and other countries will be difficult
  • Biggest risk now is implementation in coming days, weeks, months against the background of deepening recession
  • Doesn’t see big concession to Greece on debt as language almost exactly the same as in 2012.

But the most damning assessment of the capitulation came from Greece itself aftter Minister of Labor Panos Skourletis said in interview with state-run ERT-TV that “Greek snap elections aren’t possible at this stage, due to country’s economic situation, but will be needed this year as there’s “an issue,” with the govt’s parliamentary majority.”

He adds that the agreement currently negotiated between Greece and its creditors isn’t viable, no one can say what will happen after a few months. “I can’t see how we can avoid elections in 2015, they are necessary. We have a government which has probably lost its parliamentary majority, which believes, says and supports the opposite things from what those that it is forced to implement, under the threat of a gun.

Nikos Filis, the parliamentary spokesman for Tsipras’s governing party, said that Greece had been “waterboarded” by euro-area leaders during the negotiations and accused Germany of “tearing Europe apart” for the third time in the past century. “#ThisIsACoup” became the most-trending Twitter hashtag in both Greece and Germany overnight.

end

Monday morning:
Greece accepted this “deal” to negotiate a bailout.
Here is what is next:
(courtesy zero hedge)

After “Deal”, Here’s What’s Next For Greece

Now that Greece has capitulated and offered up its sovereignty in what can only be described as an unconditional surrender to Berlin and Brussels, you might be curious as to what the most likely next steps are for Greece, its government, and its people.

For reference, here is a quick summary courtesy of Bloomberg:

WHAT’S NEXT?

  • The Greek govt is set to renew a bank holiday and capital controls decree which expires today
  • The ECB’s GC is expected to discuss ELA for Greece’s banks
  • Eurogroup meeting later today will work on Greece’s short-term needs and discuss bridge financing
  • Greece has accepted to legislate on 4 action points by Thursday July 16, and another two by July 22, according to Malta’s PM Muscat
  • Then Greece would come before the Eurogroup and euro- area member states would decide to open or close the needed negotiations that would let the ESM to disburse funds, Muscat says
  • Dutch PM Rutte says it could take weeks to negotiate Greek ESM aid deal

WHAT DOES IT MEAN FOR GREECE’S BANKS?

  • Greek banks are to be recapitalized by Greek asset fund and Tsipras says the deal protects the stability of the banking system
  • ELA will stay in place all the while that another bailout is in the pipeline, Mizuho’s Peter Chatwell says in e-mailed comments
  • ECB ELA will most likely stay in place until at least Wednesday, pending Greek ability to legislate the list of prior actions, Oxford Economics says in a note

WHAT ABOUT TSIPRAS AND SYRIZA?

  • Support at Wednesday’s vote from Greece’s pro-Europe parties will come at a cost, when the timing is right, Barclays says
  • It makes more sense for those parties to let PM Tsipras bear the political cost of capital controls while triggering elections would make default inevitable, plunging the country into a complete paralysis for the next 30 days
  • Don’t entirely rule out a coalition partner change (with To Potami), and believe this situation will eventually lead to new elections after the summer
  • A new unity govt or an early election very possible, Rabobank says
  • Given political fractures in Greece, passage of the proposal through parliament is far from certain, Richard Cochinos, strategist at Citigroup, says in client note
  • Decent likelihood of a Greek cabinet reshuffle; govt could possibly fold on reforms
  • Tsipras may seek to expel those opposed to a deal with creditors from the party as he no longer commands a majority in parliament, Reuters said, citing people familiar
  • “Constructive” centrist parties will likely continue to support the government coalition, Barclays says
  • Snap elections necessary but can’t take place now, Greece’s Labor minister Skourletis says

WHAT ABOUT ITS CREDITORS? 

  • Germany, the Netherlands, Austria, Slovakia, Estonia and Finland all need parliamentary approval to open negotiations on a new Greek program, an EU official said last week, while France’s Hollande said French National Assembly to vote on the deal on Wednesday
  • While Marcel Fratzscher, president of the DIW economic institute, says it will be very difficult to sell the deal to German voters and Germany’s Greens say the deal means Greece will be stuck in a  recession, a govt lawmaker said it is likely the German coalition will approve the deal
  • Rutte says he’s unhappy he has to break an electoral promise to Dutch constituents on no further Greece aid
  • The deal is so tough there’s a better than even chance that the Finnish parliament will authorize the negotiations, Berenberg’s Holger Schmieding writes in e- mailed comment
  • Even if a deal can eventually be reached to keep Greece in the euro area, there will be long-term consequences, the damage done to relations between France and Germany may prove irredeemable while Germany’s suggestion Greece be granted a short term exit from the single currency shatters the principle that euro-area membership is irrevocable, Oxford Economics says

IS THERE ANY AGREEMENT ON RESTRUCTURING GREECE’S DEBT?

  • Over the weekend, an IMF source told Reuters said that if other creditors couldn’t agree on a haircut, grace periods on interest payments could be combined with lower rates and extended maturities
  • Tsipras said the negotiations had managed to gain restructuring while Merkel confirmed interest-payment grace periods and longer maturities will “be discussed once there is a successful evaluation of the new Greek program”

WHAT ABOUT GREXIT?

  • Tsipras says summit outcome averts collapse of banking system
  • Risks of a Greek exit have reduced in the very short term as the ECB should remain supportive as long as prior actions are passed in Parliament by Wednesday and talks are headed in the right direction, Barclays says
  • The chances of a Grexit have now fallen below 50%, UBS WM write
  • The deal and Wednesday’s vote may stretch the Greek govt to breaking point, forcing new elections; the month’s hiatus that would ensue while elections took place would almost certainly see Greece ejected from the euro area, Oxford Economics says
end
And now the discussions on Greece:
First Michael Snyder
(courtesy Michael Snyder/EconomicCollapse blog)

Germany Never Intended For Greece To Stay In The Euro

 

end

 

Barclay’s correctly states that the Greek banks are not out of the woods.  As a matter of fact, the Greek bare trapped inside a forest with no way out:

 

 

(courtesy Barclay’s zero hedge)

Greece Banks Not Out Of The Woods, May Impose Tougher Capital Controls, Barclays Says

On Friday in “Don’t Tell Merkel, Greek Banks Need Another €10-14 Billion Bailout,” we warned that the €53 billion aid request from Greece was likely only part of the story. The country’s banks, which were (and still are) on the verge of collapse would need to be recapitalized and according to one banking official who spoke to Reuters, that cost of that recap would be somewhere in the neighborhood of €14 billion.

Fast forward 24 hours and that €14 billion had turned into €25 billion, bringing the total estimated cost of the proposed ESM program for Greece to some €76 billion. EU finance ministers balked at the figure and by Sunday it was clear that creditors intended to extract the harshest set of concessions yet out of Athens in return for a new program. After 13 hours of negotiations in Brussels, EU leaders reached an agreement in principle which will require PM Alexis Tsipras to push a draconian set of reforms through parliament by Wednesday. But even if Greece does manage to secure a new bailout this week which includes the €25 billion in recap funding via the agreed upon escrow fund, the banks are by no means out of the woods. Here’s what we said on Friday:

Indeed, even if a deal is reached this weekend and the ECB raises the ELA cap on Monday, it’s difficult to imagine that the deposit outflows will cease (would you trust your deposits in a Greek bank even with a “deal”?) and as suggested above, if capital controls are lifted, the situation will be even worse because Greeks will simply take the opportunity to withdraw all of their money at once. With the liquidity “cushion” down to just €750 million (according to same official who spoke to Reuters about the recap needs), deposit flight will clearly have to be funded via more ELA, which means whatever is left in terms of pledgable collateral will soon disappear even under the rather optimistic assumption that outflows are kept at between €80-100 million per day (the current run rate). At that point (unless the ECB decides to buy the banks more time by substantially lowering haircuts), it’s recap time and then … well, see above.

 

In the final analysis, no one is going to trust Greek banks for a very, very long time and talk of a depositor bail-in won’t do anything to help the situation. The acute lack of confidence means that any capital injected from EU bailout funds will promptly disappear as depositors continue to pull their funds, while the county’s rapidly deteriorating economic situation simultaneously drives up NPLs. 

Now, Barclays is out reinforcing virtually all of the above on the way to explaining why the banking system is and will continue to be Greece’s “Achilles heel”:

As of the end of 2014, Greek banks’ total borrowing at the ECB’s regular operations amounted to €56bn, with negligible usage of ELA. Their usage of the ECB liquidity has increased to about €118bn as of the end of May and we estimate to €125.4bn currently, of which €38.8bn at the MRO and LTRO, while the ELA funding via the Central Bank of Greece should be close to the current limit of €89bn. 

The capital controls introduced on 29 June after the announcement of the referendum have reduced significantly the pace of deposit outflows. However, with depositors continuing to withdraw from ATM machines at a limit of €60 per day, Greek banks’ liquidity needs have reached a level very close to the current ELA ceiling. Therefore, for some of them the risk of running out of liquidity in the very near term is high, especially if the ECB keeps freezing the ELA provision at the current level of €89bn.

 

 

Based on some unconfirmed figures reported on Bloomberg (stating that the adjustments regard mainly securities issued or guaranteed by the Greek government for which the haircuts were brought to 45%), we estimate that the average haircut has been increased to about 54% from our previous estimate of 48%. This would imply a reduction in the ELA-eligible collateral buffer (net of haircuts) from our initial estimate of €28bn as of the end of June to about €15bn currently.

 

 

While the current collateral buffer (which we estimate at around €15bn) should allow Greek banks to keep operating if the ECB’s Governing Council approves a further increase in the ELA, we think it will not be enough to absorb any significant increase in deposit outflows in the event that capital controls are eased and banks are reopened. A tiny collateral buffer limits the banks’ capacity to borrow ELA liquidity. Also we suspect that the remaining spare collateral is not evenly distributed among the four largest banks, and therefore some of them are likely to be in more of a stressed liquidity situation than the others, making them more vulnerable to any further bank run.Therefore, we believe that capital controls should remain in place for a long period even if there are positive developments in the negotiations and the ECB eventually increases the ELA ceiling. We believe also that further tightening of the daily cash withdrawal limit from the current €60 might be needed, just to reduce the outflow of banknotes.

 

On Monday 13 July, the ECB’s Governing Council is expected to meet to decide on ELA support for Greek banks. Following the outcome of the 11-12 July meetings, paving the way for a continuation of the negotiations, we think the ECB is likely to keep the ELA ceiling at the current level of €89bn and to moderately increase it only after approval of reforms by the Greek Parliament on Wednesday 15 July. However, even if the ELA is increased, we expect the ECB to maintain its cautious approach with a very gradual step up of the limit depending on the evolution of negotiations.

 

But even if Greece averts an EMU exit and its banks continue to receive liquidity through the ELA, the country’s entry into a new programme will still likely require banks to raise capital in order to bolster solvency and cushion them against asset quality deterioration associated with a weakened economy. The average non-performing exposure ratio (NPE) is 41%, already very high but now also at risk of continually increasing over the coming quarters. Ultimately, however, a strengthened capital system is needed to help restore confidence and therefore deposits. A fresh balance sheet assessment and stress test reflecting the revised macro-economic climate cannot be ruled out as a pre-requisite of a new programme and could be the catalyst for identifying fresh capital needs.

 

 

So just as we said, the solvency of the banking system is still very much an issue and far from alleviating the need for capital controls, the days and weeks (and perhaps months) ahead will likely see capital controls get tougher in order to stem the deposit outflow and prevent the weakest of the four large banks from running out of pledgable collateral.

Furthermore, the rapid deterioration in the Greek economy could well mean further asset impairment, necessitating the need for still more capital injections going forward.

As we noted last Monday, a crisis of confidence is nearly impossible to reverse in the short-term and if there is any place on earth where confidence is in short supply, it’s at Greek banks.

And just moments ago:

  • GREECE TO EXTEND BANK HOLIDAY, CAPITAL CONTROLS TODAY: OFFICIAL
  • ECB SAID TO KEEP GREEK EMERGENCY LIQUIDITY CEILING UNCHANGED

end

 

Tsipras releases a statement:  Monday morning. He has lost all credibility:

(courtesy zero hedge)

Tsipras Releases Statement Following Greek “Deal”, Will “Fight To Regain Lost National Sovereignty”

(courtesy Harry Lambert/ Yanis Varoufakis)

Yanis Varoufakis: “Merkel’s Control Over The Eurogroup Is Absolute, They Are Beyond The Law”

Submitted by Harry Lambert via The New Statesman,

Read the full Q&A Transcript here

Greece has finally reached an agreement with its creditors. The specifics have not yet been published, but it is clear that the deal signed is more punitive and demanding than the one that its government has spent the past five months desperately trying to resist.

The accord follows 48 hours in which Germany demanded control of Greece’s finances or its withdrawal from the euro. Many observers across Europe were stunned by the move. Yanis Varoufakis was not. When I spoke with Greece’s former finance minister last week, I asked him whether any deal struck in the days ahead would be good for his country.

“If anything it will be worse,” he said. “I trust and hope that our government will insist on debt restructuring, but I can’t see how the German finance minister [Wolfgang Schäuble] is ever going to sign up to this. If he does, it will be a miracle.”

It’s a miracle the Greek people are likely to be waiting for a long time for. On Friday night, when Greece’s parliament agreed to an austerity programme that voters had overwhelmingly rejected in a referendum five days earlier, a deal seemed imminent. A partial write-off of its debt owed to the so-called “Troika” – the IMF, the European Central bank and the European Commission – was unlikely but possible. Now, despite its government’s capitulation, Greece has no debt relief and may yet be thrown out of the Eurozone.

Varoufakis, who resigned a week ago, has been criticised for not signing an agreement sooner, but he said the deal that Greece was offered was not made in good faith – or even one that the Troika wanted completed. In an hour-long telephone interview with the New Statesman, he called the creditors’ proposals – those agreed to by the Athens government on Friday night, which now seem somehow generous – “absolutely impossible, totally non-viable and toxic …[they were] the kind of proposals you present to another side when you don’t want an agreement.”

Varoufakis added: “This country must stop extending and pretending, we must stop taking on new loans pretending that we’ve solved the problem, when we haven’t; when we have made our debt even less sustainable on condition of further austerity that even further shrinks the economy; and shifts the burden further onto the have-nots, creating a humanitarian crisis.”

In Varoufakis’s account, the Troika never genuinely negotiated during his five months as finance minister. He argued that Alexis Tsipras’s Syriza government was elected to renegotiate an austerity programme that had clearly failed; over the past five years it has put a quarter of Greeks out of work, and created the worst depression anywhere in the developed world since the 1930s. But he thinks that Greece’s creditors simply led him on.

A short-term deal could, Varoufakis said, have been struck soon after Syriza came to power in late January. “Three or four reforms” could have been agreed, and restrictions on liquidity eased by the ECB in return.

Instead, “The other side insisted on a ‘comprehensive agreement’, which meant they wanted to talk about everything. My interpretation is that when you want to talk about everything, you don’t want to talk about anything.” But a comprehensive agreement was impossible. “There were absolutely no [new] positions put forward on anything by them.”

Varoufakis said that Schäuble, Germany’s finance minister and the architect of the deals Greece signed in 2010 and 2012, was “consistent throughout”. “His view was ‘I’m not discussing the programme – this was accepted by the previous [Greek] government and we can’t possibly allow an election to change anything.

 “So at that point I said ‘Well perhaps we should simply not hold elections anymore for indebted countries’, and there was no answer. The only interpretation I can give [of their view] is, ‘Yes, that would be a good idea, but it would be difficult. So you either sign on the dotted line or you are out.’”

It is well known that Varoufakis was taken off Greece’s negotiating team shortly after Syriza took office; he was still in charge of the country’s finances but no longer in the room. It’s long been unclear why. In April, he said vaguely that it was because “I try and talk economics in the Eurogroup” – the club of 19 finance ministers whose countries use the Euro – “which nobody does.” I asked him what happened when he did.

It’s not that it didn’t go down well – there was point blank refusal to engage in economic arguments. Point blank. You put forward an argument that you’ve really worked on, to make sure it’s logically coherent, and you’re just faced with blank stares. It is as if you haven’t spoken. What you say is independent of what they say. You might as well have sung the Swedish national anthem – you’d have got the same reply.

This weekend divisions surfaced within the Eurogroup, with countries split between those who seemed to want a “Grexit” and those demanding a deal. But Varoufakis said they were always been united in one respect: their refusal to renegotiate.

“There were people who were sympathetic at a personal level, behind closed doors, especially from the IMF.” He confirmed that he was referring to Christine Lagarde, the IMF director. “But then inside the Eurogroup [there were] a few kind words and that was it: back behind the parapet of the official version. … Very powerful figures look at you in the eye and say ‘You’re right in what you’re saying, but we’re going to crunch you anyway’.”

Varoufakis was reluctant to name individuals, but added that the governments that might have been expected to be the most sympathetic towards Greece were actually their “most energetic enemies”. He said that the “greatest nightmare” of those with large debts – the governments of countries like Portugal, Spain, Italy and Ireland – “was our success”.“Were we to succeed in negotiating a better deal, that would obliterate them politically: they would have to answer to their own people why they didn’t negotiate like we were doing.”

He suggested that Greece’s creditors had a strategy to keep his government busy and hopeful of a compromise, but in reality they were slowly suffering and eventually desperate.

“They would say we need all your data on the fiscal path on which Greek finds itself, all the data on state-owned enterprises. So we spent a lot of time trying to provide them with it and answering questionnaires and having countless meetings.

“So that would be the first phase. The second phase was they’d ask us what we intended to do on VAT. They would then reject our proposal but wouldn’t come up with a proposal of their own. And then, before we would get a chance to agree on VAT, they would shift to another issue, like privatisation. They would ask what we want to do about privatisation: we put something forward, they would reject it. Then they’d move onto another topic, like pensions, from there to product markets, from there to labour relations. … It was like a cat chasing its own tail.

His conclusion was succinct. “We were set up.”

And he was adamant about who is responsible. I asked whether German attitudes control the outlook of the Eurogroup. Varoufakis went further. “Oh completely and utterly. Not attitudes – the finance minister of Germany. It is all like a very well-tuned orchestra and he is the director.

 “Only the French minister [Michel Sapin] made noises that were different from the German line, and those noises were very subtle. You could sense he had to use very judicious language, to be seen not to oppose. And in the final analysis, when Dr Schäuble responded and effectively determined the official line, the French minister would always fold.”

If Schäuble was the unrelenting enforcer, the German chancellor Angela Merkel presented a different face. While Varoufakis never dealt with her, he said, “From my understanding, she was very different.  She tried to placate the Prime Minister [Tsipras] – she said ‘We’ll find a solution, don’t worry about it, I won’t let anything awful happen, just do your homework and work with the institutions, work with the Troika; there can be no dead end here.’”

The divide seems to have been brief, and perhaps even deliberate. Varoufakis thinks that Merkel and Schäuble’s control over the Eurogroup is absolute, and that the group itself is beyond the law.

Days before Varoufakis’s resignation on 6 July, when Tsipras called the referendum on the Eurogroup’s belated and effectively unchanged offer, the Eurogroup issued a communiqué without Greek consent. This was against Eurozone convention. The move was quietly criticised by some in the press before being overshadowed by the build-up to the referendum, but Varoufakis considered it pivotal.

When Donald Tusk, the European Council President, tried to issue the communiqué without him, Varoufakis consulted Eurogroup clerks – could Tusk exclude a member state? The meeting was briefly halted. After a handful of calls, a lawyer turned to him and said, “Well, the Eurogroup does not exist in law, there is no treaty which has convened this group.”

“So,” Varoufakis said, “What we have is a non-existent group that has the greatest power to determine the lives of Europeans. It’s not answerable to anyone, given it doesn’t exist in law; no minutes are kept; and it’s confidential. No citizen ever knows what is said within . . . These are decisions of almost life and death, and no member has to answer to anybody.”

Events this weekend seem to support Varoufakis’ account. On Saturday evening, a memo leaked that showed Germany was suggesting Greece should take a “timeout” from the Eurozone. By the end of the day, Schäuble’s recommendation was the conclusion of the Eurogroup’s statement. It’s unclear how that happened; the body operates in secret. While Greeks hung on reports of their fate this weekend, no minutes were released from any meetings.

The referendum of 5 July has also been rapidly forgotten. It was preemptively dismissed by the Eurozone, and many people saw it as a farce – a sideshow that offered a false choice and created false hope, and was only going to ruin Tsipras when he later signed the deal he was campaigning against. As Schäuble supposedly said, elections cannot be allowed to change anything. But Varoufakis believes that it could have changed everything. On the night of the referendum he had a plan, Tsipras just never quite agreed to it.

The Eurozone can dictate terms to Greece because it is no longer fearful of a Grexit. It is convinced that its banks are now protected if Greek banks default. But Varoufakis thought that he still had some leverage: once the ECB forced Greece’s banks to close, he could act unilaterally.

He said he spent the past month warning the Greek cabinet that the ECB would close Greece’s banks to force a deal. When they did, he was prepared to do three things: issue euro-denominated IOUs; apply a “haircut” to the bonds Greek issued to the ECB in 2012, reducing Greece’s debt; and seize control of the Bank of Greece from the ECB.

None of the moves would constitute a Grexit but they would have threatened it. Varoufakis was confident that Greece could not be expelled by the Eurogroup; there is no legal provision for such a move. But only by making Grexit possible could Greece win a better deal. And Varoufakis thought the referendum offered Syriza the mandate they needed to strike with such bold moves – or at least to announce them.

He hinted at this plan on the eve of the referendum, and reports later suggested this was what cost him his job. He offered a clearer explanation.

As the crowds were celebrating on Sunday night in Syntagma Square, Syriza’s six-strong inner cabinet held a critical vote. By four votes to two, Varoufakis failed to win support for his plan, and couldn’t convince Tsipras. He had wanted to enact his “triptych” of measures earlier in the week, when the ECB first forced Greek banks to shut. Sunday night was his final attempt. When he lost his departure was inevitable.

 “That very night the government decided that the will of the people, this resounding ‘No’, should not be what energised the energetic approach [his plan]. Instead it should lead to major concessions to the other side: the meeting of the council of political leaders, with our Prime Minister accepting the premise that whatever happens, whatever the other side does, we will never respond in any way that challenges them. And essentially that means folding. … You cease to negotiate.”

Varoufakis’s resignation brought an end to a four-and-a-half year partnership with Tsipras, a man he met for the first time in late 2010. An aide to Tsipras had sought him out after his criticisms of George Papandreou’s government, which accepted the first Troika bailout in 2010.

“He [Tsipras] wasn’t clear back then what his views were, on the drachma versus the euro, on the causes of the crises, and I had very, well shall I say, ‘set views’ on what was going on. A dialogue begun … I believe that I helped shape his views of what should be done.”

And yet Tsipras diverged from him at the last. He understands why. Varoufakis could not guarantee that a Grexit would work. After Syriza took power in January, a small team had, “in theory, on paper,” been thinking through how it might. But he said that, “I’m not sure we would manage it, because managing the collapse of a monetary union takes a great deal of expertise, and I’m not sure we have it here in Greece without the help of outsiders.” More years of austerity lie ahead, but he knows Tsipras has an obligation to “not let this country become a failed state”.

Their relationship remains “extremely amicable”, he said, although when we spoke on Thursday, they hadn’t talked all week.

Despite failing to strike a new deal, Varoufakis does not seem disappointed. He told me he is “on top of the world.”

 “I no longer have to live through this hectic timetable,” he said, “which was absolutely inhuman, just unbelievable. I was on two hours sleep every day for five months. … I’m also relieved I don’t have to sustain any longer this incredible pressure to negotiate for a position I find difficult to defend.”

His relief is unsurprising. Varoufakis was appointed to negotiate with a Europe that didn’t want to talk, no longer feared a “Grexit” and effectively controlled the Greek treasury’s bank accounts. Many commentators think he was foolish, and the local and foreign journalists I met last week in Athens spoke of him as if he was a criminal. Some people will never forgive him for strangling a nascent recovery by reopening negotiations. And others will blame him for whichever harsh fate awaits Greece this week.

But Varoufakis seemed unconcerned. Throughout our conversation he never raised his voice. He came across as imperturbably calm, and often chuckled. His conservation wasn’t tinged with regret; he appears to be treating the loss of power as ambivalently as he treated its acquisition.

Now he will return to a half-finished book on the crisis, mull the new offers publishers have already begun to send him, and likely return to the University of Athens after two years teaching in Texas.

By resigning and not signing a deal he abhorred, he has kept both his conscience free and his reputation intact. His country remains locked in a trap he spent years opposing and months fighting, but he has escaped.

*  *  *

Read the full Q&A Transcript here

 

end

Greece just handed over assets worth 25% of GDP for 50 billion euros.  Those funds must be used to payback the EU.  The big problem is that they have tried to cash in on those same assets 3 years ago.  They will not come close to what is needed—  current projection of those assets sales:  approximately 2 billion euros.

(courtesy zero hedge)

What Assets Did Greece Just Hand Over To Europe: “Airports, Airplanes, Infrastructure And Most Certainly Banks”

The Simpsons had it right all along:

 

With the provocative and dramatic Greek “time out” language pulled from the final finmin and summit draft language, the two most humiliating aspects of the latest extend and pretend “deal” for the Greek people will be the return of the Troika’s (surely we can call it the Troika again as part of the Greek capitulation) IMF mission to Athens, and the escrowing of some €50 billion in  Greek assets in a liquidation fund.

Granted said fund will not be domiciled in Luxembourg as was originally envisioned, but Europe will still have control and first refusal rights over what are technically Greek properties, in the process Athens handing over about 25% of Greek GDP (and sovereignty) over the Brussels.

What are these assets? For the answer we go to the horse’s mouth, Jeroen Dijsselbloem, who laid out the holdings of the proposed Greek privatization that would be sold off as follows: “it still is going to be an independent fund, valued at €50 billion which can be airplanes, airports, infrastructure and most certainly banks.”

Bloomberg quotes the Eurogroup finmin president:

They will be brought in with the target to privatize those in the coming years, but we will take our time for that.

 

We then hope for proceeds of EU50 billion, but that will be clear later.

 

The banks first have to be refinanced from this aid program, but after that I take it that they’re worth money and then we can sell them.

 

The proceedings are aimed at lowering Greece’s national debt.

In other words, Greece will be liquidated piecemeal to repay creditors. In even other words, the proceeds from the Third Greek Bailout will not only not reach the Greek people, but Greece will have to sell itself in pieces to top off the creditors’ funding needs.

Dijsselbloem concludes: “That is good for Greece, but also good for us. We are in the end the ones from whom the money is borrowed.

It was not exactly clear why this would be good for Greece.

So for all those curious, here are some of the “assets” that already have, or soon will hit Ebay.

 

The only caveat: when (not if) Greece defaults again, and it is time to collect on Europe’s secured DIP loan (which is what the Third bailout really is) collateral because not even the French socialists can push for a fourth bailout, good luck trying to repossess Aegean islands or the Santorini ferry terminal.

Oh, and for those struck by a case of deja vu, the €50 billion privatization “plan” is nothing new: it was first proposed by the IMF in 2011. This is what happened next:

What does the IMF say now about this latest privatization proposal? “Not realistic.”

Which may be a problem for Greek banks since as the summit deal envisions, half of the privatization “proceeds” will go to recapitalize Greece’s insolvent banks. Proceeds which the IMF projects will be about €2 billion until 2018!

 This is a problem because with this implicit admission that the Greek financial sector will effectively never receive the needed funds to remain stable, any ELA increase by the ECB will be promptly used by Greek depositors to yank as much money as they can, awaiting the next weekly dose of monetary generosity from Mario Draghi, as both capital controls and the Greek bank run remain a permanent fixture of Greek daily life.

end
Many Greek lawmakers will not back the deal.  Even with the draconian measures, the Finns also will not agree as they have had enough with Greece:
(courtesy zero hedge)

Greek Lawmakers Won’t Back Deal; Finnish FinMin Says “Can’t Agree” To New Greek Loans

Is the Greek “deal” falling apart already?

New comments are coming across the wires fast and furious over the last few minutes indicating that not only is Syriza’s Left Platform taking a stand against the new agreement (as expected), but also the Greek junior coalition partner. Meanwhile, Finnish FinMin Alexander Stubb (who has been a thorn in the Greek’s side of late) is out with some very cautious commentary as well.

From Reuters:

  • LEFTIST GROUP OF LAWMAKERS IN GREECE’S RULING SYRIZA PARTY CONSIDERING VOTING AGAINST BAILOUT DEAL – SOURCE FROM LEFTIST PLATFORM   
  • GREEK JUNIOR COALITION PARTY LEADER SAYS PM TSIPRAS FACED A COUP IN BRUSSELS FROM GERMANY

A leftist group of lawmakers in Greece’s ruling Syriza party may vote against a bailout agreement in parliament, which will vote within days on a cash-for-reforms deal key to rescuing Greece, sources from the leftist platform said.

 

‘The leftist platform is oriented towards not voting,” a source from the leftist platform told reporters. “They could declare present or give a ‘No’ vote or abstain,” the source said.

 

Separately, sources close to Energy Minister Panagiotis Lafazanis, a Syriza hardliner who fiercely opposed new austerity measures, said he is not expected to resign for now.

 

Euro zone leaders made Greece surrender much of its sovereignty to outside supervision on Monday in return for agreeing to talks on an 86 billion euros bailout to keep the near-bankrupt country in the single currency.

 

“He is not expressing an intention to resign voluntarily for now,” aides close to Lafazanis said.

From Bloomberg:

  • KAMMENOS: GREEK PM TSIPRAS WAS BLACKMAILED AT EU SUMMIT
  • STUBB SAYS FINLAND CAN’T AGREE TO NEW LOANS FOR GREECE
  • KAMMENOS: INDEPENDENT GREEKS PARTY WON’T AGREE TO BAILOUT DEAL
  • STUBB: NO EUROGROUP AGREEMENT ON BRIDGE FINANCING FOR GREECE
  • STUBB: GREECE BRIDGE FINANCING HAS TO BE AGREED ON TOMORROW
end
A new government is most likely and without a doubt a depositor bail in is in order:
(courtesy Deutsche bank/zero hedge)

New Government Likely In Greece, Depositor Bail-In Still Possible, Deutsche Bank Says

Over the weekend, the entire world looked on in horror as Alexis Tsipras – who just days earlier secured a crucial referendum victory which by all accounts empowered him to ride into Brussels a conquering hero – was eviscerated by German FinMin Wolfgang Schaeuble and several like-minded EU finance ministers who smelled blood last Thursday after Greece submitted a proposal that betrayed the Greek PM’s lack of conviction.

As outlined exhaustively here over the past 24 hours, the new “deal” for Greece has implications far beyond the Aegean and may well mark the beginning of the end for the EMU experiment, for although the Greek drama highlights the need for a fiscal union to compliment the common currency, the “bargaining” stance adopted by Germany makes it far less likely that financially weaker states will be willing to turn over their fiscal affairs to Brussels.

But leaving the bigger picture implications aside for now, the two most important short-term considerations for Greece are: 1) establishing political stability, and 2) stabilizing the banks.

Neither of these will be easy.

In fact, both could prove to be rather monumental tasks. With Tsipras facing a party revolt and the Greek banking sector facing outright insolvency, Deutsche Bank has more on politics and bank “normalization.”

*  *  *

From Deutsche Bank

Next Greek steps

On the political side, statements from Greek PM Tsipras following the conclusion of the summit indicate a desire to take ownership of the “difficult” agreement, despite the large concessions made. We would consider this as significant, as the PM still commands a meaningful degree of influence in Greek public opinion as well as within the SYRIZA party itself. Following Saturday’s authorization vote in the Greek parliament, at least 32 government MPs have indicated they would be unwilling to support an agreement, effectively leading to a loss in the government’s parliamentary majority. The support of Independent Greek junior coalition member also remains to be seen following negative statements on a potential agreement from party leader Kammenos overnight, effectively leading to a potential loss of more than 40 MPs from the government coalition.

As such, we would consider a minority or national unity government as the most likely outcome following the Greek PM’s return to Athens later today. A minority government would involve a major cabinet reshuffle by the Prime Minister with the departure of dissenting cabinet ministers (most notably energy minister Lafazanis) and the replacement by more politically-neutral members. Opposition support would remain at arm’s length, to be provided by New Democracy, River and PASOK controlling more than 100 MPs. Combined with support from moderate SYRIZA MPs, this would generate a parliamentary majority of at least two-thirds. The alternative outcome would be a government of national unity with more active involvement by pro-European parliaments in the cabinet re-shuffle as well.

Whether Greek PM Tsipras would remain in his position under such a government remains to be seen, but party leader statements so far suggest that this may be acceptable. Either way, PM Tsipras will have to take decisions on how the SYRIZA party membership and parliamentary group is likely to change in coming days: press reports that he is likely to ask for dissenting MP resignations, to be replaced by more moderate MPs, inclusive of outspoken Speaker of the House Konstantopoulou who also expressed disagreement over the weekend. Whether dissenting SYRIZA MPs resign or form a new anti-euro parliamentary grouping remains to be seen. Either way, it is likely that the new government’s mandate is implicitly or explicitly set to run until the signing of a new ESM agreement by September, to be followed by a new election. Greek politics are now likely to shift to more well-defined political narratives, ultimately distinguished by party positions on euro membership rather than austerity.

Bank normalization will take time

In terms of the Greek banking sector, immediate decisions will need to be taken given the exhaustion of the ECB ELA buffer. An immediate increase in the ELA cap would allow continued rationing of cash from ATMs in coming days. It is possible the ECB waits for such a decision on Wednesday, when the ESM negotiations formally re-open and there is a “credible perspective” for the conclusion of the review. (ZH: it does indeed appear the ECB is waiting until Wednesday at least). More broadly, the return to a more normally functioning banking system in Greece with fewer restraints on liquidity will likely depend on the timeframe of a new bank recapitalization program. The Euro leaders statement highlights that this will require a comprehensive recapitalization exercise following the transposition of the Bank Recovery and Resolution Directive in Greek legislation. At face value, this suggests that the possibility of depositor bail-in cannot be ruled out given the directive’s provisions. In practice, it is unlikely that there are a significant number of deposits above the directive’s 100k legally protected limit implying that this may be avoided. Still, bank recapitalization is unlikely to take place until after the summer. In the meantime, the ECB will require bank solvency assurances to maintain financing of the Greek banking system and continue to increase ELA, particularly given Greek bank’s declining collateral availability, likely at around 5bn EUR under the current ELA haircut schedule. ECB financing in coming months will likely need a front-loaded disbursement of ESM guarantee funds in an escrow account or an alternative “bridge guarantee” financing method. Either way, it is unlikely that capital controls are lifted soon.

*  *  *

As you can see, a government reshuffle (something we’ve predicted for months) is imminent although it is as yet entirely unclear what the political landscape will look like in six months and indeed it’s not at all clear whether Tsipras will survive the melee.

As for the banks, well, they’re essentially wandering aimlessly through a minefield. For those interested in a detailed account of the challenges that lie ahead for the Greek banking sector, see “Greek Banks Not Out Of The Woods, May Impose Tougher Capital Controls.” The short version is simply this: Lacking sufficient collateral to keep the ELA game up for much longer, Greece’s banks will need to be recapitalized in short order barring a dramatic decrease in ECB haircuts. Even in the most optimistic scenario, capital controls are likely here to stay for the foreseeable future.

 

end

This is worth watching.  Tonight a Samurai Greek bond underwritten in 1995 is due tomorrow morning.  The amount due in around 160 million usa (or 20 billion Japanese yen).   If they default on that bond, then one can visualize cross defaults being initiated

(courtesy zero hedge)

Greece Fails To Make Another IMF Loan Payment But It Is Tonight’s Samurai Bond That Everyone Is Watching

Moments ago, in what was a generally expected development, taking advantage of Grimbo and the IMF’s tacit grace period following the June 30 default to Christine Lagarde, and perhaps in an indication of just how serious Greece truly is to honor its creditor committments (not really: it just shows that without additional creditor funds, Greece can never repay its creditors), Reuters reported that Greece will not meet a 450 million euro ($496.7 million) loan repayment to the International Monetary Fund that falls due on Monday given its severe cash crunch, citing two sources close to the issue.

Reuters adds that the missed payment will follow a 1.6 billion euro payment to the IMF which Greece also missed paying last month, making it the first advanced economy to ever be “in arrears” with the fund – the IMF’s official euphemism for default. The head of the debt agency, Stelios Papadopoulos declined to comment.

However, it was not today’s IMF (non) repayment that traders, if not Eurocrats and economists, are concerned about but tonight’s maturity of a JPY 20 billion (about $160 million) Samurai note sold in 1995 and which matures on July 14. The reason why this paltry, in the grand scheme of things, payment is critical is that while continuing to repay the IMF is not an event of default if only purely technically, and for the rating agencies, a non-payment on the Samurai bond would start a cross-default cascade.

As Bloomberg reported in June: “If the Samurai bond isn’t paid, it could cause a cross default on other public bonds,” said Ryosuke Kaneko, a credit analyst in Tokyo at Mizuho Securities Co., a unit of Japan’s third-biggest bank. If Greece can’t repay the IMF at the end of the month, then “market participants may start focusing on the Samurai bond as a trigger,” he said.

It is unclear whether the cross-default cascade would also impact the ECB’s bond holding and for the first time impair the European central bank’s Greek SMP holdings.

In the meantime, if the current trading price of the Samurai bonds due in 24 hours (at par) is any indication, the market is clearly not assuming a repayment is the base case…

… unless of course this just happens to be the highest IRR opportunity available in 2015 should Greece, by some miracle, make the payment.

end

 

 

The world now knows that the Euro is reversible.

(courtesy zero hedge)

“The Genie Is Out Of The Bottle” – The Moment The Euro Became Reversible

Some are calling the “deal”, which is in reality just a framework for further discussions, that Greece achieved over the weekend a “Pyrrhic defeat.” That is certainly one way of looking at things, however an even more accurate assessment of events in the past 48 hours is that this is the moment the “genie was out of the bottle” and the Euro was finally seen as reversible, what ultimately happens to Greece and its soon to be 200%+ debt/GDP notwithstanding.

Here is Sky News’ Ed Conway with one of the more accurate summaries of this weekend’s epic fiasco:

However this story ends (and we have no idea what the next few hours will bring), Sunday 12 July will go down as a landmark moment in European history?—?alongside Rome in 1957, Maastricht in 1992 and Cannes in 2011.

For the first time, the leaders of the 19-member euro area officially discussed plans for the departure of one of their members. According to the draft proposals handed by the eurogroup (the finance ministers) to their leaders for their overnight meeting, among the clauses to be debated was one worded as follows:

In case no agreement could be reached, Greece should be offered swift negotiations on a time-out from the euro area, with possible debt restructuring.

It is difficult to overstate the significance of this. For its entire life, the euro was conceived as a currency from which there could be no exit. This was not accidental: the disasters that befell the Exchange Rate Mechanism in the early 1990s convinced European leaders that the only way to create a lasting single currency was never, ever, to countenance anyone leaving it. The euro was “irreversible”, to use the word Mario Draghi has frequently used.

Except, tonight in Brussels it transpired that it is far from irreversible. That euro finance ministers are now actively discussing giving Greece a “time-out” from the currency.

Now, one should insert a major note of caution at this stage. The clause quoted above was not agreed by all the euro members here in Brussels. It was put into square brackets, meaning it is yet to be agreed by all member states. It may well be excised by the time the leaders have honed the draft document away to produce their final statement.

Nonetheless, it was on the table. And that means that to some extent, the genie is now out of the bottle. Brussels is officially discussing how to engineer Greece’s departure. The euro is not irreversible. Clearly, they will not do “whatever it takes” to keep it together.

The big question now?—?beyond whether there actually is a Grexit?—?is how markets react. After all, since the euro is now no longer an irreversible currency but a collection of nations tied into a currency from which they could, indeed, leave?—?in other words, a fixed exchange rate system?—?do markets begin making bets about that happening? Do they ask questions about Spain, or Italy, too?

Even on top of the specific Greek issues (and the scale of compromises they may be forced to seek) this is a big moment for Europe and its leaders. They have taken a step into the unknown.

 

end

 

I cannot believe that Greece is that stupid.  Once Parliament agrees to the bailout they give up the keys to their banking system.  That means that the 120 billion euros no longer belong to Greece but the EU.  Then the ECB boys will perform their wonderful bail ins as the depositors will pay for the EU’s losses:

(courtesy zero hedge)

Greece Just Lost Control Of Its Banks, And Why Deposit Haircuts Are Imminent

Yes, Greek banks may have been insolvent – something that was clear since the first bailout of 2010 – but at least the Greek state had control over them: as such it could have mandated mergers, recapitalizations, liquidity injections, even depositor bail-ins (perhaps the harshest lesson for the ordinary Greek population as a result of this latest crisis is that deposits are not “cash in the bank” but liabilities of insolvent financial organizations).

Starting on Wednesday that will no longer be the case.

Because while Greek banks will maintain their capital controls for months and withdrawals will be limited to €60 or less for months (the ECB is well aware that any boost to the ELA will result in a promptly surge in deposit outflows until the new ELA ceiling is reached, and so on ad inf) the one key change on Wednesday when the Tsipras government, whose coalition no longer has a majority in parliament and will have to rely on opposition votes, votes through the humiliating Greek “pre-deal” to unlock negotiations for the promised €86 billion in bailouts (which will be used almost entirely to repay the Troika) is that it will hand over the keys of Greek banks to the ECB.

Here is Reuters with this little known fact:

One of the preconditions imposed on Greece for a deal is that it signs into law European rules that would put euro zone authorities at the ECB and in Brussels, rather than Athens, in charge of identifying and closing or breaking up sick banks.

 

This in turn could lead to a shake-up of the sector that could see some banks close, with losses pushed onto bondholders and possibly even large depositors. In such circumstances, there would be little that Athens could do to prevent this.

 

One European official had told Reuters that the number of big banks in the country could be reduced from four – National Bank, Piraeus, Eurobank and Alpha – to as little as two.

Keep in mind the primary leverage the ECB had over the Greek government was the hint that if only Greece agrees to the terms, the European Central Bank just may be nice enough to ease ELA haircuts and eventually boost the ELA ceiling to allow the phasing out of capital controls and permit Greeks access to their savings.

This will not happen.

Unfortunatley, the moment the Greek government votes through the “deal” required by Summit document SN 4070/15, the Greek government will not only hand over sovereignty to €50 billion of Greece’s choicest assets to some escrowed fund controlled by Belgium and designed to liquidate Greek assets to repay the Troika,it will also give up all control of the nation’s €120 billion or so in leftover personal and corporate deposits, also known as unsecured liabilities.

And since the banks are undercapitalized by at least €25 billion, and realistically over €60 billion, if one takes into account NPLs which at 50% are a veryoptimistic estimate for a country in depression for 6 consecutive years, the first decision the ECB will do once it realizes the sorry state of financial affairs in Greece is to do precisely what the government could have done but did not have the guts when it still had control: overnight it will out about 50% of Greek depositors.

In other words, Greece is about to hand over the keys to the only thing that is forcing it to hand over the keys.

Unfortunately for Greece, there will be absolutely nothing its government can do to avoid this because on Wednesday, the Greek government will vote to hand over its sovereignty to Europe for, sadly, absolutely nothing in return.

Our only question, one we first asked in April, is whether as part of the deal, the 112.5 tons of official Greek gold will also be handed over to Frankfurt, Berlin or Brussels. Recall back in 2012:

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.

Since this bailout has the most draconian terms yet, we wonder just what the fate of Greek gold will be?

end

 

Russia waiting in the wings;

(courtesy zero hedge)

Russia Readies Fuel Deliveries To Athens, Will Support Greek “Economic Revival”

Russia and Greece have a “special relationship of spiritual kinship and religious and historical affinity,” Vladimir Putin said yesterday, following the BRICS summit in Ulfa.

Over the course of the unfolding crisis in Greece, Athens has at various times gone out of its way to remind Angela Merkel that allowing the country to crash out of the currency bloc may force the Greeks to turn to their other international “friends” (to use Nigel Farage’s words) for assistance. Facing economic sanctions from the EU in connection with its alleged role in destabilizing Ukraine not to mention a spiteful anti-trust suit against Gazprom, the Kremlin has been more than happy to use the rising tensions between Athens and Brussels to its geopolitical advantage.

So far, discussions between Russia and Greece have revolved primarily around energy, and several months back, when negotiations between Athens and creditors began to deteriorate in earnest, reports began to surface that Moscow may consider advancing Greece some €5 billion against the future proceeds from the Greek portion of the proposed Turkish Stream natural gas pipeline.

Although the loan never materialized, the agreement on the pipeline did, and it was held up last week as proof that Greece is “no one’s hostage.”

Now, that contention will be put to the test as Greece faces the prospect of a “swift time-out” from the eurozone if PM Alexis Tsipras can’t convince parliament to agree to a new term sheet from creditors which seeks the implementation of a number of draconian measures in exchange for a third bailout. Of course, as we notedearlier today, a “time-out” is a polite way of saying “get the hell out,” and in the event of a messy exit and forced redenomination, an acute cash and credit crunch will likely mean a shortage of critical imports and, in short order, a humanitarian crisis.

Given the mood in Brussels over the weekend, Greece could be forgiven for not putting much faith in Jean Claude-Juncker’s “humanitarian plan”, but that’s ok because as AFP reports, Russia is ready to help:

Russia is considering direct deliveries of fuel to Greece to help prop up its economy, Energy Minister Alexander Novak said Sunday, quoted by Russian news agencies.

 

“Russia intends to support the revival of Greece’s economy by broadening cooperation in the energy sector,” Novak told journalists, quoted by RIA Novosti news agency.

 

“Accordingly we are studying the possibility of organising direct deliveries of energy resources to Greece, starting shortly.”

 

Novak said that the energy ministry expected “to come to an agreement within a few weeks,” but did not specify what type of fuel Russia would supply.

 

Greece’s left-wing leadership has made a show of drawing closer to Moscow in recent months as the spat with its international creditors has grown more ugly.

 

In June, Greek Prime Minister Alexis Tsipras during a visit to Russia sealed a preliminary agreement for Russia to build a 2-billion-euro ($2.2 billion) gas pipeline through Greece, extending the TurkStream project, which is intended to supply Russian gas to Turkey.

And so it begins. Angela Merkel has long known that one consequence of a Grexit would be a stepped up role for the Kremlin in the Greek economy and Greek politics.

This effecitvely gives Moscow a foothold in Europe just as Russia’s deteriorating relationship with the West threatens to plunge the world into a new Cold War (a situation that’s been made immeasurably worse by recent NATO war games and sabre rattling).

Or, summarized visually (because this never gets old):

 end
The following is a very important read from London’s financial times Wolfgang Munchau.  He basically states that the Eurozone is finished!!
here is why!!
(courtesy zero hedge/Munchau)

Munchau: “The Eurozone As We Know It Is Destroyed”

Despite the euphoria in global equity markets, The FT’s Wolfgang Munchau – once one of the keenest euro enthusiasts – warns regime change is coming in Europe. The actions of the creditors has “destroyed the eurozone as we know it and demolished the idea of a monetary union as a step towards a democratic political union,” Munchau exclaims, fearing they havedemoted the eurozone into a toxic fixed exchange-rate system, with a shared single currency, run in the interests of Germany, held together by the threat of absolute destitution for those who challenge the prevailing order.” He concludes rather ominously, “we will soon be asking ourselves whether this new eurozone, in which the strong push around the weak, can be sustainable.”

As The FT reports, the best thing that can be said of the weekend is the brutal honesty of those perpetrating this regime change…

In doing so they reverted to the nationalist European power struggles of the 19th and early 20th century. They demoted the eurozone into a toxic fixed exchange-rate system, with a shared single currency, run in the interests of Germany, held together by the threat of absolute destitution for those who challenge the prevailing order.

 

But it was not just the brutality that stood out, nor even the total capitulation of Greece. The material shift is that Germany has formally proposed an exit mechanism. On Saturday, Wolfgang Schäuble, finance minister, insisted on a time-limited exit — a “timeout” as he called it. I have heard quite a few crazy proposals in my time, and this one is right up there. A member state pushed for the expulsion of another. This was the real coup over the weekend: regime change in the eurozone.

 

The fact that a formal Grexit may have been avoided for the moment is immaterial. Grexit will be back on the table when you have the slightest political accident — and there are still many things that could go wrong, both in Greece and in other eurozone parliaments. Any other country that in future might challenge German economic orthodoxy will face similar problems.

The implications for the rest of the eurozone are at least as troubling…

We will soon be asking ourselves whether this new eurozone, in which the strong push around the weak, can be sustainable. Previously, the strongest argument against any forecasts of break-up has been the strong political commitment of all its members. If you ask Italians why they are in the eurozone, few have ever pointed to the economic benefits. They wanted to be part of the most ambitious project of European integration undertaken so far.

 

But if you take away the political aspiration, you may end up with a different judgment. From a pure economic point of view, we know that the euro has worked well for Germany. It worked moderately well for The Netherlands and Austria, although it produced quite a degree of financial instability in both.

 

But for Italy, it has been an unmitigated economic disaster.

 

The euro has not worked out for Finland either. While the country is considered the world champion of structural reforms, its economy has slumped ever since Nokia lost the plot as the world’s erstwhile premier mobile phone maker. France has performed relatively well during the euro’s early years But it, too, is now running persistent current account deficits. It is not only Greece where the euro is not optimal.

In such a system, someone, somewhere, will want to leave sometime. And the strong political commitment to save it will no longer be there either.

The FT columnist Wolfgang Munchau deserves some credibility… (as detailed in ‘Guilty Men’)

For many years he was one of the keenest enthusiasts for the single currency. As late as September 2006 he declared: I expect that Eurozone to be exceptionally stable in the long run… make no mistake, the Eurozone is here to stay

 

Four years later, Munchau had performed his acrobatics. ‘Whichever scenario you choose,” wrote the Financial Times columnist in March last year, “the Euro is going to be weak.”

And now, he is full euroskeptic…Such willingness to diverge from status quo thinking and candour has been all too rare among political and economic writers…

“A few things that many of us took for granted, and that some of us believed in, ended in a single weekend.”

end
They are probably a little late on this issue
:
(courtesy zero hedge)

Greece May Sue Goldman Over Bank’s Role In Greek Collapse

It’s Goldman Sachs’ world, we just happen to live in it.

That rather unfortunate, yet exceedingly accurate, characterization of the global financial and geopolitical landscape seemingly becomes more true with the passage of time and perhaps nowhere is it more evident than Europe, where the common currency experiment (which never had any hope of working without some semblance of a fiscal union) is on the brink of collapse.

As we noted in “The Biggest Winner From The Greek Tragedy,” the losers from the disintegration of the EMU are ordinary, common, taxpaying Europeans who enjoyed a few brief years of artificial prosperity, which in retrospect was entirely due to debt, masked well by the “currency swaps” and other financial engineering concocted by banks such as Goldman Sachs, in clear violation of the Maastricht treatywhich is now a long-forgotten memory of the founding ideals behind the Eurozone.

As a reminder, Greece’s EMU membership was in no small part due to a Faustian bargain with Goldman.

Back in 2001, the bank swapped dollar- and yen- denominated Greek debt for euros using a possibly made-up exchange rate that effectively allowed Greece to artificially reduce its debt-to-GDP ratio.

Now, with Greece teetering on the edge of economic oblivion, the beleaguered country could look to sue Goldman in an effort to recoup hundreds of millions in what are being presented as ill-gotten gains. Fittingly, it is a former Goldman banker who has apprised the Greek government of the possibility that they may have a claim. Here’s The Independent with more:

A leading adviser to debt-ridden countries has offered to help Athens recover some of the vast profits made by the investment bank.

 

The Independent has learnt that a former Goldman banker, who has advised indebted governments on recovering losses made from complex transactions with banks, has written to the Greek government to advise that it has a chance of clawing back some of the hundreds of millions of dollars it paid Goldman to secure its position in the single currency.

 

Greece managed to keep within the strict Maastricht rules for eurozone membership largely because of complex financial deals created by the investment bank which critics say disguised the extent of the country’s outstanding debts.

 

Goldman Sachs is said to have made as much as $500m from the transactions known as “swaps” It denies that figure but declines to say what the correct one is.

 

The banker who stitched it together, Oxford-educated Antigone Loudiadis, was reportedly paid up to $12m in the year of the deal. Now Jaber George Jabbour, who formerly designed swaps at Goldman, has told the Greek government in a formal letter that it could “right historical wrongs as part of [its] plan to reduce Greece’s debt”.

Jabbour was laid off from Goldman in 2008 (he apparently left on good terms although earlier in the year he described a $100 million deal the bank had orchestrated with the Libyan Investment Authority as “a bit scary” in an e-mail to a colleague) after which he started his own advisory firm.

The NY Times has more on the former Goldmanite’s post-Wall Street assignments:

In December 2009, Ethos won a contract to work with Metro do Porto, a Portuguese state-owned train and subway company. Mr. Jabbour’s assignment was to untangle a pair of offsetting derivatives contracts with Goldman Sachs and Nomura that were meant to help manage interest rate risk on 126 million euros of debt but instead, at different points, incurred expected losses greater than the amount of the loan itself, according to documents released in the parliamentary inquiry related to the contracts.

 

At the time, Goldman and Nomura told Metro do Porto that it would cost it €26 million to cancel the identical elements of the contracts.Mr. Jabbour helped to restructure them, and instead of paying Goldman and Nomura, Metro do Porto earned back nearly €20 million to cancel the offsetting parts of the trades, according to emails and presentations made available as part of the inquiry.

 

At Ethos, in addition to representing Metro do Porto, he reviewed swaps in the county Seine-Saint-Denis in France and did some work in Italy, according to media reports in Portugal. 

 

If the Libyan Investment Authority has its way, Mr. Jabbour will also play a role in the suit it has brought against Goldman.

In a 2013 interview with Público, Jabbour said the following about his new venture: “having worked in banking, I noticed that banks took advantage of public sector entities when dealing in complex and structured transactions, including swaps and derivatives, therefore, I set up my business, Ethos, in 2009 to alert, assist and increase the awareness of public sector entities when dealing in these transactions.”

Yes, banks often do “take advantage of public sector entities” (and all manner of other entities and individuals for that matter) by using opacity and complexity to structure deals that overwhelming favor the banks’ interests over those of the client and indeed that may have been exactly what happened in the Goldman/Greek deal, which is why, as we noted last week, it’s particularly interesting that the man in whose hands some €110 billion in Greek deposits now rests was Vice Chairman and Managing Director at Goldman from 2002 to 2005.

We can only hope that if Greece does indeed decide to take Mr. Jabbour up on his offer to help clawback some of the half billion euros the bank reportedly pocketed from helping to hide Greece’s debt – which in turn allowed the country to join a currency union it had no business joining thus ensuring its eventual expulsion and the attendant economic collapse – that the discovery process will help shed some light on whether the man now in charge of the ECB personally oversaw and endorsed the perpetuation of the Greek lie.

end

 

Your important early morning currencies/interest rates and bourses results overnight:

Euro/USA 1.1068 down .0080

USA/JAPAN YEN 123.39 up .747

GBP/USA 1.5556 up .01360

USA/CAN 1.2715 up .0060

This morning in Europe, the Euro fell by a considerable 80 basis points, trading now well below the 1.11 level at 1.1068; Europe is still reacting to deflation, announcements of massive stimulation, a proxy middle east war, and the ramifications of a default at the Austrian Hypo bank,  an imminent  default of Greece and the Ukraine, and rising peripheral bond yields.

In Japan Abe went all in with Abenomics with another round of QE purchasing 80 trillion yen from 70 trillion on Oct 31. The yen continues to trade in yoyo fashion as this morning it settled down again in Japan by 75 basis points and trading just below the 123 level to 122.39 yen to the dollar.

The pound was up smartly this morning by 136 basis points as it now trades just above the 1.55 level at 1.5509, still very worried about the health of Barclay’s Bank and the FX/precious metals criminal investigation/Dec 12 a new separate criminal investigation on gold, silver and oil manipulation.

The Canadian dollar is down sharply by 60 basis points at 1.2715 to the dollar.

We are seeing that the 3 major global carry trades are being unwound. The BIGGY is the first one;

1. the total dollar global short is 9 trillion USA and as such we are now witnessing a sea of red blood on the streets as derivatives blow up with the massive rise in the rise in the dollar against all paper currencies

2, the Nikkei average vs gold carry trade (still ongoing)

3. Short Swiss franc/long assets (European housing/Nikkei etc. This has partly blown up (see Hypo bank failure).

These massive carry trades are terribly offside as they are being unwound. It is causing global deflation ( we are at debt saturation already) as the world reacts to lack of demand and a scarcity of debt collateral. Bourses around the globe are reacting in kind to these events as well as the potential for a GREXIT>

The NIKKEI: this morning : up 117.86 points or 0.60%

Trading from Europe and Asia:
1. Europe stocks  all in the green

2/ Asian bourses mostly in the green … Chinese bourses: Hang Sang green (massive bubble forming) ,Shanghai in the green (massive bubble ready to burst), Australia in the red: /Nikkei (Japan) red/India’s Sensex in the red/

Gold very early morning trading: $1156.00

silver:$15.47

Early Monday morning USA 10 year bond yield: 2.46% !!! up 5 in basis points from Friday night and it is trading well above  resistance at 2.27-2.32%

USA dollar index early Monday morning: 96.40 up 40 cents from Friday’s close. (Resistance will be at a DXY of 100)

This ends the early morning numbers, Monday morning

And now for your closing numbers for Monday:

Closing Portuguese 10 year bond yield: 2.80%  down 5 in basis points from Friday

Closing Japanese 10 year bond yield: .46% !!! up 1 in basis points from Friday/still very ominous

 

Your closing Spanish 10 year government bond, Monday, down 2 in basis points

Spanish 10 year bond yield: 2.11% !!!!!!

Your Monday closing Italian 10 year bond yield: 2.11% down 3 in basis points from Friday: (very ominous)

trading 0 basis point higher than Spain.

IMPORTANT CURRENCY CLOSES FOR TODAY

 

Closing currency crosses for Monday night/USA dollar index/USA 10 yr bond: 4 pm

Euro/USA: 1.1010 down .0137 ( Euro down 137 basis points)

USA/Japan: 123.42 up  .774 ( yen down 77 basis points)

Great Britain/USA: 1.5487 up .0043 (Pound up 43 basis points)

USA/Canada: 1.2759 up .0104 (Can dollar down 104 basis points)

The euro fell by a huge amount today. It settled down 137 basis points against the dollar to 1.1010 as the dollar traded  northbound  today against most of the various major currencies. The yen was down by 77 basis points and closing well above the 123 cross at 123.42. The British pound gained back more ground today, 43 basis points, closing at 1.5487. The Canadian dollar lost some more ground against the USA dollar, 104 basis points closing at 1.2759.

As explained above, the short dollar carry trade is being unwound, the yen carry trade , the Nikkei/gold carry trade, and finally the long dollar/short Swiss franc carry trade are all being unwound and these reversals are causing massive derivative losses. And as such these massive derivative losses is the powder keg that will destroy the entire financial system. The losses on the oil front and huge losses on the USA dollar will no doubt produce many dead bodies.

Your closing 10 yr USA bond yield: 2.43% up 2 in basis point from Friday// (well above the resistance level of 2.27-2.32%)/ominous

Your closing USA dollar index:

96.79 up 79 cents on the day

.

European and Dow Jones stock index closes:

England FTSE up 64.57 points or 0.97%

Paris CAC up 95.03 points or 1.94%

German Dax up 168.75 points or 1.49%

Spain’s Ibex up 188.10 points or 1.70%

Italian FTSE-MIB up 229.69 or 1.00%

 

The Dow up 217.27  or 1.22%

Nasdaq; up 73.82 or 1.48%

 

OIL: WTI 52.09 !!!!!!!

Brent:57.83!!!

 

Closing USA/Russian rouble cross: 56.54  down 1/4  rouble per dollar on the day

 

And now for your more important USA stories.

NY trading for today:

US Equities Soar On Greek “Deal”; Greek Stocks, Euro Plunge

Looking at stocks (which is now how we are supposed to judge everything ever), there is only one clip for today…

 

And in honor of what Tsipras did…

*  *  *

But it appears FX and bond markets disagreed with stock’s exuberance…

 

And it appears Greek stocks also disagree over the awesomeness of everything…

 

Today completes the biggest 3-day rally in stocks since December 2014… so it seems Greece matters after all. Note that the S&P 500 tested perfectly up to its 50DMA at 2100 (and above its 100DMA at 2095) and Volume is tumbling

 

Volume was terrible…

 

Which was driven by the biggest short squeeze in 5 months…

 

US Equities filled the gap back to Tsipras’ “Greferendum” announcement but could not get any fruther…

 

As did VIX (collapsing to a 13 handle)…

 

Cash equity markets went absolutely nowwhere from the ramp open… until the last hour…

 

Treasury yields ended the higher but rallied notably off the kneejerk dump after a Greek deal was announced…

 

The US Dollar surged today…

 

On the heels of a 200 pip collapse in EURUSD from its highs of the day… (breaking to a 1.09 handle)

 

The dollar strength weighed on precious metals, copper held on to modest gains and crude whipped around on Iran headlines.

 

Charts: Bloomberg

Bonus Chart: This seemed to sum Europe up perfectly…

end

US Automakers Worst Nightmare: Chinese Auto Inventories Explode In May

week ago we exposed the massive number of cars piling up in GM’s parking lots in China. A few days later, we note that Chinese auto sales have collapsed at the fastest rate in 3 years and an increasing number of new orders are being cancelled as the stock market crashes. But the triple whammy for US auto manufacturers – who have incessantly pitched China as their growth engine – is news from Huaxia Times thatChina’s import car dealers saw inventory days reach a mind-blowing 143 days in May. For context, the normal average has been 24-36 days. Once again it appears the serial extrapolators at the automakers, excited by the serial extrapolators at the big banks have excitedly mal-invested right at the turn.

Car Sales tumblingas The Wall Street Journal reports,

China sold 1.51 million passenger vehicles last month, down 3.4% from a year earlier, the China Association of Automobile Manufacturers said Friday. That compares with a 1.2% year-over-year rise recorded in May and a 3.7% increase in April.

 

The performance was the worst since February 2013 when car sales fell 8.3% on-year during the weeklong Lunar New Year Holiday when car showrooms are closed. Stripping out the holiday factor, the last time China’s car market posted a decline was in September 2012, when a territorial dispute between Beijing and Tokyo over a group of uninhabited islands in the East China Sea hit demand for Japanese cars.

 

… also cut its growth forecast for China’s automobile market in 2015 to 3% from the previous 7%.

 

“2015 will be an off-year for the Chinese car market,” said Dong Yang, a vice president for the auto manufacturers’ association. He said the slowdown was caused by a confluence of factors including the cooling economy, increasing restrictions on car ownership to combat congestion and pollution and stock market volatility.

 

“Neither a bull market nor bear market does good to car sales. Our surveys of dealers show that visiting volumes to car showrooms dropped sharply in the first-half,” said Mr. Dong.

 

 

“The painful market adjustment currently under way is far from over,” he said.

*  *  *

Auto Inventories exploding

But, as we previously noted, it appears there just is no more room to stuff inventories in its Shenyang, Lianing province parking lots  (as China has become the new car graveyard over the last 3 years)

 

 

But it’s not just China… inventories are surging in America too…

 

Judging by the massive volume of cars ‘parked’ in GM’s Shenyang Liaoning lots, it is clear that automakers learned nothing from the last “if we build it, they will come” channel-stuffing inventory surging dysphoria that, among other things, led to their last bankruptcy… if only Chinese buyers would take up the credit terms like Americans.

end

 

 

Well that about does it for tonight

I will see you Tuesday night

Harvey

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