Two dangerous Myths about a ‘Grexit’ JPM On Grexit, TARGET2, And The ECB. Unless Greece chooses to leave the Euro area, which JPMorgan doubts will happen, the rest of the region will have to push Greece out. The mechanism for this will be the ECB excluding the Greek central bank from Target2, the regional payments and settlement system. Although this might look like a technical decision about monetary plumbing, the ECB will elevate this to Euro area Heads of State. There is understandably a lot of interest in the mechanics of how a possible Greek exit from the Euro would play out in relation to the ECB. Reports of significant deposit withdrawal from Greek banks also direct attention toward the support for Greek banks coming from the Greek Central Bank and the Eurosystem.
And yesterday’s announcement by the ECB of restricted access to regular repo Eurosystem financing for a number of Greek banks adds some more complication. The view from the asset side… The view from the liability side…. How Greece could get cut off from Target2. Greece default 2012. The Endgame in Greece—How a Bank Run Can Be Part of the Solution. Greek politicians have once again let their country down and we are now headed for new Greek elections by mid-June. A highly volatile couple of weeks are in store, since the elections are sure to serve as a referendum on Greek membership of the euro. On one side will be the euro area and the two traditional mainstream parties in Greece, the Socialists (PASOK) and New Democracy, advocating that Greece stick with the austerity program imposed by the International Monetary Fund (IMF) and the euro area leaders, warning that failure to adhere will force a euro area exit.
On the other side, the populist parties led by Alexis Tsipras and Syriza will argue—fallaciously—that the International Monetary Fund (IMF) austerity can be avoided even as Greece remains inside the euro. The hard liner Wolfgang Schäuble, Germany’s finance minister, was explicit again on Tuesday, saying: “If Greece—and this is the will of the great majority—wants to stay in the euro, then they have to accept the conditions. ECB Halts Operations With Several Greek Banks. The European Central Bank has stopped providing liquidity to some Greek banks as they have not been successfully recapitalized, the ECB said on Wednesday, confirming news earlier reported exclusively by Reuters. The news sent the euro lower against the dollar, fanning concerns among investors and in Greece that the country may have to leave the euro zone. The development highlights the weak state of the banking sector in Greece, where Greeks are pulling euros out of the banks in fear that their country may exit the European single currency despite the declared determination of EU powers Germany and France to keep Athens in the monetary union.
"As recapitalisation wasn't in place, the ECB stopped monetary policy operations," a euro zone central bank source told Reuters, declining to be identified. "They are now in the ELA of the Greek central bank. " The ECB only conducts its refinancing operations with solvent banks. The sources did not name the banks concerned. Europe Must Face Ugly Reality of Greek Exit from Euro. A Greek exit from the euro area has the potential to be the European Union’s most economically and politically destructive event of a generation.
Unfortunately, Europe has reached the point where it must prepare for such an outcome. Whether Greeks want it or not, circumstances could soon force their country to return to the drachma. Europe’s leaders, as Luxembourg Prime Minister Jean-Claude Juncker hinted, might extend Greece’s deadlines to meet the budget targets required for rescue money, but they won’t provide emergency financing to a government that refuses austerity measures. Without Europe’s help, Greece’s government (whoever ends up leading it) faces a dilemma: Cut spending even more than under the austerity program, or default on its debts and print a new currency to pay its bills. A return to the drachma would be painful. The currency would immediately be worth a fraction of a euro, and would depreciate further if the government printed money to finance deficit spending.
Greece would face dire consequences from a euro exit – as its electorate knows | Business | The Observer. Protesters raise a Greek flag in front of parliament during a rally last year. Nearly 70% of Greeks want to stay in the eurozone – a fact reflected at the polls in the election earlier this month despite no single party winning a majority. Photograph: John Kolesidis/Reuters Far from revealing that Greeks want to exit the euro, the election results send out a clear signal that the policy framework imposed since the crisis began has been wrong and needs to be rethought.
The majority of the electorate supported parties that would prefer to keep Greece in Europe, while delivering a strong rebuke to the two traditional parties of government, New Democracy and Pasok, for having brought Greece to bankruptcy and then being associated with the "austerity memorandum" – the terms of the troika bailout packages. Opinion polls show that 70% of Greeks want to remain part of the eurozone. It is not in the interests of either Greece or the rest of the eurozone to reinstate the drachma.
If Greece Exits, Here Is What Happens. Now that the Greek exit is back to being topic #1 of discussion, just as it was back in the fall of 2011, and the media has been flooded by groundless speculation posited by journalists who have never used excel in their lives and are merely paid mouthpieces of bigger bank interests (long live access journalism and the book sales it facilitates), it is time to rewind to a step by step analysis of precisely what will happen in the moment before Greece announces the EMU exit, how the transition from pre to post occurs, and the aftermath of what said transition would entail, courtesy of one of the smarter minds out there, Citi's Willem Buiter, who pontificated precisely on this topic last year, and whose thoughts he has graciously provided for all to read on his own website.
Of course, take all of this with a huge grain of salt - these are observations by the chief economist of a bank which will likely be swept aside the second the EMU starts the post-Grexit rumble. From Willem Buiter. Why Greece Needs to Leave the Euro Zone. There are many things Alexis Tsipras likes about Germany. The leader of Greece's Coalition of the Radical Left (Syriza) party drives his BMW motorcycle to work at the Greek parliament in the morning, Germany's über-leftist Oskar Lafontaine is one of his political allies, and when it comes to his daily work, his colleagues have noticed a certain tendency toward Prussian-style perfection. Tsipras could easily count as a friend of the Germans, if it weren't for the German chancellor. Greek magazines have frequently caricatured Angela Merkel dressed in a Nazi uniform, because she imposes her fondness for balanced budgets and austerity on the rest of Europe.
The Greeks, says Tsipras, want to "put an end" to the Germans' requirements and their "brutal austerity policy. " Tsipras is the new political star in Athens. Tsipras knows what many Greeks are thinking. At the end of last week, his poll numbers rose to a new record level of almost 28 percent. Turning Point In Greece's Best Interest. The final death throes of the euro. World edges closer to deflationary slump as money contracts in China.
A shinier future outside euro's straitjacket. From an economist point of view, it is obvious that Greece has no chance to prosper in the eurozone. However, exiting the eurozone still raises a lot of fears and uncertainties. Fortunately, with some imagination, there may be some solutions to make an exit a real opportunity for change in Greece.
In the following post, I’ll argue that Greece should seize the banks through a special vehicle funded by the Bank of Greece, opening its banking sector to smaller and local players, and reconstitute its money supply through the distribution of a monetary dividend to every greek citizen. The case of Greece is very tricky. And despite the rise of anti-austerity parties among Europe, the problem remains that it would take months for the EU to swap austerity against a truly european solidarity scheme, with a fiscal union and fiscal transfers among European countries. So, I think it is time for the Greeks not to wait for anything from a broken Europe that have never intended to help Greece anyway. How Greece could leave the eurozone – in five difficult steps | Business | The Observer.
Mass unemployment in Greece, inflation at 50%, a devastating recession and Greeks heading for the borders – that's the apocalyptic scenario being painted by some economists in the increasingly likely event that Greece leaves the eurozone in coming months. Greece is small in economic terms: it contributes only 2.2% of eurozone GDP. But withdrawal from the single currency would unleash chaos in the country, and have potentially severe knock-on effects on other euro nations. US bank Citigroup now reckons there is a 75% chance that Greece will pull out of the single currency within the next 18 months. This would set a precedent, and the eurozone could quickly unravel if other vulnerable members like Spain and Italy were to follow suit.
The fallout from a Greek exit would quickly wipe 20% off Greece's GDP, send inflation soaring to 40%-50%, and see Greece's debt-to-GDP ratio soaring over 200%, say analysts at French bank BNP Paribas. So what happens if Greece remains without a government?