http://hat4uk.wordpress.com/2012/05/18/exlusive-euro-banknotes-update-berlin-printing-new-euronotes-x-en-masse-ecb-withdrawing-greek-notes-y-20-2/

MAY 18, 2012 · 1:42 PM

EXLUSIVE: EURO BANKNOTES UPDATE: Berlin printing new Euronotes (X) en masse, ECB withdrawing Greek notes (Y)

Slog’s Brussels mole clears up the riddle

“must mean Greek euroexit now seen as near-certainty”

Following this morning’s Slogpost about the dearth of Greek-origin euronotes (Y) and the torrent of new German versions (X) across the EU at the moment, I have been in contact with my regular Brussels informant. Since appearing, the piece that went up this morning has evoked a mass of emails to my Slog address, all of which have enabled further quantification of the fact that German notes are dominating supplies at the minute, while Greek versions are disappearing fast.

The Commission mole has ‘confirmed’ that the process is designed to ensure minimal numbers of ‘Y’ designated Greek notes are in circulation, in order to reduce refusal to accept them outside Greece to a bare minimum “as and when the Greeks exit the eurozone”.

I suggested that surely he meant “if and when”. After a brief silence, he added, “I doubt if the ECB and Berlin would’ve gone to these lengths if they didn’t feel that an exit is inevitable”.

I have to say that surprises me. I stick to my view that Berlin would do almost anything to avoid that exit, but at the same time – on the German principle of ‘immer alles klar’ – this has all the hallmarks of a contingency plan – nothing more, necessarily: after all, the notes are of equal value – and being replaced (allegedly) in balance. But sources, as we all know, are not always right in their interpretations. In this case, however, the Slog mole is sure of his facts regarding the operation itself.

“It was inevitable that people would start to notice sooner or later,” he has told me this afternoon, “and in a way it does show that the chiefs here are thinking it through. I would’ve thought that would reassure the markets rather than panic them.”

Not sure I’d agree with that either, although some observers today are suggesting that the markets will see the final exit of Greece as a relief. (With Spain and Italy yet to come, they shouldn’t see it as a relief so much as a trailer, but I don’t pretend to understand the minds of these people any more).

Blimey. Something to chew on over the weekend, this one.

and....

http://hat4uk.wordpress.com/2012/05/18/european-banknotes-the-suddenly-missing-y-chromosome-in-greece-40/

MAY 18, 2012 · 7:47 AM

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EUROPEAN BANKNOTES: The suddenly missing Y chromosome in Greece

The strange case of Y = 0

Some of you may recall a post of mine on the subject of how one tells the origin of euronotes by country, and how the Bank of Greece has gone into the business of printing its own unauthorised version.

At the time, I pondered at length during several posts as to why Mario in Frankfurt didn’t seem to be worried about it. Did he know anyway? some Sloggers asked: to which the answer is ‘Yes’, because each country issuing Toytown notes uses a prefix in the note number to denote the origin. Without that, the note isn’t legal tender.

Greece’s code-letter is ‘Y’. And up until just three weeks ago, there were a lot of new ‘Y’ notes in Greece.

Over the past fews days, a number of Greeks have been looking at the serial numbers of their Euro notes. I was alerted to this by one Athenian Slogger, who was surprised to find he had almost no Euro notes issued by Greece. In an email, he tells me:

‘I am sat here in Greece and decide to check out my notes. They were all withdrawn from Greek banks or ATMs over the last two weeks. At the moment I have rather a lot of cash as I have things to pay and also need to bring back some cash to use when travelling back to Greece later in the year. I have in total 27 bank notes of various values. The breakdown is as follows:-

French – 1

German - 14

Italian - 3

Irish - 2

Dutch – 5

Greek None’.

The German figure of 14 shouldn’t be misinterpreted by the way: Germany has an enormous population, and one of the lowest usage levels of plastic cards. It is also Greece’s biggest customer.

An acquaintance of my informant also notes: ‘It’s really odd about the notes beginning with a Y. Late last year I checked my notes and nearly all had them beginning with a Y, but yesterday I asked several people to check and no-one had any notes beginning with a Y. Has someone already begun withdrawing them from circulation?’

Very good question. Since receiving the email, I’ve asked a dozen or so Greek contacts to check the notes in their wallets. And guess what? Apart from one respondent, nobody had any notes beginning with ‘Y’.

There are two main ways one could interpret this:

1. Mario’s ECB has been churning out loads of notes in an effort to allay any fears that Greece has none left. (Not really likely).

2. Mario has issued an edict to the Bank of Greece: no more money from us until you stop printing your own at will. In the meantime, I’m taking all your Y-fronts out of circulation. (This is considerably more likely).

Earlier today, Mario Draghi announced that the European Central Bank would temporarily stop lending to some Greek banks, in order to limit its risk. That clearly wasn’t the whole story.

I am left wondering if whether, in anticipation of a run on Greek banks, SuperMario is starting a policy of starving the Greek banking system of cash. If so, he is going to have one helluva job doing the same thing in Spain, where withdrawals (especially from Bankia) are running wildly ahead of even Greek institutions.

That’s not really a serious suggestion. If he wanted to save Greece, the last thing Signor Draghi would do is add to the illiquid nature of this eurozone State. On the other hand, maybe he wants Greece to go under quickly. Maybe he wants every euro removed from Greece as quickly as possible in order to make room for all those new drachma coming in. Because when a drachma meets a euro (research shows) they tend not to get on. I’m told. Allegedly.

Or maybe he has a bet on (under the assumed name of Gary di Maggio) with bookies across four continents at 250-1 that by Saturday week Greece will be a drachma country once again.

I offer these vaguely silly suggestions because I really have no idea what this might mean. Anyone who does (and I mean really does, not wild theories) the address is the usual jawslog@gmail.com

And as Germany and the ECB and EU prepare for Greece's departure , Greece looks at its options...

Gov’t mulls options if coffers run dry

The Finance Ministry is urgently looking into alternative scenarios of how to maintain its weak cash reserves if the revenue inflows outlook deteriorates.
The only apparently safe option is to cut or suspend certain expenses. The total in June is projected at 5 billion euros, of which 4 billion is expected to flow in from the International Monetary Fund and the European Financial Stability Facility (EFSF).
The representatives of the country’s creditors -- collectively known as the troika -- may have put off their visit until after the formation of a Greek government but technical cooperation with the General Accounts Office (GAO) and monitoring of the budget is continuing on a daily basis. Sources report that besides political developments, the troika is “particularly concerned” at the recession of the Greek economy and developments in the budget.
The public coffers are seen running dry at the end of June, but this will depend on two key factors. First, revenue collection: In the first 10 days of May, inflows were about 15 percent lower than projected but there are fears that the slide may reach 50 percent. The GAO will have a picture for the first 20 days on May 23, while the last three days of the month are considered crucial, when 1.5 billion euros of the month’s budgeted total of 3.6 billion are expected to flow in.
Second, whether the IMF and EFSF installments are disbursed: This is not certain, as the decision will be purely political for both providers and evidently partly linked to political developments. Earlier this month the eurozone approved a disbursement 1 billion short of the 5 billion euros that were expected.
If revenue collection keeps faltering and the IMF and EFSF loans do not arrive, the first option the ministry is considering is cuts in income tax rebates and credits to social security funds. It may also trim grants to various state agencies and payments to public sector suppliers. This particular tactic was employed last September and enabled the government to retain cash until mid-December.
Another option considered is to continue to issue treasury bills. Of the budgeted 5 billion in expenses, 3.6 billion euros comprise the refinancing of T-bills and interest payments.
There is also the option of not paying Greece’s contribution to the EFSF, which amounts to 900 million in June. The eurozone may approve its postponement to July or August.
Finally, the government may use part of the resources of the Financial Stability Fund (FSF), which are mainly earmarked for the recapitalization of banks. The fund currently has a reserve of 3 billion euros.

According to statements by FSF members, the fund will disburse 18 billion on Tuesday or Wednesday to boost banks’ capital base. National Bank of Greece will receive 6.9 billion, Eurobank 4.2 billion, Alpha Bank 1.9 billion and Piraeus Bank 5 billion euros.

and.....

Greek crisis weighs heavily on OTE telecom bonds

By Hannah Benjamin
Hellenic Telecommunications Organization (OTE) SA’s bonds are falling more than those of any of the largest high-yield debt issuers as Greece lurches through a political and banking crisis that may see it exit the euro region.

The 3.2-billion-euro ($4.1 billion) par value of notes that Greece’s largest phone company has in Bank of America Merrill Lynch’s Euro High-Yield index fell 22 percent on average this month. That’s a bigger drop than any of the 50 biggest issuers in the lender’s Global High Yield index, where Petroleos de Venezuela SA notes faced the biggest losses at 9.1 percent.

“OTE’s performance has a lot to do with political turbulence and worries of the economic climate declining even further, which will affect domestic revenues for sure,” said George Satlas, the Athens-based head of investments at Postal Savings Bank, which owns OTE bonds. “Current political incompetence seems to drive the market now.” The market value of OTE bonds fell by $861 million to $2.6 billion this month, according to Bank of America Merrill Lynch data. That has driven the average yield of its debt to 40 percent from 18 percent.

OTE’s 5 percent bonds due 2013 slumped 26.9 cents on the euro since the end of April to 61.8 cents, pushing the yield to 57 percent, Bloomberg Bond Trader prices show. The yield relative to benchmark German government debt widened to 56 percentage points from 17.5 percentage points.

Credit default swaps protecting OTE’s debt more than doubled this month, surging to 3,709 basis points from 1,692 at the end of April, according to prices compiled by Bloomberg. The debt insurance contracts are the worst performers among European phone companies this month.

“There is an obvious disconnect between the prices at which our bonds are currently trading and the company’s operational performance,” Kevin Copp, OTE’s chief financial officer in Athens, said in an e-mail. “In the first quarter, OTE group revenues showed their smallest decrease in the last two years and mobile revenues were actually up for the first time in several years, with cash flow generation remaining robust.”

Negative outlook

Fitch Ratings put OTE’s BB rating on review for downgrade last month, citing the contraction in the Greek economy and the lack of a refinancing plan for maturing debt. Still, last year’s earnings were better than expected and its debt to earnings ratio of 2.54 is “comparable to low BBB-rated peers,” Fitch analyst Bulent Akgul said in an April 16 report.

OTE is rated B at Standard & Poor’s and an equivalent B2 at Moody’s Investors Service, both five steps below investment grade and both with “negative” outlooks.

The company has 3.2 billion euros of notes outstanding including the 1.2 billion euros of 5 percent bonds due 2013 issued a decade ago, Bloomberg data show. Net debt at the end of the first quarter was 3.4 billion euros, down from 4.3 billion euros a year earlier, the company said on May 10.

The phone company has a 445-million-euro loan and a 312-million-euro revolving credit facility due in September, according to its website. It also has a fully drawn 900-million- euro revolving credit due 2013. Money in a revolving credit can be borrowed again once it’s repaid; in a term loan, it can’t.

OTE is “well under way” in implementing a refinancing strategy, “which is aimed at both extending our maturity profile as well as reducing our overall net debt,” Copp said, without providing details.

“Despite the strong market noise caused by politicians and scared traders with a high-grade mentality, OTE’s 2013 bonds represent an outstanding investment opportunity,” said Stan Manoukian, founder of Independent Credit Research in Agoura Hills, California. When OTE’s debt is refinanced the “notes will get back to the high 80s to low 90s.”

OTE’s share price plunged more than 15 percent on May 16 after the company was deleted from the MSCI Greek Index. “Hellenic Telecom bonds are very liquid and represent a technical proxy of Greek sovereign debt,” Manoukian said.

and.....

Fitch downgrades Greek banks after sovereign cut

Fitch lowered its ratings of Greek banks Friday in the wake of its cut of the country's sovereign rating.
Fitch put the new rating for the National Bank of Greece, Efg Eurobank Ergasias, Alpha Bank, Piraeus Bank and Agricultural Bank of Greece at CCC, down from B-minus, in the mid-level range for «speculative» or junk bonds.
The move came a day after Fitch cut Greece's sovereign rating to CCC, or «vulnerable to default», over the increased risk that the country would be forced to leave the eurozone.
"In the event that the new general elections scheduled for 17 June fail to produce a government with a mandate to continue with the EU-IMF program of fiscal austerity and structural reform, an exit of Greece from (the eurozone) would be probable, and/or this could be followed by a withdrawal of international support to Greek banks,» Fitch said.
"A Greek exit would likely result in widespread default on private sector as well as sovereign euro-denominated obligations."