EU, ECB said to be working on Greece exit contingency [update]
The European Commission and the European Central Bank are working on an emergency scenario in case Greece has to leave the euro zone, EU trade commissioner Karel De Gucht said in an interview published on Friday.
The comments would appear to be the first time that an EU official has confirmed the existence of contingencies being taken for a possible Greek exit from the currency bloc. Speculation has been rife about such plans, but their existence has not been confirmed.
“A year and a half ago there may have been the danger of a domino effect,” he said in an interview with the Belgium's Dutch-language newspaper De Standaard.
“But today there are, both within the European Central Bank and the European Commission, services that are working on emergency scenarios in case Greece doesn't make it.”
Meanwhile, an industry source told Reuters Friday that De La Rue has drawn up contingency plans to print drachma banknotes should Greece exit the euro and approach the British money printer.
The source, who asked not to be named, said that as a commercial printer De La Rue needed to be alive to the possibility of a Greek exit from the single currency and prepare accordingly. [Reuters]
and....
De La Rue Warming Up The 'New Drachma' Printer
Now that the consensus seemingly is one that a Greek exit is inevitable, there was only one missing step: an actual New Drachma currency, not in When Issued, electronic 1s and 0s format, but real, based on cotton and linen. It appears UK banknote printer De La Rue is now on top of that. From Reuters: "De La Rue (DLAR.L) has drawn up contingency plans to print drachma banknotes should Greece exit the euro and approach the British money printer, an industry source told Reuters on Friday. The news comes as EU trade commissioner Karel De Gucht said on Friday the European Commission and the European Central Bank are working on an emergency scenario in case Greece has to leave the euro zone - the first time an EU official has confirmed the existence of contingency plans." Now as noted earlier, the "emergency scenario" was promptly denied by the EC, but as of now nobody has denied the drachma printing yet, which in the world of Venn Diagrams is the "big one."
More:
and...
Letting The Cat Out Of The Bag It's Ascension Day today, and the EU institutions are closed. Still, someone at the European Commission felt the need to say something on Greece. In an interview with Belgian daily De Standaard, EU Trade Commissioner, Belgium's Karel de Gucht, said, "A year and a half ago maybe there was a risk of a domino effect. But today, there are [people] in the European Central Bank, as well as in the Commission, working on emergency scenarios if Greece shouldn't make it." He also added, "A Greek exit does not mean the end of the euro, as some claim." De Gucht's comments were not appreciated by his colleagues at the Commission, however. Within hours, European Commission spokeswoman Mina Andreeva moved to deny the existence of any such plans, saying, "[The European Commission] is working on scenarios to keep Greece within the eurozone, not to make it leave." According to the spokeswoman, Commissioner de Gucht was speaking "in his personal capacity". This isn't the first time Karel has annoyed colleagues by letting the cat out of the bag (well, on a potential Greek exit, the cat wasn't exactly in the bag). He was the first one to admit, "We knew that Greece was cheating [on its public accounts]." That was in May 2010.
http://www.openeuropeblog.blogspot.co.uk/2012/05/letting-cat-out-of-bag.html
and spanish banks jumping higher because short selling bans may be brought back ? I mean really.........
http://www.zerohedge.com/news/short-selling-ban-returning-insolvent-european-countries-near-you Short Selling Ban Returning To Insolvent European Countries Near You
Back in August 2011 Europe ushered in the totally idiotic idea of reinstating a short selling ban in financial stocks. We predicted at the time that the result would be a sheer disaster: "To those who may have forgotten, on September 18, the SEC banned the shorting of all financials here in the US. Below is a chart of the carnage that ensued... The same chart is coming to Europe first. End result: 48% drop in under a month." Sure enough, a week later we were right: "European banks are already unchanged compared to the day of the ban and in France they are now negative! What next: selling is illegal or "Speculation" is a felony? We expect to find out soon..." Why do we bring this up? Because according to Spanish daily Cinco Dias this last sugar high recourse of a collapsing system is soon coming back to an insolvent European country near you. From MarketWatch: "Spanish stocks rebounded from a sharp opening loss on Friday lifted by gains across the banking sector and led by a 26% rise for Bankia SA ES:BKIA +26.37% after a media report on a possible ban on short selling of banks. The IBEX 35 index defied losses across Europe to gain 1% to 6,596.40. Spanish daily Cinco Dias reported Friday, citing banking sources, that banks in the country want market regulator, CNMV, to reinstate a ban on short selling of domestic banking stocks."
At this point we are going to go out on a limb and say that if indeed true, and if it happens in Spain it means it will have to happen everywhere in Europe as well for it to be effective, the ramp higher will last for all of 48 hours tops, just as it did last time, and realistically will be shorter due to the habituation side-effects of a liquidity addicted market, and then proceed to lead financial stocks to new lows, resulting in the same outcome we saw after the last short selling ban: another coordinated global intervention to save the world from collapse. Only this time the OIS is already at +50, cut from +100 previously. What next: the Fed will hand out USDs in FX swap at no cost, or even better, negative?
And when this now biannual intervention fails, what then?
and while spanisn bank stock prices can be manipulated for a day or two , credit markets don't play that same game..... Spanish banks, wider still
A flurry of short-covering, encouraged by rumours that the Spanish authorities might re-introduce a ban on short-selling, saw Spanish bank stocks bounce on Friday.
But that “recovery” has not extended to the CDS market…
and ......
http://www.telegraph.co.uk/finance/debt-crisis-live/9273766/Debt-crisis-live.html
11.45 Citibank fears contagion a lot more than a Greek exit from theeurozone:
  We believe that Grexit, in isolation, would be manageable for European banks. Grexit, with 50pc to 75pc probability, could impact exposures to Greece of up to around €410bn. However, we estimate most of these exposures (up to around €360bn or 87pc) belong to the official sector. We calculate the remainder is attributable to the private sector: up to €15bn for CASA, SocGen, Bank of Cyprus and Cyprus Popular which have subsidiary or branch exposures to Greece; up to c.€5bn for Greek banks; up to around €20bn to other European banks; and up to €15bn to other investors.
"Contagion Risks Are Trickier - In the run-up to potential Grexit, all eyes would likely be focused on the contagion risks to Ireland, Italy, Spain and Portugal (IIPS). With sufficient fiscal resources and an accommodating ECB, contagion to Italy and Spain should be manageable. We estimate the ECB would need to deploy up to an additional €800bn in liquidity to support potential deposit outflows and debt refinancing for the IIPS banks – the equivalent of a one LTRO and a half. ECB’s assets could rise to around 41pc of EA GDP versus 33pc today.
11.38 De La Rue has drawn up contingency plans to print drachma banknotes should Greece exit the euro and approach the British money printer, an industry source has told Reuters.
11.37 More from Bruno Waterfield in Brussels on the Greek crisis plans drawn up by the EU:
 ”How much will it cost… I do not know, but it will cost money. What I am assured of is that there will be no contagion: a Greek exit does not mean the end of the euro,” Karel De Gucht said.
Painting a grim picture the commissioner said that if Greece left the euro it was “finished” and that, while the euro would survive it would have to fight off a “cataclysm”.
”C'est fini. It [Greek exit] means that after a while you can no longer pay your officials who can no longer pay your pensions,” he said.
”All you can do is have your central bank to print money, and then you get hyperinflation. That would cause a cataclysm in other countries that are now under pressure.”
11.01 The Telegraph's Bruno Waterfield is in Brussels with the latest on the new that the EU is working on emergency plan for a Greek euro exit:
EU officials are horrified that one of their number has let the cat out of the bag. Until today, European Commission and European Central Bank officials peddled the line that there was no such plan. And that "Grexit" was simply unthinkable.
Karel De Gucht, a former Belgian foreign minister before he became EU trade commissioner, would be one in the know as he holds a key economic portfolio.
His remarks that the EU is ready to handle the "cataclysm" of Greek exit without a "domino effect" will seem highly complacent given the financial turmoil engulfing Spain.
"Totally off message," was the verdict of one EU diplomat.
As G8 leaders gather, it is yet another sign that eurozone and European leaders are in disarray with France insisting that Greece must be helped and Germany, with key EU officials onside, planning to leave the Greeks to their fate.
10.57 The German finance ministry has said it has a responsibility to be prepared for any eventuality in the eurozone. It added that it believesSpain can deal with its bank problems.
The language from politicians during this Greek crisis has been a lot more negative than the last time. Have they concluded that Greece can't stay in the euro?
10.02 Greek President Karolos Papoulias has held talks with German Chancellor Angela Merkel. No information on what was said, but we're trying to find out.
09.50 Karel De Gucht, European Commissioner for Trade, has said te ECB and EU Commission are working on emergency scenarios for aGreek euro exit. He told Belgium's Dutch-language newspaper De Standaard:
A year and a half ago there may have been the danger of a domino effect. But today there are, both within the European Central Bank and the European Commission, services that are working on emergency scenarios in case Greece doesn't make it.
09.41 However, the Spanish central bank has said the country's bad loans have hit their highest level since 1994 (see 08.58). They hit €147.968bn. Strangely, Spanish banking shares are up significantly today - Bankia has risen 31.1pc.
09.40 Inigo Fernadez de Mesa, a junior minister at the Spanish treasury, has told Radio 4's Today programme that there is "no liquidity problem" in his country:
09.34 Barclays: "The costs [and the risks] for Greece and Europe greatly exceed the benefits. If the size of the firewalls increase and the process of EU integration accelerates, a Greek exit would become less costly for Europe."
09.20 Big turnaround in Spanish banking shares. Bankia has leapt 19.6pc to €1.70, while number-one bank Santander surged 3.5pc and BBVAadvanced 4.2pc.
The IBEX is now up 0.5pc after falling 2.3pc on opening.
09.15 Alexis Tsipras, head of the Greek Coalition of the Radical Left, has told the Wall Street Journal that he sees little chance Europe will cut off funding to his country but that if it does, Athens will stop paying its debts.
Our first choice is to convince our European partners that, in their own interest, financing must not be stopped... If they proceed with unilateral action on their side, in other words they cut off our funding, then we will be forced to stop paying our creditors, to go to a suspension in payments to our creditors.
09.08 Spain has seen the eurozone's biggest outflow of bank deposits since last January (see 08.58):
09.05 The eurozone could cope with a Greek exit from the bloc, a top member of German Chancellor Angela Merkel's junior coalition partners has said.
Former economic minister Rainer Bruederle told German business dailyHandelsblat:
Unlike two years ago, the eurozone today could cope with a Greek exit. It would cost a lot of money but it would be manageable. The decision, however, lies in Athens and not in Berlin. The Greeks themselves have to weigh up whether reintroducing the drachma would help their economic recovery more than staying in the eurozone.
09.03 Italian industrial orders rose 3.5pc in March from previous month.
09.00 William Hill has said a Greek euro exit before the end of 2012 is now odds on at 5/6. 1/8 favourite to be first to go.
08.58 Bank of Spain deposits fell 4.2pc in March from the same period in 2011. Country's bad loans rate increases to 8.37pc from 8.3pc in February.
08.19 Greece's European partners took too long to help the country and the goal must now be to spur economic growth as well as cutting the debts of the eurozone country, French Prime Minister Jean-Marc Ayraulthas said.
 Greece needs to revive its economy. There are unused [EU] structural funds and what's needed now is help to secure that revival alongside putting its accounts back in shape. We waited too long before helping Greece. This has been going on for two years now and only gets worse. |
Friday, May 18, 2012
Greece and Spain updates - strangely spanish banks actually up today despite Moody's sharp downgrades Thursday ( perhaps those rumors of Spain imposing short selling bans on banks doing the trick for Friday ) . Facebook effect in Europe ? G-8 hopium ? Grexit won't threaten spain hopium ? TGIF and the world hasn't ended yet ?
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