Greece Blows Up Negotiations – Bank Run Has Started – Some Banks Won’t Be Able To Open On Monday
Despite cautious optimism earlier last week about reaching a deal, the talks have suddenly derailed after Greek Prime Minister Alexis Tsipras announced he would organize a referendum in Greece about whether or not to accept the proposal from the three institutions. Strange enough, Tsipras received a standing ovation from his coalition partners when he arrived in the Greek parliament earlier today (see next image)
This was a huge surprise as this basically was sticking up another middle finger to the European Institutions. By instating a referendum (to be held next Sunday), Tsipras tried to accomplish two things. First of all, he wanted to arm-wrestle the institutions into giving Greece an extension of a few weeks (which obviously didn’t work), but secondly it also looks like he was trying to cover his (political) ass by putting the responsibility of the decision on the shoulders of the (uninformed) citizens.
Indeed, uninformed. Not only have the Greek citizens been influenced by demagogic statements (‘the three institutions only want to humiliate the Greeks (and Greece as a nation) and don’t care about an honest solution that works for everyone’), but on top of that, the question which will be asked at the referendum also isn’t really worded very fair. According to our information, the only question on the ballot will be ‘Do citizens of Greece reject the proposal by the three institutions? Yes/No’ and someone should call Tom Cruise because it will definitely be a ‘Mission Impossible’ to educate the Greek citizens about what exactly the proposal was about.
Even if we ignore the legal aspects of calling a referendum (our sources tell us a referendum can only be called on matters of national security and not for foreign relationships), it wasn’t just the Eurogroup and us who were surprised, the Greek population was also caught by surprise and a new bank run started on Friday night already.
Things only got worse on Saturday as several reports and images have reached us of tens of people are queuing at the ATM’s of the country and ‘several hundred’ (almost 10% of the) ATM’s all over Greece are now empty (see previous image), despite the Greek national bank stating the ATM’s are replenished ‘smoothly’. The Greek citizens obviously don’t trust the situation and if the current bank run continues, we expect some banks to be closed on Monday unless the ECB makes more funds available – which it refused to do on Friday.
Something WILL have to happen, and the ECB has called an emergency session on Sunday. If no agreement can be reached before Monday, we expect several smaller banks in Greece will have to keep their doors closed for the public. Pensioners are standing in line to withdraw their entire pension (which was deposited yesterday), and it looks like people will start to hoard cash. It would be very interesting to see some updated numbers on the demand for gold from the Greek citizens
The tension is rising on the streets of Athens and Thessaloniki and if the banks shut down on Monday, the always hot-tempered Greeks could be on the verge of rioting. Several European countries have already emphasized tourists need to bring a sufficient amount of cash if they plan to travel to Greece, indicating a disruption of the complete financial system is a very realistic possibility.
Disclosure: None.
There are many analogies that could be used to partially describe the Greek/EU situation, but plainly the most apt analogy is the idea of an unsecured loan, made by a very large institution to a weak individual borrower, who had no money when the loan was made and who, to no one's surprise, still has no money. Clearly, both sides have something at stake, and the question of who has the most to lose, in the immediate financial sense, becomes somewhat unimportant. Greece simply does not have the money to pay the amount due, or the amount demanded, and the EU is not going to go broke if Greece does not pay. That is one reality.
But there is another, bigger picture reality, which is that the EU was meant to provide stability and improve the economic situation for poorer countries like Greece, to be inclusive and to be a lasting solution, as one part of, and to help create, a new and inclusive "European" State Union.
Now it is not looking like the EU is about that at all: Instead there is a suspicion, a real concern, that the loan made to Greece was used to make it possible for Greeks to buy Euro goods, meaning German goods, and not made with any real intent of somehow improving the economic situation for the Greeks. After all, Greece was an economic basket case when the loan was made, before the current government was in charge. So now it looks more like the Euro loan was more of a trap than anything else: Exactly who made any credit analysis regarding the original loan? How was it believed that it was ever going to be possible for Greece to repay the loan? Who benefitted from the loan?
Alternatively, as the Greeks see this, maybe the EU was intended to make all people in the EU "Countries" work and act like Germans? To get them all to work harder, and more, for their own good?
Of course these appear to be, at this moment, somewhat idle questions and concerns, because the personal and soap opera drama of the left wing government trying to deal with this mess is so entertaining. But the political slant of the Greek government is of no real consequence: Greece has no money, no matter who might be in charge.
This was a "loan" that should never have been made, a loan in name only, and the current situation is almost entirely the fault of the EU and IMF, etc. because the EU approved and made the loan. Yes, we could try to blame the former Greek government equally with the EU, but why blame the Greek government for taking a "loan" when they had no money?
At present, the way I see this, Greece would be better off reverting to its own currency, and telling the EU to buzz off. But then, that seems to be the inevitable result of how this must play out.