Is this the crisis that precipitates the formation of the "10 Kings"?
Is this the beginning of the end for the eurozone? For years, European officials have been trying to “fix Greece”, but nothing has worked. Now a worst case scenario is rapidly unfolding, and a “Grexit” has become more likely than not.
On Sunday, the European Central Bank announced that it was not going to provide any more emergency support for Greek banks. But that was the only thing keeping them alive. In order to prevent total chaos, Greek banks have been shut down for at least a week.
ATMs are still open, but it is being reported that daily withdrawals will be limited to 60 euros. Of course nobody knows for sure if or when the banks will reopen after this “bank holiday” is over, so needless to say average Greek citizens are pretty freaked out right about now. In addition, the stock market in Greece is not going to open on Monday either. This is what a national financial meltdown looks like, and the nightmare that has been unleashed in Greece will soon start spreading to much of the rest of Europe.
This reminds me so much of what happened in Cyprus. Up until the very last minute, politicians were promising everyone that their money was perfectly safe, and then the hammer was brought down.
The exact same pattern is playing out in Greece. For example, just check out what one very prominent Greek politician said on television on Saturday…
“Citizens should not be scared, there is no blackmail,” Panos Kammenos, head of the government’s coalition ally, told local television. “The banks won’t shut, the ATMs will (have cash). All this is exaggeration,” he said.
One day later, the banks did get shut down and ATMs all over the country started running out of cash. The following comes from CNBC…
Despite a tweet from Greek Finance Minister Yanis Varoufakis that his government “opposed the very concept” of any controls, Greek Prime Minister Alexis Tsipras said later Sunday that he had forced the country’s central bank to recommend a bank holiday and capital controls.
The Athens stock exchange will also be closed as the government tries to manage the financial fallout of the disagreement with the European Union and the International Monetary Fund. Greece’s banks, kept afloat by emergency funding from the European Central Bank, are on the front line as Athens moves towards defaulting on a 1.6 billion euros payment due to the International Monetary Fund on Tuesday.
So what is the moral of this story?
Never trust politicians – especially when a major financial crisis is looming.
All over Greece, people are taking photos of very long lines at the ATMs that actually do still have some cash. Here are just a couple of examples…
Of course those that were smart enough to see this coming took their money out of the banks long ago. And even as late as last week, people were pulling more than a billion euros out of the banks every single day. Without direct intervention by the European Central Bank, most Greek banks would have totally collapsed by now…
So now that the banks are shut down, what happens next?
Needless to say, economic activity in Greece is going to come to a grinding halt. In addition, very few foreigners are going to want to travel to Greece or deal with Greece financially until this crisis is resolved somehow…
An extended bank shutdown and tough capital controls will likely wreak further havoc on the Greek economy by scaring away tourists and chilling commercial activity.
And with Greece unable to borrow from financial markets, and apparently unwilling to strike a deal with the only institutions prepared to lend it money, it will find itself sliding rapidly towards exit from the euro.
When the Greek banks finally do reopen, which of them will still be solvent?
Will some of them need “bail-ins”?
Will account holders be forced to take “haircuts” like we saw in Cyprus?
For the moment, what we do know is that the banks will all be shut down until at least July 6th. Greek Prime Minister Alexis Tsipras has called for a national referendum to be held on July 5th. The Greek people will get a chance to vote on whether or not the latest creditor proposals should be accepted. But the funny thing is that Tsipras and the rest of Syriza are already encouraging the Greek people to vote no…
Greece’s parliament has voted in favor of Prime Minister Alexis Tsipras’ motion to hold a referendum on the country’s creditor proposals for reforms in exchange for loans, the Associated Press reported. Tsipras and his coalition government have urged people to vote against the deal, throwing into question the country’s financial future.
The vote is to be held next Sunday, July 5. It has raised the question of whether Greece can remain in Europe’s joint currency, the euro.
So why hold a referendum if you just want everyone to vote no?
It is because Tsipras does not want to solely shoulder the blame for what comes next. A “no vote” would essentially be a vote to leave the euro and go back to the drachma. The following comes from the Daily Mail…
If Greece does default and ends up leaving the euro, the short-term economic consequences for Greece will be catastrophic.
But the rest of Europe will feel a tremendous amount of pain as well. In fact, we are already getting a sneak peek at coming attractions. As we approach Monday morning in Europe, Asian stocks are crashing big time, and European futures are absolutely cratering. It should be very interesting to see how Monday plays out.
In addition, the euro is already way down in early trading. If Greece does ultimately leave the euro, the value of the euro is going to plunge like a rock. As I have warned repeatedly, the euro is heading for parity with the U.S. dollar, and at some point it will drop below parity.
And once Greece is out, everyone is going to be speculating who the “next Greece” will be. Expect bond yields for Italy, Spain, Portugal and France to go skyrocketing.
Just a couple of days ago, I issued a red alert... We are entering a period of time when the global financial system is beginning to unravel. Most people still have a tremendous amount of faith in the system and assume that those running it are fully capable of keeping it from collapsing. In fact, many have accused me of being crazy for suggesting that the global financial system is in imminent danger of imploding.
A very wise man once said that “pride goeth before destruction”. Our arrogance and our blind faith in the fundamentally flawed systems that we have established will contribute greatly to our undoing.
Events are starting to accelerate greatly now, and it is just a matter of time before we see who was right and who was wrong.
European bank stocks and borrowing costs for Italy, Spain and Portugal bore the brunt on Monday of financial markets' fright at the growing risk that Greece will leave the euro.
The worst fall in shares for six months and a 30 basis point rise in bond yields for other southern euro zone states was the start of an acid test of policymakers' hopes that, if Greece does go, the rest of Europe is isolated from the fallout.
After an initial wave of selling, however, most markets recovered ground. The one-day moves were large but looked pale in comparison to the events of 2008 or the last major round of Greek-spurred turmoil in 2011-12.
Wall Street was set to open around 1 percent lower while the FTSE Eurofirst blue chip index was down by just over 2 percent overall.
"The European financial system now has much less exposure to Greece than in 2011 and 2012," said Stephanie Flanders, Chief Market Strategist for Europe at JP Morgan Asset Management.
It is also better equipped to deal with contagion to other countries -- and so are the countries themselves."
Greece's banks and stock market were closed on Monday and were expected to remain so until after the July 5 snap referendum called by Greek Prime Minister Alexis Tsipras on further austerity demanded by euro zone partners.
The euro zone's banking index .SX7E fell 5.5 percent, with the worst falls for Portuguese, Spanish and Italian lenders.
Adding to the gloomy backdrop, China shares dived another 3 percent, bringing the losses in the past two weeks to 25 percent, with the Chinese central bank's measures on Saturday to support the economy failing to calm jittery investors.
Shock vote on terms of bailout pushes Greek banks to the brink of meltdown as long queues form at country's cashpoints
- Eurozone finance ministers have refused a Greek request to extend its bailout programme
- The current programme expires on June 30, and will not be continued
- Finance ministers are continuing emergency meetings in Brussels without Greece to decide the consequences
- Hundreds rushed to ATMs across the country, after Prime Minister Alexis Tsipras called for a referendum on the bailout at 1am Greek time
Greek banks were on the brink of meltdown last night after the shock announcement that its crisis-hit government would hold a referendum on the terms of a fresh international bailout.
Long queues formed outside the country’s cashpoints after prime minister Alexis Tsipras accused the International Monetary Fund and eurozone of trying to blackmail his country – and pledged to give the Greek people the final say in a vote next weekend.
Mr Tsipras described the bailout plan as ‘humiliation’, condemned ‘unbearable’ austerity measures demanded by creditors and said he would campaign for a ‘no’ result.
Last night, finance ministers in Brussels raised the stakes further by refusing to extend its bailout to allow Greece to meet a £1.2 billion payment due to the IMF on Tuesday – setting the country on a path to default.
Jeroen Dijsselbloem, Dutch president of the eurogroup of finance ministers, warned even a ‘yes’ vote in a Greek refer-endum might not be enough to get a deal, if the government did not fully support the plan.
‘If it is a “yes”, in the meantime there are major problems for Greece. If it is a “yes”, the question is: who are we trusting, who are we working with to then implement the program?’
With fears growing that the country’s banks could grind to a halt this week, the Greek authorities are expected to consider imposing capital controls as early as tomorrow morning.
Thousands of British tourists would be among those affected by the measures, which include restricting cash withdrawals and curbing electronic transfers from the Greek system.
The Association of British Travel Agents and Foreign Office advise taking various methods of payment if travelling to Greece, including cash.
With the eyes of the world on Greece and a possible collapse of the Eurozone as a likely end result, many are ignoring a potentially much more massive elephant in the room. It's been the hottest market in the world, so flush with cash that they have actually built entire ghost-cities lacking populations and mega shopping centers without tenants – a clear sign of bubble waiting to be pricked. But the inevitable seems to now be taking hold as once unstoppable Chinese stock markets are now reversing the unprecedented gains seen over the last several years.
That market had been in a parabolic blow-off since roughly December, a classic (to a chartist) three-stage parabolic move with two retracements.
Yes, a 2-month of about 20%.
With China's stock markets now imploding on a scale that can only be described as a crash, it is only a matter of time before the chain reaction of derivative-based defaults leads to similar detonations across the entire wor
What comes next is anyone's guess, but it won't be pretty. One possible outcome, as suggested by analyst Greg Mannarino, is pretty much the worst imaginable scenario and one we have urged our readers to prepare for:
Central Banks Scramble To Stabilize Crashing Markets: China Fails, Switzerland Succeeds (For Now) | Zero Hedge
Following a week in which the Chinese stock bubble popped and a weekend in which the Eurozone bubble followed, it was all up to central banks to stabilize the devstation that would follow should the Plunge Protection Team, now global, not show up.
And while US equities futures were looking grim overnight, China at least started off on the right foot, rising a little over 2% in early trading following China's scramble to stabilize markets as it knows the alternative could very well be (deadly) civil unrest. And then something unexpected happened: the market did not follow the Chinese central bank script. In fact, as noted earlier, stocks plunged tumbling as much as limit down for CSI-300 futs, and the SHCOMP crashing the most since 1996.
This was not supposed to happen: in fact, with China unleashing the bazooka of the double rate cuts, it was virtually assured that at least China's stock would rise as the rest of the world tumbled on Greek worries. That it did not was the biggest red flag, far more so than what the Greek referendum reveals this weekend, as it means that after Sweden last week, now China has lost control!
As the SNB president admitted: “There was an increased demand for francs” over night, Thomas Jordan says at conference in Bern. “The SNB intervened in the market to stabilize it.”
In other words, without the SNB, the situation would have been truly dire.
And this is only on Monday night: we now have 5 more days of agonizing wait until we get to the Greek rerferendum, which may not even happen because as German FAZ reports Greece may not even have the funds to hold the Greferendum!
To be sure before the week is done every single other central bank will have a go at stabilizing the "market" although if everyone else decides to sell, the Chinese contagion will spread as central bank after central bank loses market intervention credibility. At that point, it will be time to really get the hell out of Dodge.