Greece

[bacpacker]

Here is a couple of interesting news articles I ran across. What do you all think?



PARIS — The head of the International Monetary Fund on Tuesday raised the possibility that Greece could leave the eurozone in an orderly fashion.

“If the country’s budgetary commitments are not honoured, there are appropriate revisions to do, which means either supplementary financing and additional time or mechanisms for an exit, which in this case must be an orderly exit,” Christine Lagarde said in an interview with France 24.
Greece's 'orderly exit' from eurozone a possibility, IMF chief Christine Lagarde says | News | Financial Post (http://business.financialpost.com/2012/05/15/imf-chief-raises-possibility-of-greeces-orderly-exit-from-eurozone/)



While it may be too early to tell, initial reports indicate that a bank run could be taking place in Greece.

“Stocks faded in the final hour of trading Tuesday to finish lower after a transcript from the Greek meeting showed deposits leaving the banking system, fueling speculation that the nation might leave the euro zone,” CNBC reports.

If the transcripts are accurate, depositors withdrew approximately €700 million euros ($898 million) from local banks, according to President Karolos Papoulias.

However, CNBC notes, “the exact timing of the transfer was unclear.”

The transcripts also show that Papoulias cited a conversation he had with Greek Central Bank Governor George Provopoulos wherein it was agreed “that the strength of banks is very weak right now,” the Wall Street Journal reports.
Is This a Greek Bank Run? | TheBlaze.com (http://www.theblaze.com/stories/are-we-seeing-a-run-on-the-greek-banks-right-now/)

[Sniper-T]

blah!


greece's entire economy depends on the tourist trade. when they start shooting tourists in the streets. I'll worry!

BTW. Ihave spent 1/2 years backpacking through greece at a time. Yeah, they're f'd up righ now, but I wouldnt count them out. remember.... They wrote the book on democracy. for good or bad.

/me crosses his fingers

[GunnerMax]

they have had a bank run. over 700mil Euro's have been withdrawn. Looks like economical SHTF for them now, at least of a smaller more controlled scale. I have been to Greece 5 times. They do depend on tourism.

[The Stig]

Original story from Reuters
(http://www.reuters.com/article/2012/05/16/us-ecb-greece-banks-idUSBRE84F0SN20120516)


Exclusive: ECB stops operations with some Greek banks

By Annika Breidthardt and Andreas Framke

BERLIN/FRANKFURT | Wed May 16, 2012 1:52pm EDT

(Reuters) - 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 recapitalization 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. Banks which fail to meet strict ECB rules but are deemed solvent by the national central bank (NCB) concerned can nonetheless go to their NCB for emergency liquidity assistance (ELA).

The sources did not name the banks concerned.

An ECB official later added: "Pending the recapitalization of Greek banks that are severely undercapitalized as a result of the recent PSI (debt restructuring) operation, some of the Greek banks have been moved to Emergency Liquidity Assistance."

"Once the recapitalization process is finalized, and we expect this to be finalized soon, the banks will regain access to standard Eurosystem refinancing operations," the official added. "The ECB/Eurosystem (of euro zone central banks) continues to support Greek banks."

It was unclear exactly how many lenders were affected but the development marked a increase in the number of Greek banks depending on emergency borrowing from the Bank of Greece.

One person familiar with the matter said four Greek banks' capital was so depleted they were operating with negative equity capital. According to its own rules, the ECB cannot provide liquidity to banks in such a situation.

ECB policymaker Luc Coene told the Financial Times in an interview released earlier this week Greek banks on ELA were still solvent.

Greece's cabinet on April 27 agreed a state bank support fund (HFSF) would provide the country's four big banks with 18 billion euros worth of European bonds as an interim solution until they are recapitalized later in the year.

The fund will allocate the 18 billion euros by next week to the country's four biggest lenders as an interim recapitalization, its chief said on Wednesday.

"Procedures to allocate the funds should be concluded by next week," the head of the Hellenic Financial Stability Fund (HFSF), Panagiotis Thomopoulos, told Reuters.

Athens is working with EU/IMF officials on technical aspects of a recapitalization plan for its banks, likely to be unveiled after the national election.

About 50 billion euros ($66 billion) have been earmarked in Greece's second bailout to prop up its struggling banking sector.

ECB President Mario Draghi said earlier the central bank wanted Greece to remain in the currency bloc.

"I want to state that our strong preference is that Greece will continue to stay in the euro zone," he said in a speech, adding: "Since the treaty does not foresee anything on exit (from euro), this is not a matter for the ECB to decide."

(Reporting by Annika Breidthardt and Andreas Framke; Writing by Paul Carrel; Editing by Noah Barkin/Jeremy Gaunt)

[bacpacker]

I missed the Rueters Report, thanks Stig.

I've been watching this develop for some time and reagardless of what Germany and France have done, the situation don't seem to be improving at all. To me it just begs the question, What does Greece do if they are pushed out of the Euro, or leave on their own? What do they use for currency? Do they go back to their old standard? What will back that?

I would think that whatever they switch to will be inder valued compared to the Euro or Dollar. With Greece being heavily dependant on tourism, will a cheaper unit there attract more tourist and help turn them around? Or will a bunch of tourist get caught in a riot and get killed and really roll things down hill? Who knows, but I feel like it bears watching.