17-05-2012, 10:32 AM
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By Ambrose Evans-Pritchard | Agency: Daily Telegraph
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[TD]A tsunami of capital flight from Greece is threatening to overwhelm the authorities, forcing the country out of the euro even before fresh elections in June.
Economists warned that the Greek financial system could crumble within a matter of days or weeks unless the European Central Bank steps up support.
President Karolos Papoulias told party leaders that banks had lost €700 million in withdrawals within a day, citing central bank warnings that "great fear" might soon escalate to panic. The leaked details lend credence to claims that capital flight by both savers and firms has reached €4 billion-a-week since the triumph of anti-bailout parties in elections on May 6.
Outflows are becoming unstoppable, not helped by open talk in EU circles of "technical" plans for Greek withdrawal from the eurozone, said Steen Jakobsen from Danske Bank.
"This has a self-fulfilling prophecy built into it and I don't think we can get to June," he said. "The fuse is burning and the only two options now are a controlled explosion, where Germany steps in to ensure an orderly exit, or an uncontrolled explosion."
The growing alarm came as judge Panagiotis Pikrammenos was picked as Greece's caretaker leader until the next vote on June 17. Polls show the Left-wing Syriza leader Alexis Tsipras will be a clear victor.
Tsipras has vowed to tear up the EU-IMF bail-out "Memorandum", exhorting German Chancellor Angela Merkel to "stop playing poker with the lives of people".
The Greek impasse has rattled markets across Europe all week. Yesterday (Wednesday) Spanish lender Bankia was down 11%, while gold tumbled $17 to a 10-month low of $1,540 on dollar strength.
The Greek crisis is replicating the pattern of fixed-exchange ruptures through history. Britain was forced off the Gold Standard in 1931 after pay-cut protests in the navy triggered capital flight.
Greek banks have lost 30% of their deposits since late 2009. The total fell to €171 billion in March.
"The surprise is that there is still so much left," said Simon Ward, from Henderson Global Investors. "I can't believe it will stay much longer."
The ECB is holding the line with an estimated euros 100bn of Emergency Liquidity Assistance (ELA) for lenders, channeled through Greece's central bank. Supplicants must pawn their loan book in exchange.
"The risk is that banks will run out of collateral since these are low quality assets with haircuts of 50% or more," said Ward.
JP Morgan said Greek banks have already exhausted their collateral. A refusal by the ECB to ease rules would amount to expulsion, forcing Greece "to issue its own money."
The ECB said it had stopped routine operations with certain Greek banks with depleted capital buffers, but underscored that they are still able to access the ELA scheme.
There is already a political storm in Germany over "junk collateral", as well as anger over the Bundesbank's €645 billion exposure to Club Med debtors through the ECB's internal "Target2" payments nexus.
Ward said it would be hard to justify to German taxpayers why the Bundesbank should lend more to "austerity-resistant Greeks" so that they can squirrel money abroad.
Julian Callow, from Barclays Capital, said the ECB risks grave contagion if it lets go of Greek banks. "We have reached the point where the ECB needs to come in with massive intervention and outright quantitative easing," he said.
The central banks of Italy and Spain have built up liabilities of €279 billion and euros 284bn, partly reflecting bank withdrawals. This is owed to Germany, Holland, Luxembourg, and Finland.
http://www.dnaindia.com/money/report_gre...le_1690030
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Greek euro exit looms as banks crumble
Published: Thursday, May 17, 2012, 13:22 ISTBy Ambrose Evans-Pritchard | Agency: Daily Telegraph
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[TD]A tsunami of capital flight from Greece is threatening to overwhelm the authorities, forcing the country out of the euro even before fresh elections in June.
Economists warned that the Greek financial system could crumble within a matter of days or weeks unless the European Central Bank steps up support.
President Karolos Papoulias told party leaders that banks had lost €700 million in withdrawals within a day, citing central bank warnings that "great fear" might soon escalate to panic. The leaked details lend credence to claims that capital flight by both savers and firms has reached €4 billion-a-week since the triumph of anti-bailout parties in elections on May 6.
Outflows are becoming unstoppable, not helped by open talk in EU circles of "technical" plans for Greek withdrawal from the eurozone, said Steen Jakobsen from Danske Bank.
"This has a self-fulfilling prophecy built into it and I don't think we can get to June," he said. "The fuse is burning and the only two options now are a controlled explosion, where Germany steps in to ensure an orderly exit, or an uncontrolled explosion."
The growing alarm came as judge Panagiotis Pikrammenos was picked as Greece's caretaker leader until the next vote on June 17. Polls show the Left-wing Syriza leader Alexis Tsipras will be a clear victor.
Tsipras has vowed to tear up the EU-IMF bail-out "Memorandum", exhorting German Chancellor Angela Merkel to "stop playing poker with the lives of people".
The Greek impasse has rattled markets across Europe all week. Yesterday (Wednesday) Spanish lender Bankia was down 11%, while gold tumbled $17 to a 10-month low of $1,540 on dollar strength.
The Greek crisis is replicating the pattern of fixed-exchange ruptures through history. Britain was forced off the Gold Standard in 1931 after pay-cut protests in the navy triggered capital flight.
Greek banks have lost 30% of their deposits since late 2009. The total fell to €171 billion in March.
"The surprise is that there is still so much left," said Simon Ward, from Henderson Global Investors. "I can't believe it will stay much longer."
The ECB is holding the line with an estimated euros 100bn of Emergency Liquidity Assistance (ELA) for lenders, channeled through Greece's central bank. Supplicants must pawn their loan book in exchange.
"The risk is that banks will run out of collateral since these are low quality assets with haircuts of 50% or more," said Ward.
JP Morgan said Greek banks have already exhausted their collateral. A refusal by the ECB to ease rules would amount to expulsion, forcing Greece "to issue its own money."
The ECB said it had stopped routine operations with certain Greek banks with depleted capital buffers, but underscored that they are still able to access the ELA scheme.
There is already a political storm in Germany over "junk collateral", as well as anger over the Bundesbank's €645 billion exposure to Club Med debtors through the ECB's internal "Target2" payments nexus.
Ward said it would be hard to justify to German taxpayers why the Bundesbank should lend more to "austerity-resistant Greeks" so that they can squirrel money abroad.
Julian Callow, from Barclays Capital, said the ECB risks grave contagion if it lets go of Greek banks. "We have reached the point where the ECB needs to come in with massive intervention and outright quantitative easing," he said.
The central banks of Italy and Spain have built up liabilities of €279 billion and euros 284bn, partly reflecting bank withdrawals. This is owed to Germany, Holland, Luxembourg, and Finland.
http://www.dnaindia.com/money/report_gre...le_1690030
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"The philosophers have only interpreted the world, in various ways. The point, however, is to change it." Karl Marx
"He would, wouldn't he?" Mandy Rice-Davies. When asked in court whether she knew that Lord Astor had denied having sex with her.
“I think it would be a good idea” Ghandi, when asked about Western Civilisation.
"He would, wouldn't he?" Mandy Rice-Davies. When asked in court whether she knew that Lord Astor had denied having sex with her.
“I think it would be a good idea” Ghandi, when asked about Western Civilisation.