DofD News: WASHINGTON, May 21, 2015 – Undersecretary of Defense for Policy Christine E. Wormuth met yesterday with Greece's Minister of Defense Panos Kammenos at the Pentagon to discuss security and defense issues of mutual concern, according to a DoD news release. Those issues included trans-Mediterranean migration, terrorism, Russia's aggressive actions in Ukraine, the Balkans, Libya, and the Middle East, the release said. Wormuth thanked Greece for hosting U.S. forces at Souda Bay, Crete, and for its participation in operations in Afghanistan and Kosovo, according to the release.
Greece's Support in Opposing ISIL: Wormuth also noted the important support Greece is providing the coalition in opposing the Islamic State of Iraq and the Levant, the release added. She and Kammenos agreed that the security situation along NATO's southern flank is a growing concern and called for NATO to develop a southern strategy.
She also conveyed that Secretary of Defense Ash Carter is looking forward to working with Kammenos at the NATO Ministerial next month, the release said.
Watsa decided to come to Greece in the last phase of the negotiations between Greece and lenders to have a very clear picture of what will happen. The Watsa Canadian fund Fairfax took a huge risk in Greece and has a current value of shares of approximately 640 million euros and had invested close to 800-900 million euros
More Watsa comments: ”Short-term fluctuations in either stock prices or the economy are not a cause for concern. Things will turn. Eurobank is the most private bank in Greece regarding the ownership of the philosophy and management style, while the government is satisfied with the privacy of the bank.”
“In difficult times, banks can choose either to drastically reduce their lending or to lend and to support good clients. What customers will not forget ever. This makes the Eurobank. They help clients to motivate people, to create value for its shareholders and then return some of its profits to the community. It's a win-win situation.”
Just noticed 13% of Eurobank’s assets are GTBs. If you google GTB bonds, it explains GTBs are bonds from Guaranty Trust Bank, a Nigerian financial institution with an Asset Base of over 2 Trillion Naira and with vast business outlays in W and E Africa and the UK. Ha, I guess Africa holds potential and Eurobank isn't missing out..
As many as two thirds of these deposits were from Russian mobsters and oligarchs and some belonged to well-to do Cypriots. However, pension funds belonging to employees for state-run companies were also taxed. Some basic capital controls were kicked in to prevent a total run on Cyprus banks.
Greek bankers are not worried about capital controls. They say the Government will reach an agreement and parallel currency scenarios and capital controls are outdated nonsense .The capital controls are suicide, and no politician wants to commit suicide.
Bankingnews.gr asked top Greek bankers to give their approach to capital controls and the parallel currency, and they assured those options will not be implemented. The following points were presented.
Many have said if Greece defaults on its obligations to the IMF, it will cause such panic that banks will risk collapse and will need to implement capital controls as citizens rush to withdraw their deposits. However, the Greek banks through the Eurosystem have liquidity and are systemic with European characteristics.
Recapitalization by deposits, i.e. bail in, now have strict rules. On August 1, 2013, the European Commission adopted temporary state aid rules. These rules demand mandatory capital write-down and bail-in of subordinated debt before any support is granted by private citizens. The example of Cyprus cannot and will not be applied in Greece is 100% certain.
Cyprus was a special situation that led to restrictions on the movement of capital. Cyprus had a runaway and corrupt banking sector that had been content to serve as a money haven. Of the 72.8 billion deposits in Cyprus, about 22- 24 billion were deposits of rich Russians and Germans. Specifically, in May 2011, Cyprus had a EUR18.5 billion GDP and 72.8 billion in deposits, four times more than its GDP.(In Europe, the average ratio of deposits to GDP is between 0.8 to 1 times. Greece deposits of 128-130 billion account for 70% of its 85 billion GDP) The Cypriot state was unable to fund its liquidity needs and the huge capital shortfall could not be treated. In order to get an aid package, Cyprus was required to dramatically shrink its banking sector. Cypriot officials decided to transfer deposits over 100,000 euros ($128K) from its troubled bank to the Bank of Cyprus where they were severely taxed to help pay for Cyprus’s part of the bailout. (continued below)
Tsipras told him there will be an agreement. Prem Watsa, Chairman of Fairfax Financial, met Prime Minister Tsipras at the Maximos Mansion. The conclusion that came out of the meeting is that Greece will agree with the EU and avoid the worst.
Watsa said, “These agreements are often completed at the last moment.” Watsa also met with Governor of the Bank of Greece, Ioannis Stournara,, and spoke to a group of of Eurobank administrators..
Tsipras reiterated the firm position that he supports Watsa’s national effort through investing in Eurobank. Watsa received the message from Tsipras that there will be agreement.
Tsipras says that he prefers to have a political crisis within SYRIZA instead of leading the country to economic destruction. He stated that if the agreement is not voted by the majority of the SYRIZA-ANEL coalition, he is willing to go to elections.I
In Tsipras’ weekend speech to deputies and party committees he said: “We retreat but will not budge in extreme and unreasonable demands. We have a moral and political obligation to win this bet. And we will win."
We didn’t hear much from the IMF for a while. Perhaps because Germany and the European Commission thought they could achieve success in getting Tsipras to agree on all reforms (he's hanging tough on certain issues) without the IMF’s involvement. After all, Germany would prefer to do things their way as the EC and IMF don't see eye to eye on how to handle Greek debt.
Some sources have reported the IMF is pushing for a debt write-off for Athens; they favored a write-off in 2012 but ultimately went along with a new bailout.
With the IMF’s leadership, technical skills and more active involvement an agreement may be reached sooner. However, just as Tsipras doesn’t seek a short-term financial fix that doesn’t address longer-term problems, Largarde says there should be no “quick and dirty deal” and everyone should work harder to reach an agreement immediately.
In Tsipras first speech before Parliament he said: ““We see hope, dignity and pride returning to Greek citizens. Our obligation and duty is not to disappoint them. We realize that negotiations [with foreign lenders] won’t be easy … but we have faith in our struggle, because justice is on our side.” Ha, not to mention the geo-political factor is on their side.
Tsipras, Merkel and Hollande converged on the need for a compromise solution in the presence of the International Monetary Fund so to agree within 10 days. The IMF may insist on debt restructuring.
IMF Director Poul Thomson dismissed press reports that he had asked Europeans for a debt haircut. “I pushed them for debt restructuring,” he said and emphasized that no study has been done for debt sustainability.
Threats by the IMF increase pressure on the Eurozone, so that it will be more flexible. As pointed out by analysts at RBS, the decisive intervention of the IMF in the Greek issue is a positive development.
Good grief! A provision of the insurance bill to be tabled soon in the House calls for debt repayments in 40 or more months to be withheld from monthly pension. For a person who owes up to 25,000 euros and receives a pension of 1000 euros, 600 euros will be withheld. How can a person, or dependent family, survive on the remaining 400 euros ($444) per month? Perhaps the catch phrase is "40 or MORE" months which would reduce the payment. The government may reject that bill. No wonder insurance reform is still being negotiated.
I too hope Syriza hangs tough. It may help him now that the EC and ECB are insisting the IMF has to be involved for an agreement to be negotiated. The IMF is strict on reforms for insurance and labor but they also call for debt restructuring. If the debt is restructured, some of the reforms may not be necessary. Merkel and Hollande may finally realize debt restructuring is needed and will persuade the other states to accept it.
I have a feeling the creditors are making rather extreme demands because they hope to make it difficult for Tsipras to stay in power. They are hoping when some of these reforms go into effect the people will turn against the government. They want to maintain politics as usual and resent the new government’s ideas. As they say, you can't teach an old dog new tricks.
Just read that nearly 45% of pensioners in Greece (approximately 2.5 million) live on an income of less than 665 euros a month ($779) - that is, below the poverty line the EU has set. The government has introduced a bill to include provision for the restoration of a minimum pension of 360 euros for the uninsured elderly.
A recent communique by the Office of the Deputy Prime Minister, John Dragasaki states: "After five years of recession and a cumulative loss of 25% of GDP reminiscent of war, pensions have become the last safety net which prevents the complete dissolution the Greek society and this is because most old people are the ones who feed the rest of the family. "Demographics, Greece also enjoys a downward spiral, as it has one of the lowest birth rates in Europe.
Mr. Rollakis, general secretary of the country's pensioners’ federation, whose own pensions was cut by one third due to the crisis, says “I myself fear that the struggle for justice has a long way to go. Under pressure from creditors, the government can easily add pensions to the list of self-proclaimed red lines already compromised.”
Majedie Asset Management (British), Wellington Management and American Vanguard Group. Each lost about 10 mil. euro in Greece in the first 3 months of 2015.
The Cambria Investment Management has an investment of 7 million, 9% of its total assets; In the last 12 months has recorded 20% losses. (ha, the advantage of leveraging in derivatives). However, as he explains the founder Meb Faber, investment in Greece is for long-term, even if the country exits the Eurozone. Besides, according to Faber , the Grexit may prove to be a positive development for Greek shares (? That’s what he says).
And Japonica Partners is one of the largest holders of Greek government bonds. According to the former Goldman Sachs banker and founder of Japonica, Paul Kazarian, the budgetary position of Greece on the merits are clearly better than what is shown in the statistics ."The main problem in Greece is the lack of credibility.
John Paulson one of the 100 richest people in the world, with a fortune of 11.2 billion. dollars in 2014, has major holdings in Greek banks and other companies: Eurobank, Piraeus Bank, Alpha Bank, EYDAP etc.
The government has persisted in refusing collective redundancies, claiming the restoration of collective bargaining and the gradual increase in the minimum wage.
Greece is following Int’l Labor Organization (ILO) best practices. On May 15, Greek Minister of Labor Skourletis met with Guy Ryder at ILO headquarters in Geneva. ILO expressed appreciation for the new efforts of the government and its social partners to move towards the promotion of collective bargaining, including through the on-going legislative efforts aiming at conformity with international labour standards. So there should be no problem with this reform.
The new VAT rate, along with a restriction on early retirement and an unpopular property tax, would enable the government to raise an additional five to six billion euros reports Ekathimerini news.
However, the VAT issue has become the latest thorn in negotiations. Creditors propose two VAT rates, a low 11% and a high of 23%.The Greek side rejects the proposal and insists on the need for the establishment of three rates of VAT. Ha, I wonder if the cash registers at the grocery stores can be reprogrammed to accommodate the different rates.
May 21: Lenders will accept raising the minimum wage if Tsipras reforms the pension system. However, creditors will not accept an increase in the minimum wage to prior 2012 levels, but they are open to a gradual increase.
I don’t know how “gradual” an increase the creditors are agreeing to. In 2012, the austerity measures lowered private sector minimum wages by 22% to 586 euros for workers over 25. The current minimum wage is 602 euros, indicating an initial cutback. And the gov. had proposed raising the minimum wage on Oct 1 to 680 euros ($778) and next July to 751 euros ($859), presenting other revenue raising reforms to cover the increase in wages. Like Sweden and other countries, the government believes lowering wages is recessionary.
"The pension system is unsustainable and needs reform," says the Brussels Group director, Mr. Wolf, speaking to Bloomberg. They refer to social security benefits as pensions.. Mr. Stratoulis, Minister for Social Security, noted in a March report that 85.6% of pensioners are over 61 years of age. Further, of the 2.63 million pensioners (retirement, death, disability), about 1.511 million (approx 60%) receive up to 800 euros ($889) or less. Tsipras had proposed the creation of the National Wealth Fund to strengthen the financing of the SS system.
The government has agreed to raise the minimum retirement age to 65. (cont. below)
The Minister of Finance was asked recently on whether Greece is considering implementing capital controls to prevent a bank run. He replied, “Capital controls and a monetary union are incompatible. We have no plans to bring them in.” Deposit withdrawals this month have stabilized and decreased from the highs of previous months.. Also the ECB will continue to provide liquidity to the banks, as needed, until an agreement is reached, eliminating any need for capital controls. (sorry I don't have time now to discuss further)
ECB raised ELA by 200 mil euros, just enough to meet the needs of the industry, given the stabilization of deposits in recent days. IMO, ECB wants to maintain pressure on the government to submit to all reforms.
Also, after a long debate with fellow ECB members, Draghi averted an additional haircut of guarantees of the banks, arriving at the prevailing view to wait on the outcome of negotiations between Greece and its creditors.
Yes, I thought you did. You're such a bad, bad boy! LOL!
According to analysts, it is important that anyone trading the market understand the difference between fear and pessimism, greed and optimism. When prices rise too quickly and run away from the trend line, we have greed which usually corrects itself back to the trend line. When prices fall too quickly, fear is causing people to accept prices that are too low and prices fall far below the downward trend line.
When you open a chart for NBG and draw the latest trend line, the low point was a close of 1.07 on April 21. It’s easy to see the direction of that trend. Looking at a trend line from the 52 week closing low of 1.03 on Jan 28, it still shows a slight upward trend. That longer trend line was broken on April 14 and came back above it on April 27.
The longer trend indicates that the pessimistic mood of the market has only slightly been broken since January. Many foreign investors have not re-entered the Greek market since losing money. However the more recent trend since April 21 is positive. IMO much depends on the future events that unfold in Greece for the positive mood to continue. I'm surprised that the price hasn't been more volatile due to the uncertainty about the agreement with creditors.
NBG is trading above its 20 and 50 day moving average, 1.38 and 1.30 respectively and yesterday went below its 10 DMA of 1.41. Over the past month, shares of NBG are up 17.6%. Over the past 3 months they are down 14%. The relative strength index is 53.
now reported to be at a Eurogroup meeting 5-8 June. Daily fluctuations from headline news, IMO much of which is nothing but “sensational” journalism, presents short-term trading opportunities. It's reported stocks will react to expected positive statements from the Summit tomorrow. The Brussels Group will continue negotiations through Saturday focusing on VAT, pension, labor, red loans, the fiscal gap, the primary surplus and debt sustainability. The ECB continues to support the banks through ELA. Reports indicate Greece will implement some reforms and be rewarded by an 'initial agreement' with enough funds to pay debts to the IMF and ECB, and thus avoid default.
In the last few days, banks stocks have retracted some after rallying. Some analysts are predicting an eventual rally in bank stocks from 40% - 60%, or more. Goldman Sacks continues its massive buying of Piraeus warrants, which will be detrimental to shareholders when warrants are exercised (Eurobank has no warrants).