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Wednesday, May 27, 2015 12:35 PM


Run on Greek Banks Accelerates; ECB Halts Emergency Funding Hike; Untangling the Lies


The curious story of the day is back-to-back reports, minutes apart, by the same news agency, saying different things.

I commented on that just a bit ago in Greece Says Creditor Agreement Deal Close, Senior Eurozone Official Says "I Wish it Were True".

There is no proof Greece is the one lying, but Greece certainly benefits more from such a lie, two different ways.

  1. Lies buy Greece more time to prepare capital controls
  2. Lies may stop some panic out of Greek banks

Assuming point number two is in play, I did a search for "Greek bank deposit outflows". Three stories from today popped right up. Here are two of them.

Run on Banks Accelerates

Please consider ECB Halts Emergency Funding Hike to Greek Banks.
The European Central Bank on Wednesday did not raise a ceiling on emergency funding for Greek banks in a weekly review for the first time since February, a banking source said, adding financial pressure as the country scrambles to stay solvent.

Greek banks have survived on the emergency liquidity assistance (ELA) since largely losing access to capital markets and the ECB's main funding window.

The ECB has been raising the cap on ELA in increments, but there has been opposition from within the bank to doing so each week on concerns it helps finance the Greek government. The banking source said the ceiling was unchanged because deposit outflows had slowed to low levels, leaving an untapped liquidity cushion.

But Greek newspaper Kathimerini reported on Wednesday that deposit outflows had picked up in the last days on worries over the possibility of capital controls. Official data on deposit outflows in April will be released on Thursday.

The ECB declined to comment.
Greek Bank Outflows Accelerate, Reached 5 Billion Euros in April

CNBC reports Greek Bank Outflows Accelerate, Reached 5 Billion Euros in April.
Greek banks have seen deposit outflows accelerate over the past week as fears rise that the euro zone country will default on debt, two banking sources said on Wednesday.

The spike follows a steady outflow of money from Greek lenders this year as Athens and its creditors struggle to agree an aid-for-reforms deal before Greece runs out of money.

"The past week in May was more challenging compared to the previous ones in the month, with daily outflows of 200 to 300 million euros in the last few days," a senior Greek banker said.

Outflows picked up in April to about 5 billion euros ($5.44 billion) from 1.91 billion euros in March, three Greek bankers told Reuters. Official data on April deposits will be released by the Bank of Greece on Thursday.

Speculation about capital controls has resurfaced after a prominent lawmaker from the conservative opposition said she was worried about the prospect if no deal is reached with creditors and Athens defaults on an IMF payment next month. The government's spokesman has dismissed such a scenario.
Untangling the Lies

It's possible that Greece will reach an agreement, but here are the lies as I see them now.

  1. Greece is not close to an agreement with creditors as Greek officials claim.
  2. The ECB is telling a whopper about outflows from Greek banks slowing.
  3. In contrast to official statements, capital control measures are in the works.

To untangle the lies, all one had to do was look at what's really happening. Here is the single most believable statement made by anyone ...

"The past week in May was more challenging compared to the previous ones in the month, with daily outflows of 200 to 300 million euros in the last few days," a senior Greek banker said.

Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com 

11:52 AM


Greece Says Creditor Agreement Deal Close, Senior Eurozone Official Says "I Wish it Were True"


The curious story of the day is back-to-back reports, minutes apart, by the same news agency, saying different things.

Greece Says has Begun Drawing Up Agreement with Creditors

Here is Reuters headline number one: Greece Says has Begun Drawing Up Agreement with Creditors

Greece and its creditors are starting to draft a technical-level agreement, a government official said on Wednesday, signalling progress in long-running talks to unlock aid for the cash-strapped country.

"At the Brussels Group (of credit negotiators) today procedures to draw up a staff-level agreement are beginning," the official said, adding that Prime Minister Alexis Tsipras would be in constant touch with other leaders to conclude a deal.

The official said the deal would avoid wage and pension cuts, include reform of value-added taxes and include a lower target for a primary surplus in the first year.

The Greek official also cited differences between the EU and IMF as holding up an overall deal and called on the creditors to do their part to ensure a deal was struck.

"There remains a problem with the differing stance among the institutions. If an agreement by the IMF was not needed, the deal would have closed by now," the official said.
Eurozone Officials Dismiss Greek Comments

Here is Reuters headline number two (actually 8 minutes before the above): Euro Zone Officials Dismiss Greek Comments on Deal Being Drafted.
Greece's European creditors cannot confirm a statement by Athens that it is starting the process of drafting a technical-level agreement with creditors to secure aid, an EU official told Reuters on Wednesday.

"I wish it were true," a senior euro zone official said.
Loop of Lies?

It's vaguely possible no one is lying here, but that's only possible if the senior eurozone official does not know what is going on.

Another curious aspect is the Greek official blaming the IMF, when actually it is the IMF and not the eurozone creditors that have admitted Greek debt needs another haircut.

I suppose it is possible the IMF wants harsher terms on a new deal than Germany and the creditors, but somehow that seems unlikely.

Who Benefits?

Who benefits more from a lie?

The answer to that question is Greece, two ways.

  1. It buys Greece more time to prepare capital controls
  2. It may stop some panic out of Greek banks

Just because someone benefits from a lie is no proof a lie is in progress. Yet, lie or not, both of those two points are in play.

Greece needs to prepare for capital controls to stop a run on banks should talks fail.

Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com

11:05 AM


Livestream of Rand Paul "Unleashing the American Dream" 12:45 PM Central


U.S. Sen. Rand Paul joins the Illinois Policy Institute at the 1871 Center for a discussion about how to transform Chicago, the state of Illinois and the U.S. with liberty-based public policy solutions.

Tickets are completely sold out, but you can watch the livestream at 12:45 p.m. CST.

Paul's speech is on unequal economic opportunity, failing schools and a broken criminal-justice system.

Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com

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