5.16.12 AEP: Greek euro exit looms closer as banks crumble

by John Galt
May 16, 2012 16:55 ET


What can I say? Ambrose Evans-Pritchard is on a roll this week with his columns in the U.K. Telegraph and this one protion from today’s piece sums up the disaster we are facing quite nicely:


The 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 30pc of their deposits since late 2009. The total fell to €171bn in March. “The surprise is that there is still so much left. I can’t believe it will stay much longer,” said Simon Ward from Henderson Global Investors.


The ECB is holding the line with an estimated €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 50pc or more. The ECB could relax the rules but they would have to take an active decision to do so,” said Mr 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.”




Got Gold and Drachma?


To read the article in full, click on the title below it is a worthy read tonight, that is for sure!


Greek euro exit looms closer as banks crumble


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