Editor’s Note – Today we see a stark new reality sweeping across Greece. The election has shifted the entire nation and for the first time neo-Nazis (See videos below) have attained power. Today, reports (See below) are emerging that indicate its virtually over for Greece economically, nationally, and civilly. The people are emptying the banks of Euros, and the world is watching but:
Just when you thought you’d seen the worst, its gets worsterer. While US equities are oscillating in a broad range trying to ignore the Eurocalypse, European asset markets had one of the worst days of the year today across the board. (Read the rest below in the second Zero Hedge article.)
At the time of this post, the NYSE and other indicators are showing gains, we wonder why, and how long that trend will last. (Post time: 12:55 PM EST)
A neo-Nazi party who advocate forcing immigrants into work camps and planting landmines along the border are today savouring unprecedented political success in Greece. Golden Dawn party will enter parliament with seven per cent of the vote after the electorate shunned the main parties who they blame for plunging the nation into austerity. The obscure extreme-right group are one of the biggest winners in a poll which has plunged Greece into a fresh political crisis. (Read more here.)
By Tyler Dryden – Zero Hedge
While the long-term decline in bank deposits over the past 3 years has been well documented both on Zero Hedge and elsewhere, it is the most recent, acute post-election phase that has not gotten much coverage.
Minutes ago Bloomberg sent out a notice that things in Greece may be on the verge of the final collapse. From Bloomberg: “Anxious Greeks have withdrawn as much as 700 million euros ($893 million) from the nation’s banks since the inconclusive May 6 election, President Karolos Papoulias told party leaders yesterday, according to a transcript of the meeting posted on the presidency’s website today.
Papoulias said he got the information from the head of the Bank of Greece, the central bank, George Provopoulos, according to the transcript.” While this was likely a negotiation talking point to facilitate the formation of the government, the reality as we now know is that there has been NO government formed, which now means that the bank run will only get worse.
Needless to say, a Greek banking system which is now virtually shut out of any extrenal funding except for the ELA, where it has a few billions euros in access left, will be unable to deal with hundreds of millions in deposit outflows.
And courtesy of Russian_market, here is a picture of the first Greek ATM lines:
Also from Zero Hedge:
Just when you thought you’d seen the worst, its gets worsterer. While US equities are oscillating in a broad range trying to ignore the Eurocalypse, European asset markets had one of the worst days of the year today across the board.
Spanish and Italian bond spreads are 40bps wider this week alone (adding 15-20bps today) and Portugal (sorry Stevie) are 52bps wider this week as our prediction that a compressed basis would remove any technical support for the bonds has come true. With sovereigns deteriorating rapidly, and given the forced contagion of the LTRO program, it is no surprise that financials are imploding.
Senior and Subordinated credit spreads are underperforming dramatically with Subs +90bps and Seniors +55bps in May, while high-yield credit is 100bps wider and broad European equities (Bloomberg’s BE500 index) are tracking them lower now practically unchanged for the year (and back below its 200DMA). Of course, while Greek bank runs are accelerating (and are likely beginning in Spain) and ASE is at all-time lows, the hope remains that if things get ugly enough, the ECB will save the day and Draghi will magically re-appear.
The hope of another LTRO is meaningless, though likely inevitable, as it will only exacerbate the stigma that we have been so accurate on. With collateral in short-supply, especially in Spain, any further encumbrance will crush LTRO-facing bank debt and equity-holders via subordination and so it may make sense to be even more long the ‘stigma’ divergence between LTRO and non-LTRO.
LTRO Stigma explodes to year’s highs leaving the banks that took LTRO loans at 5 month wides and near record crisis wides on average (as non-LTRO banks remain much more sane)…
See Charts here.