Greece banking system is officially bankrupt

The latest opinion polls, as per Credit Suisse, show Syriza soar from 52 seats to a hugely dominant 128 seats.









Greece After Elections - current opinion polls...







Just few hours ago this was the biggest danger to the Eurozone a left party willing to reject the current status quo and repudiate previous contracts.
But things have been moving fast and ECB President Draghi just admitted that while the ECB Governing Council would like Greece to stay, they will not take any further extraordinary measures to save it.

Bloomberg: Draghi Signals ECB Won’t Keep Greece in Euro Area at Any Cost

European Central Bank President Mario Draghi indicated that while his “strong preference” is that Greece stays in the euro area, the bank won’t compromise on its principles to prevent an exit.

“The ECB will continue to comply with the mandate of keeping price stability over the medium term in line with treaty provisions and preserving the integrity of our balance sheet,” Draghi said in a speech in Frankfurt today. Since the euro’s founding treaty does not envisage a member state leaving the monetary union, “this is not a matter for the Governing Council to decide,” Draghi said.

The comments are the closest Draghi has come to conceding Greece could leave the euro region. Greece faces a fresh election on June 17 that may boost parties opposed to the conditions of its international bailouts, raising the specter of its exit.

“The Governing Council’s strong preference is that Greece will continue to stay in the euro area,” Draghi said.

What does it mean it became just to clear when Reuters came out with the following piece of news:

From Reuters:

The European Central Bank has stopped monetary policy operations with some Greek banks as they have not been successfully recapitalized, euro zone central bank sources said on Wednesday.

The ECB declined to comment.

The ECB only conducts its refinancing operations with solvent banks. With no access to ECB funds, the banks concerned must go to the Bank of Greece for emergency liquidity assistance (ELA).

It was unclear exactly how many banks were affected.

One person familiar with the matter said four Greek banks' capital was so depleted they were operating with negative equity capital. According to its own rules, the ECB cannot provide liquidity to banks in such a situation.

What it means is that we are practically witnessing an attempt to control the default of Greece and the bankruptcy of its banking system which in a matter of hours or days unless by hook or crook something is implemented will happen.

Greece cannot bailout its banks, we are facing a total collapse of a banking system unless a sudden injection of money will materialize from somewhere.

Eventful days worth being monitored closely not only for Greece but for the entire world economy.

Italy Exposure to Derivatives

It was nothing more than a footnote in the Morgan Stanley financials; a $3.4 billion pay-out by Italy to settle a derivatives contract made in 1994. Say goodbye to 50% of the tax hikes imposed by the Monti government because that is what was wiped out by this payment. It is also interesting to note that that Mario Draghi, currently President of the European Central Bank, was the Director-General of the Italian Treasury when this derivative was formulated. Then comes the bomb, only mentioned in a brief article on Bloomberg, and not noted anywhere in the Press. Marco Rossi Doria, an undersecretary in Monti’s administration, tasked with responding to a parliamentary interrogation on derivatives, admitted that the Italian Treasury had $211 billion in "notional" exposure to derivatives, which is around eleven percent (11%) of Italy’s total GDP. This new exposure now brings Italy’s actual debt to GDP ratio to a whopping 144.3%.
Expect further corrections of Monti's government in the following months, the ransack of Italy to cover derivatives contracts is likely to continue for years.

Has Italy Gone Fascist?

Form Zero Hedge, worth reading!


Has Italy Gone Fascist?

In August this year, CLSA’s Russell Napier wrote: “Italy is scary – yields will rise when governments chose to take money from their savers – what Russell calls THE GREAT THEFT - Expect massive capital flight”.  Yet while Russell was commenting on Italy’s opening move in repressing private capital by raising the capital gains tax, but not on gains of government debt, the situation has moved with such speed over the past 5 months that the emergence of the first Fascist regime following the 2008 crisis can probably now be associated with the new Monti government.
It may be time for Italian to get themselves as well as their capital even faster out of Pizzaland.
Here are the latest developments which are coming in at extraordinary speed:

• The appointment in December of an unelected government. This government has no accountability and no fixed time mandate. It is being sold as being “technocratic”, but is in fact headed by a University Professor who is distinguished for: (i) having been head of the EU Internal Market Commission, where he used the power of the State to fine Microsoft and other corporate that were “getting too big for their boots”;(ii) being a good friend of Romano Prodi, another University Professor from the Communist  heartland of the University of Bologna and creator of the Euro (more on him later);(iii) a paid hand of Goldman Sachs and a friend of Mario Draghi, another Goldman puppet who dispatched of the government of Berlusconi within days of taking the helm of the ECB; (iv) a fervent believer in the pre-eminence of the state over the individual;

• Prodi, the original architect of this catastrophe, famously made this comment in 2001, indicating that this cabal of Professors are playing a very long game indeed:

I am sure the Euro will oblige us to introduce a new set of economic policy instruments. It is politically impossible to propose that now. But some day there will be a crisis and new instruments will be created.”

Romano Prodi, EU Commission President, December 2001

• Thanks to his friendship with Monti and the current government, he is very much still involved in shaping just what such instruments can be;

• The passing of an extraordinary edict making cash transactions of more than Euro 1,000 illegal (not subject to reporting – just plain illegal). Following Prodi’s own desire, the existing regime has indicated that this level will be progressively reduced to a limit as low as Euro 300. Hence cash is maybe for the first time in history no longer legal tender (over Euro 1,000, for now);
• A requirement that credit card companies report all transactions carried out by Italians, in Italy and abroad to the fiscal authorities;
• Delays and refusals by banks in allowing customers to withdraw  cash balances of as little as Euro 10,000;
• Finance Police has placed cameras at the physical borders with Switzerland (see below) to register all license plates. In addition, currency-sniffing dogs have been deployed at the border (http://www.cdt.ch/ticino-e-regioni/cronaca/56250/fiscovelox-riapparsi-no...).

Events in Italy must be watched closely.
And while Russell Napier (correctly) foresees capital controls being imposed and suggested that one parks his cash in Singapore dollars, Italians may want to get themselves out as well before the current group of Professors slams the gates shut. Things are moving even faster than one of the world’s leading financial historians could foresee.

Italy Surrendered!

Quite a show, 1 week of bear markets and attack of speculators to the Italian bonds have been enough for Italy to surrender, give up sovereignty and sell the country to the best bidder.
After all that was to be expected when a Prime Minister with the credibility and authority of a pimp is running the 7th world economy like a feudal manor.
So what is the deal? ECB will start buying Italian bonds in exchange for a full emergency austerity package (diplomatically called structural reforms) which in a first draft should include the following:

Reach a positive balance in 2013
Include in the Italian Constitution the compulsory provision for a balanced budget
reform of the labour market (aka fire everyone who is not strongly connected to a politician and condemn an entire generation to underemployment at best)
privatize EVERYTHING! (aka Fire sale of EVERYTHING THEY CAN SELL)

The only positive note is that finally Berlusconi stopped telling jokes, he started finally his speech with a serious note and this should give us an idea how serious the situation is even considering that only yesterday he was spitting jokes on the markets and dismissing the importance of the events.
It seems now the markets have the devoted attention of the Prime Minister and if the discussion only yesterday was in regards to MPs pilgrimages to Holy Land and extended holidays after a prompt telling off from both EU and USA our lap dogs have finally turned serious and are even staying in Rome during the summer to work on the prompt execution of their new masters' orders.
Of course it is very easy to convince a Prime Minister who is charged with countless crimes ranging from bribery to child prostitution and whose first goal is to stay in power to skip jail time.
Italy and Spain have officially entered the death spiral. They will start tax to death to enforce the ECB diktats and in 1-2 years will face the same situation of Greece with eroded tax base while loss of productivity will plunge them in a deeper depression and social upheaval.
The scariest part is that Italy is already now facing a serious social emergency; in order to reach a balanced budget the amount of cuts required will unleash a destruction of the country's social cohesion. We are facing a possible social explosion  when the fabric of public jobs-for-life will disintegrate and a lot more young people will be pushed in the hopelessness territory.

Italy crisis and the Pilgrims to the Holy land!

Quite a day for the Euro and Italy. I will not repeat all the data sufficiently covered at this time by media all over the world.
Enough to say that Milan Stock Exchange has tumbled 2.53% today going down almost 15% since the start of this year while Italian debt reached a post-EMU high of 6.22pc before retreating a little bit at the end.
Anthony Peters from Swissinvest says large clients have been telling asset managers to eliminate Southern European risk. "They have kissed peripheral Europe good-bye," he said.
In the meanwhile, Italy's president Giorgio Napolitano held a second meeting in days with central bank chief Mario Draghi, the future head of the ECB. There has been speculation in the Italian press that the well-respected Mr Draghi might be called to lead an emergency government to restore market confidence.

Finance minister Giulio Tremonti invoked the country's financial crisis committee on Tuesday as the Milan bourse fell to a three-year low, once again led by bank stocks.
Fiat fell 6pc after an 11pc drop in Italian car registrations in July.
Banks were massacred with total yearly losses for some banks amounting now to 45% in details: Unicredit -5,7%, Ubi banca -5,5%, Intesa Sanpaolo -5,2%, Popolare di Milano -5,04%, Mediobanca -4,59% , Banco popolare -4,3%.

Spain Prime Minister faced with similar losses cancelled his holidays to monitor the deteriorating situation.
You would expect amid all this turmoil that Italian politicians would stay and control the situation as well, right!
Well wrong, they are ready to pack and leave for holidays tomorrow until the 12th of September.
They will assist Prime Minister Berlusconi referring to the Parliament about the recent turmoil on the markets and then insanely will fly away to their holiday destinations.
Berlusconi dealt another blow to the reputation of his government today declaring he wants to be in charge of the Ministry of Finance ad interim practically pushing Tremonti in a corner and putting himself in charge of the Italian economic policies during this major crisis.
The first thought coming to the mind of every investor listening to this news must have been " We are screwed" as for the Catholic Italians it must have been "God Save Us!"
Undoubtedly bad news which require some serious reflection and meditation that is why the motivation brought by the government for such an extended summer holiday is the following:

The President of the MPs for the governing PDL Party Fabrizio Cicchitto replied that his decision to allow for such a long summer closing is due to the September Pilgrimage to the Holy Land where annually over 170 MPs are flocking to meditate and pray.
I join the chorus of astonished Italian citizens praying for a divine intervention we are clearly running out of options here!