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ITC Greece- Andreas Koutras: update from Athens.

Update on Greece

As the debate enters the last few days it is getting not just hotter but blazing hot. Banks are closed, liquidity is non-existent and problems are starting to surf everywhere. Credit cards are supposed to work but few businesses accept them. Cash is king now, and people try to save it by buying only the essentials. Hotels that need to cater for tourists and need to buy food supplies on a daily basis are starting to have problems as their local suppliers would only accept cash and nothing else. In addition the slow realization that deposits are not guaranteed is panicking many.

The european deposit guarantee scheme which is part of the Banking Union process is not yet active. This effectively means that Greek deposits which still run at around 125bln are supported by the local fund which few months ago had less than 3bln in it (www.teke.gr). A possible bail-in given the capital needs of the Banks would be massive. This is not Cyprus were the biggest problem concentrated in one bank. All four Greek system banks run exactly the risk. Close to one third of their equity comes from Deferred Tax Assets supported by the guarantee of the Greek republic. Non-performing loans may have breached the 100bln. Back of the envelope calculations show that a 20% conversion of all deposits to equity is not unreasonable. And as there are few depositors with deposits over 100k the threshold could be lowered to 50k or even less.

A poll conducted by GPO a respected polling firm was leaked today. It shows the YES on 47% and the No at 43%. This is a massive move in favour of the YES as was predicted after the capital controls were imposed. The data are from Tuesday so things may have changed since then.

The campaign is entering a very critical phase. The YES campaign is stressing the hardship a NO vote would bring and that the real question is whether we want the Euro or not. The NO campaign on the other hand is saying that the referendum has nothing to do with a Euro exit and it is just a negotiating tool.

On the side of NO we have SYRIZA and ANEL (their gov partners) and the Golden Dawn in what can be called an unholy alliance.

On the side of YES we have the conservative party (ND), the socialist party (PASOK), Potami, and most of the other small parties that did not enter parliament. The communist party which is traditionally anti-European has kept a neutral profile. Arguments however degenerate very fast when the NO supporters accuse the YES side as traitors, unpatriotic, german lovers etc. This is a very divisive campaign and tempers are very high.

For access to this report and a broad range of real-time information on short-term flows, trader chatter and market moving events contact David Fuller via BBG or tel. +44 208 879 1234. Alternatively type {TUCH <GO>} on your BBG for further information. This document and materials within are for informational purposes only. Its purpose is not to solicit, offer or facilitate a decision to buy or sell any financial instrument. In Touch Capital Markets Ltd does not warrant the accuracy or completeness of this information. No liability is accepted by it or the sender for any error or omission, nor for any loss of business, profits or any indirect, direct or incidental damages arising from the use of this information.

 

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