Greece Played Germany Like a Violin; Horrified Syriza Demands 'Icelandic' Default

 Hello Mish 

Draghi revealed today that the current Intra-Eurosystem liabilities of the Bank of Greece is €118 billion. It is unclear if this is Target2 plus banknotes. If it is, then the increase since end April is only €3 billion. That's not much, but the €118 billion represent 66% of Greek GDP. It's also a little more than 2 times ECBs equity. 

The Bank of Greece has not published the end of May balance sheet yet. They normally do that mid-month. 

The ECB will continue to extend liquidity to Greece as long as collateral is provided. I suppose that collateral will collapse in value if Greece defaults.

Draghi is either very brave or very stupid. Then again, he says his approach is rules based, so he is on auto pilot. 

The Greek drama will continue as long as liquidity is provided by ECB to Greece. 

Regards Lars

 The radical wing of Greece's Syriza party is to table plans over coming days for an Icelandic-style default and a nationalisation of the Greek banking system, deeming it pointless to continue talks with Europe's creditor powers. 

Syriza sources say measures being drafted include capital controls and the establishment of a sovereign central bank able to stand behind a new financial system. While some form of dual currency might be possible in theory, such a structure would be incompatible with euro membership and would imply a rapid return to the drachma. 

The confidential plans were circulating over the weekend and have the backing of 30 MPs from the Aristeri Platforma or 'Left Platform', as well as other hard-line groupings in Syriza's spectrum. It is understood that the nationalist ANEL party in the ruling coalition is also willing to force a rupture with creditors, if need be. 

"This goes well beyond the Left Platform. We are talking serious numbers," said one Syriza MP involved in the draft. 

"We are all horrified by the idea of surrender, and we will not allow ourselves to be throttled to death by European monetary union," he told the Telegraph. 

Mr Tsipras warned over the weekend in the clearest terms to date that Greece's creditors should not push him too far. "Our only criterion is an end to the 'memoranda of servitude' and an exit from the crisis," he said. 

"If Europe wants the division and the perpetuation of servitude, we will take the plunge and issue a 'big no'. We will fight for the dignity of the people and our sovereignty," he said. 

European officials examined 'war game' scenarios of a Greek default in Bratislava on Thursday, admitting for the first time that they may need a Plan B after all. They have been negotiating on the assumption that Syriza must be bluffing, and will ultimately capitulate. Little thought has gone into possibility that key figures in Athens may be thinking along entirely different lines.

 The ECB has proved a major stumbling block in agreeing a second rescue plan for Greece as it has threatened to refuse restructured Greek bonds as collateral in its lending operations in the event of a default or a "restricted default," which ratings agencies are threatening to impose. 

"We say no to selective default," Trichet said.