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USB examines the two main routes that Greece can take to leave the Euro

UBS does not believe that Greece will leave the euro however, were it to happen, USB believed it would probably do so via one of two main routes.

Alex Christoforou

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Post originally appeared on Zerohedge.

What was once anathema has become conventional wisdom, and lately the only question when discussing the fate of Greece is not if but when it will default. Actually, there is another question: how? Because as the following UBS flow chart shows, when it comes to the matter of picking an obligation on which to not make a payment, Greece has a truly 5 star menu selection.

Grexit likely consequenc3s_1_0

Ths is what UBS says:

We do not believe that Greece will leave the euro in our base case scenario. However, were it to happen, we think it would probably do so via one of two main routes:

(1) The fast route: A rapid deposit withdrawal from the banking system, if the Eurosystem refused to finance it through expansion of the ELA facility. The government would then need to refinance (and probably recapitalise) the banking system by creating a new currency to do so. However, this could probably be slowed with the imposition of capital controls limiting deposit withdrawal.

(2) The slow(er) route: The government, running out of funds, could substitute IOUs for euros in some of its payments. Starting with payments to suppliers (including for pharmaceuticals, as in 2011), and then – in theory – progressing on to public sector salaries and pensions over time. As current Greek debt obligations are not valued at their face value by the bond market, nor would these notes be, meaning that their purchasing power would likely be lower than that of the euro. In this way, the parallel currency would already be devalued.

The more of these notes that were issued, the greater the need would be for the banking system to clear payments in them. The need would also increase for businesses and citizens to use them to pay taxes. As this continued, it would be likely that more euros would leak out of the Greek banking system and the economy would rely on the new currency to a greater extent.

Nominally, Greece could (in theory, and just conceivably) remain in the euro under these circumstances, but there would come a point in this process at which it had in a practical sense already left.

Below we look at the likely impact of impairment of some of the Greek government’s obligations, were any to take place.

IMF loans

The IMF has a “timetable of remedial measures” for overdue payments which we reproduce in the annex at the bottom of this note. As the cross-default clause in the bond documentation only refers to impairment of other securities, we doubt that non-payment to the IMF would accelerate bond repayments.

UBS Greece debt 2_0

However, it is possible that non-payment to the IMF causes an acceleration of amounts due to the EFSF, which in turn could accelerate repayment of bonds if as would seem likely they were also left unpaid.

According to the “Master Financial Assistance Facility Agreement” between the EFSF and Greece, the EFSF may “declare the aggregate principal amount of any or all Financial Assistance made and outstanding… immediately due and payable, together with accrued interest” if (among other clauses) “the Beneficiary Member State does not make timely repurchases from the IMF in relation to the IMF Arrangement of any outstanding purchases… or has overdue charges on outstanding purchases”.

It is important to note that the EFSF also states that it “may, but is not obliged to, exercise its rights under this Clause”.

Were the EFSF to exercise this right, it is likely that bond repayments would also be accelerated. The documentation for the PSI bonds (those issued in exchange in the 2012 restructuring) cites as an event of default if amounts due to the EFSF “are declared to be due and payable prior to their scheduled maturity”. However, it should be noted that this clause does not appear in the prospectuses for the 2017 and 2019 bonds issued by the Greek government last year.

Government bonds and bills

The normal consequences of a failure to make a payment on a sovereign bond or bill are relatively well-known: the bonds enter into default and in due course CDS is triggered after a decision of the ISDA determinations committee. Additionally, in the case of non-payment on the “New Greek Bonds” (PSI bonds), the EFSF could decide to accelerate amounts due to it as with non-payment to the IMF (see above).

It is possible (though for a variety of reasons very unlikely) that an attempt is made to restructure privately-held bonds at some point in the near-medium term. However, no bonds have been issued to the private sector under Greek law since before the 2012 restructuring, meaning that any restructuring within the law would have to take place via investor votes as per collective action clauses. As the investor base is mostly composed of hedge funds and foreign asset managers, it is reasonable to infer that such a restructuring attempt would be unsuccessful.

Bilateral and EFSF loans

No interest or principal payments are due on the loans made in the first and second Greek aid programmes until 2020. As a result, and unless the Greek government were formally to repudiate its debt obligations under these programmes, impairment would seem unlikely.

So now that you know your options Greece, choose. And remember: your last check should always bounce, or at least be written in a currency that will soon no longer exist.

References:

http://www.zerohedge.com/news/2015-04-28/how-will-greece-default-let-us-count-ways

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BARR: No collusion by any Americans

Trump never used his powers to interfere with Mueller, and thus had no “corrupt intent” in the matter.

Alex Christoforou

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Attorney General Barr found no one in the Trump campaign colluded with “Russia” to meddle in the 2016 US election.

A devastating blow to Democrats and their mainstream media stenographers.

Trump reacted immediately…

Via RT…

With the full report on special counsel Robert Mueller’s investigation into claims President Donald Trump colluded with Russia about to be released, Attorney General William Barr is giving a press conference about its findings.

Barr maintains the allegation that the Russian government made efforts to interfere in the election through the Internet Research Agency, an alleged Kremlin-control “troll farm”, as well as “hacking efforts” by the Russian intelligence agency GRU.

The bottom line, Barr says, is that Mueller has found Russia tried to interfere in the election, but “no American” helped it.

Barr explained the White House’s interaction with the Mueller report, whether Trump used executive privilege to block any of its contents from release, as well as on how the Justice Department chose which bits of the 400-page paper to redact.

On the matter of obstruction of justice, Barr said he and his deputy Rod Rosenstein have reviewed Mueller’s evidence and “legal theories”, and found that there is no evidence to show Trump tried to disrupt the investigation.

He said Trump never used his powers to interfere with Mueller, and thus had no “corrupt intent” in the matter.

Most of the redactions in the report were made to protect ongoing investigations and personal information of “peripheral third parties”.

Barr said that no-one outside the Justice Department took part in the redacting process or saw the unredacted version, except for the intelligence community, which was given access to parts of it to protect sources.

Trump did not ask to make any changes to Mueller’s report, Barr said.

Trump’s personal counsel was given access to the redacted report before its release.

A number of Trump-affiliated people, as well as Russian nationals, have been indicted, charged or put on trial by Mueller over the course of the past two years, but none for election-related conspiracy. Still, Democrats in Congress as well as numerous establishment media personalities have been insisting that Barr, a Trump pick for AG office, is somehow “spinning” its findings in order to protect and exonerate Trump, and are calling to see the full report as soon as possible.

They have equally condemned Barr’s decision to hold a news conference before the report is release, claiming he is trying to shape the public perception in Trump’s favor.

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Moscow’s Strategy: To Win Everywhere, Every Time

The main feature of Moscow’s approach is to find areas of common interest with its interlocutor and to favor the creation of trade or knowledge exchange.

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Authored by Federico Pieraccini via The Strategic Culture Foundation:


Important events have occurred in the Middle East and North Africa in recent weeks that underline how the overall political reconfiguration of the region is in full swing. The Shia axis continues its diplomatic relations and, following Rouhani’s meeting in Baghdad, it was the turn of Adil Abdul-Mahdi to be received in Tehran by the highest government and religious authorities. Among the many statements released, two in particular reveal the high level of cooperation between the two countries, as well as demonstrating how the Shia axis is in full bloom, carrying significant prospects for the region. Abdul-Mahdi also reiterated that Iraq will not allow itself to be used as a platform from which to attack Iran: “Iraqi soil will not be allowed to be used by foreign troops to launch any attacks against Iran. The plan is to export electricity and gas for other countries in the region.”

Considering that these two countries were mortal enemies during Saddam Hussein’s time, their rapprochement is quite a (geo)political miracle, owing much of its success to Russia’s involvement in the region. The 4+1 coalition (Russia, Iran, Iraq, Syria plus Hezbollah) and the anti-terrorism center in Baghdad came about as a result of Russia’s desire to coordinate all the allied parties in a single front. Russia’s military support of Syria, Iraq and Hezbollah (together with China’s economic support) has allowed Iran to begin to transform the region such that the Shia axis can effectively counteract the destabilizing chaos unleashed by the trio of the US, Saudi Arabia and Israel.

One of the gaps to be filled in the Shia axis lies in Lebanon, which has long experienced an internal conflict between the many religious and political currents in the country. The decision by Washington to recognize the Golan Heights as part of Israel pushed the Lebanese president, Michel Aoun, to make an important symbolic visit to Moscow to meet with President Putin.

Once again, the destabilizing efforts of the Saudis, Israelis and Americans are having the unintended effect of strengthening the Shia axis. It seems that this trio fails to understood how such acts as murdering Khashoggi, using civilian planes to hide behind in order to conduct bombing runs in Syria, recognizing the occupied territories like the Golan Heights – how these produce the opposite effects to the ones desired.

The supply of S-300 systems to Syria after the downing of the Russian reconnaissance plane took place as a result of Tel Aviv failing to think ahead and anticipate how Russia may respond.

What is surprising in Moscow’s actions is the versatility of its diplomacy, from the deployment of the S-300s in Syria, or the bombers in Iran, to the prompt meetings with Netanyahu in Moscow and Mohammad bin Salman at the G20. The ability of the Russian Federation to mediate and be present in almost every conflict on the globe restores to the country the international stature that is indispensable in counterbalancing the belligerence of the United States.

The main feature of Moscow’s approach is to find areas of common interest with its interlocutor and to favor the creation of trade or knowledge exchange. Another military and economic example can be found in a third axis; not the Shia or Saudi-Israeli-US one but the Turkish-Qatari one. In Syria, Erdogan started from positions that were exactly opposite to those of Putin and Assad. But with decisive military action and skilled diplomacy, the creation of the Astana format between Iran, Turkey and Russia made Turkey and Qatar publicly take the defense of Islamist takfiris and criminals in Idlib. Qatar for its part has a two-way connection with Turkey, but it is also in open conflict with the Saudi-Israeli axis, with the prospect of abandoning OPEC within a few weeks. This situation has allowed Moscow to open a series of negotiations with Doha on the topic of LNG, with these two players controlling most of the LNG on the planet. It is evident that also the Turkish-Qatari axis is strongly conditioned by Moscow and by the potential military agreements between Turkey and Russia (sale of S-400) and economic and energy agreements between Moscow and Doha.

America’s actions in the region risks combining the Qatari-Turkish front with the Shia axis, again thanks to Moscow’s skilful diplomatic work. The recent sale of nuclear technology to Saudi Arabia, together with the withdrawal from the JCPOA (the Iranian nuclear agreement), has created concern and bewilderment in the region and among Washington’s allies. The act of recognizing the occupied Golan Heights as belonging to Israel has brought together the Arab world as few events have done in recent times. Added to this, Trump’s open complaints about OPEC’s high pricing of oil has forced Riyadh to start wondering out aloud whether to start selling oil in a currency other than the dollar. This rumination was quickly denied, but it had already been aired. Such a decision would have grave implications for the petrodollar and most of the financial and economic power of the United States.

If the Shia axis, with Russian protection, is strengthened throughout the Middle East, the Saudi-Israel-American triad loses momentum and falls apart, as seen in Libya, with Haftar now one step closer in unifying the country thanks to the support of Saudi Arabia, the United Arab Emirates, France and Russia, with Fayez al-Sarraj now abandoned by the Italians and Americans awaiting his final defeat.

While the globe continues its multipolar transformation, the delicate balancing role played by Russia in the Middle East and North Africa is emphasized. The Venezuelan foreign minister’s recent visit to Syria shows how the front opposed to US imperialist bullying is not confined to the Middle East, with countries in direct or indirect conflict with Washington gathering together under the same protective Sino-Russian umbrella.

Trump’s “America First” policy, coupled with the conviction of American exceptionalism, is driving international relations towards two poles rather than multipolar ones, pushing China, Russia and all other countries opposed to the US to unite in order to collectively resist US diktats.

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Nigel Farage stuns political elite, as Brexit Party and UKIP surge in polls (Video)

The Duran Quick Take: Episode 144.

Alex Christoforou

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The Duran’s Alex Christoforou and Editor-in-Chief Alexander Mercouris take a look at Nigel Farage’s Brexit Party’s stunning rise in the latest UK polls, which show Tory support splintering and collapsing to new lows. Theresa May’s Brexit debacle has all but destroyed the Conservative party, which is now seeing voters turn to UKIP and The Brexit Party.

Corbyn’s Labour Party is not finding much favor from UK voters either, as anger over how Britain’s two main parties conspired to sell out the country to EU globalists, is now being voiced in various polling data ahead of EU Parliament elections.

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Authored by Mike Shedlock via MishTalk:


The Guardian reports Tories Hit by New Defections and Slump in Opinion Polls as Party Divide Widens.

The bitter fallout from Brexit is threatening to break the Tory party apart, as a Europhile former cabinet minister Stephen Dorrell on Sunday announces he is defecting to the independent MPs’ group Change UK, and a new opinion poll shows Conservative support plummeting to a five-year low as anti-EU parties surge.

The latest defections come as a new Opinium poll for the Observer shows a dramatic fall in Tory support in the past two weeks and a surge for anti-EU parties. The Conservatives have fallen by six percentage points to 29% compared to a fortnight ago. It is their worst position since December 2014. Labour is up one point on 36% while Ukip is up two points on 11%.

Even more alarmingly for the Tories, their prospects for the European elections appear dire. Only 17% of those certain to vote said they would choose the Conservatives in the European poll, while 29% would back Labour, and 25% either Ukip (13%) or Nigel Farage’s new Brexit party (12%).

YouGov Poll

A more recent YouGov Poll looks even worse for the Tories

In the YouGov poll, UKIP and BREX total 29%.

Polls Volatile

Eurointellingence has these thoughts on the polls.

We have noted before that classic opinion polls at a time like this are next to useless. But we found an interesting constituency-level poll, by Electoral Calculus, showing for the first time that Labour would get enough constituency MPs to form a minority government with the support of the SNP. This is a shift from previous such exercises, which predicted a continuation of the status quo with the Tories still in command.

This latest poll, too, is subject to our observation of massively intruding volatility. It says that some of the Tory’s most prominent MPs would be at risk, including Amber Rudd and Iain Duncan-Smith. And we agree with the bottom-line analysis of John Curtice, the pollster, who said the abrupt fall in support for Tories is due entirely to their failure to have delivered Brexit on time.

The Tories are facing two electoral tests in May – local elections on May 2 and European elections on May 23. Early polls are show Nigel Farage’s new Brexit party shooting up, taking votes away from the Tories. If European elections were held, we would expect the Brexit party to come ahead of the Tories. Labour is rock-solid in the polls, but Labour unity is at risk as the pro-referendum supporters want Jeremy Corbyn to put the second referendum on the party’s manifesto.

Tory Labour Talks

The Tory/Labour talks on a compromise have stalled, but are set to continue next week with three working groups: on security, on environmental protection, and on workers’ rights. A separate meeting is scheduled between Philip Hammond and John McDonnell, the chancellor and shadow chancellor. The big outstanding issue is the customs union. Theresa May has not yet moved on this one. We noted David Liddington, the effective deputy prime minister, saying that the minimum outcome of the talks would be an agreed and binding decision-making procedure to flush out all options but one in a series of parliamentary votes.

May’s task is to get at least half of her party on board for a compromise. What makes a deal attractive to the Tories is that May would resign soon afterwards, giving enough time for the Tory conference in October to select a successor before possible elections in early 2020.

This relative alignment of interests is why we would not rule out a deal – either on an agreed joint future relationship, or at least on a method to deliver an outcome.

Customs Union

A customs union, depending on how it is structured, would likely be worse than remaining. The UK would have to abide by all the EU rules and regulations without having any say.

Effectively, it will not be delivering Brexit.

Perhaps May’s deal has a resurrection.

Mike “Mish” Shedlock

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