Just One False Flag Away

One week ago we reported that, according to Greek sources, Greece had suffered a “massive” deposit outflow to the tune of €700 million just last Friday, culminating a week of €3.4 billion in total outflows following the acrimonious failure by the Greek government to reach a deal with the Troika.

This was confirmed by Wednesday’s news that Greek banks had received another weekly boost in their ELA allottment, the biggest since February, amounting to €2.3 billion and bringing the total to a record €83 billion.

… even as deposits continued to slide inexorably toward parity with the ECB’s funding of Greek banks, at last official check at €130 billion although realistically much lower as of this moment.

Today, following yet another diplomatic snafu when yesterday the IMF announced unexpectedly that it had cut off negotiations on with an intransigent Greek delegation, which hardly restored depositor confidence in their local banks (hit by the double whammy of yet another S&P downgrade) Greek media newsit.gr reports that the relentless bank run once again surged and that as of 3:30 pm, another €600 million or more were withdrawn from local banks by locals “who fear that something might happen over the weekend.”

This follows the withdrawal of €500 million on Wednesday, the day of the ill-fated Tsipras/Merkel/Juncker conference which aggravated the already precarious situation.

Tangentially, Keep Talking Greece reports that today’s outflow may be due to a payday for the civil servants, “who receive their salaries in the middle and the end of the month. Salaries and pensions are traditionally paid Fridays when weekend interferes before the payday.”

It is unclear if the €600 million outflow reported above is gross or net of this number, but unless the outflow is replenished by a comparable inflow, the nature of the withdrawal is irrelevant and means that since the Wednesday’s ELA boost, Greek banks are already down another €1 billion in liquidity, which means that the traditional ELA buffer of €3 billion is correspondingly less and will require another replenishment momentarily by the ECB.

Speaking of which, also according to newsit.gr, next Wednesday is when a non-monetary policy board meeting of the ECB non-governing council will take place in Frankfurt where Draghi and company will discuss the issue of guarantees of Greek banks and perhaps the proposal for collateral “haircut.”

According to some the ECB may also decide to no longer boost or even lower the amount of ELA which would in turn precipitate the collapse of the local banking sector, unless of course the ECB is willing to cover virtually every single euro deposited in Greek banks, which at this pace should take place in a few short weeks.

There is still hope: Greece has promised it will present Europe with its latest revised proposal on Saturday. However, with Eurozone already admitting it is contemplating a Grexit, and Greece responding “only over its red lined body”, the Greek exit from the Eurozone may be just one “false flagged” accident away. Becase at the end of the day nobody wants to be blamed for an outcome which it appears both sides have agreeed upon.

Reprinted with permission from Zero Hedge.