Writing's On The Wall: Texas Pulls $1 Billion In Gold From NY Fed, Makes It "Non-Confiscatable"

The lack of faith in central bank trustworthiness is spreading. First Germany, then Holland, and Austria, and now - as we noted was possible previously - Texas has enacted a Bill to repatriate $1 billion of gold from The NY Fed's vaults to a newly established state gold bullion depository..."People have this image of Texas as big and powerful … so for a lot of people, this is exactly where they would want to go with their gold," and the Bill includes a section to prevent forced seizure from the Federal Government.

From 2011:

"The University of Texas Investment Management Co., the second-largest U.S. academic endowment, took delivery of almost $1 billion in gold bullion and is storing the bars in a New York vault, according to the fund’s board."

The decision to turn the fund’s investment into gold bars was influenced by Kyle Bass, a Dallas hedge fund manager and member of the endowment’s board, Zimmerman said at its annual meeting on April 14. Bass made $500 million on the U.S. subprime-mortgage collapse.

“Central banks are printing more money than they ever have, so what’s the value of money in terms of purchases of goods and services,” Bass said yesterday in a telephone interview.“I look at gold as just another currency that they can’t print any more of.”

And now, after we noted the possibility previously, as The Epoch Times reports, Texas Governor Greg Abbott signed a bill into law on Friday, June 12, that will allow Texas to build a gold and silver bullion depository. In addition, Texas will repatriate $1 billion worth of bullion from the Federal Reserve in New York to the new facility once completed.

On the surface the bill looks rather innocent, but its implications are far reaching. HB 483, “relating to the establishment and administration of a state bullion depository” to store gold and silver coins, was introduced by state Rep. Giovanni Capriglione.

Capriglione told the Star-Telegram:

“We are not talking Fort Knox. But when I first announced this, I got so many emails and phone calls from people literally all over the world who said they want to store their gold … in a Texas depository. People have this image of Texas as big and powerful … so for a lot of people, this is exactly where they would want to go with their gold.”

But isn’t New York, where most of the world’s gold is stored, also big and powerful? Why does the state of Texas want to go through the trouble of building its own storage facility?

There are precisely two important reasons. One involves distrust in the current storage system. The second threatens the paper money system as a whole.

“In a lot of cases with gold you may not have clear title to the metal. You may have a counterparty relationship that makes you a creditor. If the counterparty has a problem unrelated to gold, they can default and then you become an unsecured creditor in bankruptcy,” said Keith Weiner, president of the Gold Standard Institute.

This means you get whatever is left after liquidation, often just a fraction of the initial value of your holdings.

“This exact scenario happened with futures broker MF Global. I knew people who had warehouse receipts to gold bars with a specific serial number. But that gold had an encumbered title and they became unsecured creditors in bankruptcy,” said Weiner.

In Texas, two big public pension funds from the University of Texas (UoT) and the Teacher Retirement System (TRS) own gold worth more than $1 billion.

Being uncomfortable with holding purely financial gold in the form of futures and Exchange-traded Funds, University of Texas actually took delivery of the gold bars in 2011 and warehoused it with HSBC Bank in New York.

At the time pension fund board member and hedge fund manager Kyle Bass explained: “As a fiduciary, which I am in that position to the extent you own gold and you are going for a long time, and it’s not a trade. … We looked at the COMEX at the time and they had about $80 billion of open interest between futures and futures options. And in the warehouse they had $2.7 billion of deliverables. We are going to own it a long time. You are on the board, you are a fiduciary, so that’s an easy one, you go get it.”

Bass is implying that there is much more financial gold out there than physical, and that it is prudent to actually hold the physical.

Taking the gold to Texas would then also solve the counterparty risk. “In this case it’s going to be a depository, the gold is going to be there, they are not going to be able to lend it out and it won’t serve as collateral for other transactions of the bank.” said Victor Sperandeo of trading firm EAM Partners. “Because if the bank closes, you are screwed.”

“I think that somebody was looking at that, we better have this under our complete control,” said constitutional lawyer and gold expert Edwin Vieira, of the Texas bill. “They don’t want to have the gold in some bank somewhere and in two to five years it turns out not to be there.”

So far most of the attention has focused on the part of the depository and the big institutions. However, the bill also includes a provision to prevent seizure, which is important for private parties who want to avoid another 1933 style confiscation of their bullion by Federal authorities.

Section A2116.023 of the bill states: “A purported confiscation, requisition, seizure, or other attempt to control the ownership … is void ab initio and of no force or effect.” Effectively, the state of Texas will protect any gold stored in the depository from the federal government.

And free from the threat of confiscation, private citizens can use gold and silver as money, completely bypassing the paper money system.

“People can legally do that with gold contracts. The difficulty is the implementation. Now Texas has set up a mechanism with the depository. We have accounts in that institution and can easily transfer back and forth certain amounts. So we can run our money system a gold or silver basis if we were so inclined,” said Vieira.

This would not be possible if the gold is stored in a bank because of the risks of bank holidays and bankruptcies. It would also not be possible if the federal government could confiscate gold.

According to Vieira, this anti-seizure provision rests on Article 1, section 10 of the Constitution of the United States, which obliges the States to not make anything tender in payment of debts apart from gold and silver coin. 

“If someone from the Department of Justice comes along you are going to see legal and political fireworks. The state is going to say ‘we need to have a mechanism to make gold and silver money. This is pursuant to the constitutional provision we have. You can’t touch this. Our state power on the constitutional level is more powerful than any statute you may pass,'” said Vieira.

Because one of the litigant parties is a state, the case would go directly to the Supreme Court.

“We are talking about something completely new in terms of the legal playing field. This is no longer a fringe concept,” he adds, but cautions about a possible fight with the federal government: “We will have to see how committed the governor and the attorney general are.”

Official Statement from Governor Abbott:

Governor Greg Abbott today signed House Bill 483 (Capriglione, R-Southlake; Kolkhorst, R-Brenham) to establish a state gold bullion depository administered by the Office of the Comptroller. The law will repatriate $1 billion of gold bullion from the Federal Reserve in New York to Texas. The bullion depository will serve as the custodian, guardian and administrator of bullion that may be transferred to or otherwise acquired by the State of Texas. Governor Abbott issued the following statement:

“Today I signed HB 483 to provide a secure facility for the State of Texas, state agencies and Texas citizens to store gold bullion and other precious metals. With the passage of this bill, the Texas Bullion Depository will become the first state-level facility of its kind in the nation, increasing the security and stability of our gold reserves and keeping taxpayer funds from leaving Texas to pay for fees to store gold in facilities outside our state."

*  *  *

Is this the first step down a road to secession? Notably, they'll need that gold to establish their own country once they win the potentially imminent war with the US military which starts on Monday (Jade Helm).

*  *  *

This implicit subordination of The Fed's gold sends a more ominous signal of rising fears of confiscation and leaves us wondering just how long before every state (and or country) decides to follow Texas' lead?

http://www.zerohedge.com/news/2015-06-13/writings-wall-texas-pulls-1-billion-gold-ny-fed-makes-it-non-confiscatable

Clash Of The Titans: Merkel, Schaeuble Spar Over Greece As German FinMin Draws Up Grexit Plans

"Yanis, have this nourishment for the nerves. You're going to need it,” German FinMin Wolfgang Schaeuble told his Greek counterpart last week, presenting Varoufakis with a box of chocolate euros at a meeting in Berlin.

That’s what counts as humor for Schaeuble who, as Speigel puts it, has become the embodiment of the despicable German to the Greek populace over the course of fraught negotiations with Athens and who now faces a rift with Chancellor Angela Merkel over how far Germany should be willing to go to keep the Greeks in the single currency. 

Although Merkel enjoys widespread popularity, Schaeuble is a veteran of the German government and lawmakers’ reverence for the FinMin is increasingly manifesting itself in the growing parliamentary opposition to what some view as an unacceptably soft stance towards Athens on the part of the Chancellor. Speigel has more on Merkel, Schaeuble, and politics in Berlin.

Via Speigel:

Schäuble is extremely good at shrugging off conflict with gallows humor -- a gift that has served him well throughout his lengthy career. He is well aware that a handful of Social Democrats aren't the only ones talking about the widening rift in the government. Insiders who know Merkel well are saying the same. The chancellor has to answer one of the hardest questions she's had to face since assuming office, namely, should Greece be allowed to remain in the euro, or should the whole drama be brought to a spectacular close with a Grexit.

Merkel would like Greece to remain in the euro. Not necessarily at any cost, but she's prepared to pay a high price. Schäuble is not. He is of the opinion that a Greek withdrawal from the euro zone is in Europe's best interests..

Schäuble is something of an éminence grise in the German government: He became a member of parliament in 1972, when Merkel was preparing to graduate from high school in Templin. In 1998, as head of the CDU/CSU parliamentary group in the Bundestag, he made Merkel his secretary general, but then became enmeshed in the CDU donations scandal. Merkel succeeded him in 2000.

Although she's the one in charge, he intermittently makes it clear that he remains his own man; that he doesn't kowtow to anyone. Appointed finance minister in 2009, Schäuble remarked that Merkel likes to surround herself with people who were uncomplicated, but that he himself was not uncomplicated. He tends to be a little derisory about Merkel, admiring her hunger for power but deeming her too hesitant when the chips are down.

The euro crisis first drove a wedge between them in 2010, when they disagreed on the International Monetary Fund's contribution to the Greek rescue fund. Schäuble was against it, on the grounds that Europe should sort out its problems by itself. Merkel, however, was keen to enlist the help of a body that has clear criteria when it comes to offering aid, and which would therefore prevent the Europeans from making one concession after another. Merkel prevailed.

But they've now traded positions. Schäuble believes that enough concessions have been made to Greece and he's bolstered by the frustration currently rife in his parliamentary group over Merkel's strategy. It will be hard for Merkel to secure majority support if he opposes her, so her fate is effectively in his hands..

The conflict is not about differences in their respective assessments of the situation.. Where they differ is when it comes to the consequences..

Officially, the differences between Schäuble and Merkel are explained away as a reflection of their respective tasks. It's Schäuble's job to hold the purse strings and Merkel's to keep an eye on what's happening on the international stage. Will Putin be getting a foot in the door if the euro zone cuts the rope on Greece? Will the country turn into a failed state in the middle of Europe if it no longer has the euro?

This isn't just a matter of good cop, bad cop. Unlike Merkel, Schäuble doesn't need to worry about looking as though he doesn't care enough about Europe. He wrote the book on the EU, penning papers on how to intensify the union when Merkel was still only a freshly-minted member of the cabinet. She, by contrast, has often been confronted by accusations that her EU policy is austerity-driven and nothing else. In terms of Europe, she lacks Schäuble's street cred..

Merkel has never been overly bothered about going down in the history books. But if she does end up hounding Greece out of the euro, the development will certainly be more than a footnote. Which is one possible reason for her hesitancy. She, not Schäuble, will be the one who has to deal with the inevitable criticism and attacks.

Speigel goes on to say that Schaeuble could "easily" stage a rebellion against Merkel if he chose but, at least for now, that doesn't seem likely and indeed may not be necessary if Greece's creditors can remain resolute in their insistence on pension cuts and VAT hikes for another week or two.

It still remains to be seen how Tsipras will respond once Greece's back is truly against the wall. So far, the Greek PM has remained defiant, but that may be because pensions have still been paid (albeit hours late on at least one occasion), there's still money in the ATMs (even if the lines are getting longer), and Greece has managed to pay creditors (even if the payments have been made using creditors' own money). All of that changes at the end of the month and that is when Tsipras' resolve will truly be tested.

In other words, unless Greece decides to chance a default and a euro exit, a showdown between Merkel and Schaeuble will likely be averted, but should Tsipras decide to go down with the ship, there may come a time in July when Merkel is called upon to intervene and pull Greece back from the brink in order to avoid what she views as unacceptable geopolitical consequences. If it comes to that, she may have to go through Schaeuble which, as the above makes clear, could prove politically challenging. 

In the mean time, Schaeuble is said to be drawing up plans for a Greek default. Here's Bloomberg, citing Spiegel, with more:

German Finance Minister Wolfgang Schaeuble has asked his staff to conceive a mechanism by which a euro-area state in the future could default on its debt in an orderly way that would ensure the continuity of currency union, Der Spiegel reported, without saying how it obtained the information.

Schaeuble also looking at ways to limit aid from member states and put the brunt of the burden on bondholders of the country in question: Spiegel

Roadmap is intended to prevent countries in healthy financial state being held to ransom by states unable to repay their debt: Spiegel

Academics also participating in the discussions: Spiegel

Once again we see that in the final analysis, this is all about being careful to send a strong message to Europe: the troika will not be held hostage by debtor countries seeking to win austerity concessions by threatening to shatter the idea of euro indissolubility. This is essentially the negotiating tactic Syriza has employed as Athens attempts to preserve Greeks' right to decide for themselves how they want to be governed. We will see, in a matter of weeks, whether Tsipras was bluffing or is in fact all-in.

http://www.zerohedge.com/news/2015-06-13/clash-titans-merkel-schaeuble-spar-over-greece-german-finmin-draws-grexit-plans

Greece Looks To Trade Concessions For Writedowns As Standoff Continues

Things took a turn for the worst in talks between Greece and creditors two Fridays ago, when Alexis Tsipras delivered a speech to parliament that, in the eyes of European Commission President Jean-Claude Juncker, did not fairly represent creditors’ position. Juncker took the speech as something of a personal insult given that he had spoken with Tsipras earlier in the week in what was billed as a cordial and productive meeting. Juncker refused to take a phone call from the Greek PM the following day.

A G-7 meeting in Germany last Sunday produced a few token comments from various world leaders and Greece responded by submitting a half-hearted set of counterproposals midway through the week — EU officials called the proposals “not serious.” Juncker then proposed a deal that would have allowed Greece to defer pension cuts if it agreed to implement offsetting reductions in military spending, but the IMF did not agree to the compromise. A day later, Christine Lagarde sent her negotiating team back to Washington and Europe gave Greece 24 hours to come back with a draft agreement that included pension cuts and a VAT hike. 

A little more than 24 hours has now passed and although there have certainly been no breakthroughs, Tsipras and his negotiating team are in Brussels this weekend to try and secure some manner of funding that will allow the country to avoid a default to the IMF on June 30. Preliminary reports suggest Tsipras may be set to make painful concessions if it means creditors will agree to write down some of their existing Greek debt. Reuters has more:

Greek Prime Minister Alexis Tsipras said he was willing to accept unpalatable compromises to secure a deal with international creditors, provided he gets debt relief in return, something that Germany refuses to countenance.

With Greece heading towards possible default and bankruptcy, he told his negotiating team before it took a counter-proposal to Brussels that without debt relief he would say "no" to any settlement with the EU and IMF that isolate his country from the rest of Europe..

Greek ministers arrived in Brussels on Saturday to resume negotiations with international creditors on a cash-for-reforms deal that ended in stalemate on Thursday.

The counter-proposal offering concessions on budget issues is designed to break the deadlock that is threatening Greece's future in the euro zone..

If this proves to be accurate, it looks as though Tsipras may be planning to deflect criticism from party hardliners and voters by claiming that Athens only conceded to creditors’ demands once it was promised debt relief. It’s also possible that Tsipras will be able to convince the European Commission and the ECB that without writedowns, the IMF will be unwilling to participate, something that Angela Merkel views as a serious impediment to a workable deal. 

"If we have a sustainable solution, regardless of how difficult the compromise is, we will bear the burden because the only criteria are exiting the crisis and the bailouts," a government official quoted Tsipras as telling the ministers on Friday night before they headed to Brussels.

Tsipras used the term "sustainable solution" to refer to a long-standing demand for large parts of Greece's mountainous debts to be written off - something he believes is vital if the Greek economy is to start getting back on its feet after a five-year depression.

At the same time, Greece effectively owes some €64 billion to Germany, and any suggestion that the money won’t be paid back will serve to further incense FinMin Wolfgang Schaeuble and lawmakers loyal to his position on Greece. Further, the German public, three-quarters of which oppose extending more aid to Greece, would likely be staunchly opposed to taking a multibillion euro loss. 

Much of that debt is owed to Germany, the biggest contributor to Greece's 240 billion euro bailouts. Any acceptance by Merkel that the money might never be paid back would almost certainly create uproar among the country's politicians and taxpayers.

Merkel is thus facing a lose-lose scenario. The Chancellor views keeping Greece in the euro as critical to maintaining the balance of power between Russia and Europe, even if a ‘Russian pivot’ on the part of Greece would be more symbolic than anything else.

However, if preserving the idea of euro indissolubility ends up requiring debt forgiveness, lawmakers and the public alike could turn against the Chancellery. In short, Merkel may be forced to choose between two outcomes that each have the potential to negatively impact how history remembers her tenure as Europe’s most important political figure.

As for the chances of a messy EMU exit, Varoufakis figures that's about as likely as armegeddon:

"As a former statistician, I will never consent to the notion that there is a zero probability event. It is also possible that a comet will hit planet Earth ... (but) I don’t believe that any sensible European bureaucrat or politician will go down that road.”

http://www.zerohedge.com/news/2015-06-13/greece-looks-trade-concessions-writedowns-standoff-continues

One Week After "Massive" Outflow, Greek Depositors Yank Another €600 Million From Local Banks

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.

http://www.zerohedge.com/news/2015-06-12/one-week-after-massive-outflow-greek-depositors-yank-another-%E2%82%AC600-million-local-bank

Grexit Contagion Uncontained - European Peripheral Bond Risk Is Soaring

While talking heads have proclaimed any Grexit contagion will be contained... it appears they are wrong (surprise!). The last 2 days have seen sovereign bond spreads soar 25-35bps for Spain, Portugal and Italy. On the yield side, Spain 10Y spread to Bunds is at its highest since August 2014 and Portugal at its highest since Feb 2015.

EU Sovereign Bond risk is soaring...

The contagion has been rising...

Charts: Bloomberg

http://www.zerohedge.com/news/2015-06-12/grexit-contagion-uncontained-european-peripheral-bond-risk-soaring

Greece Refuses To Blink; EU Says Noncompliance "Not An Option"

Months of tense negotiations between Athens and creditors came to a head on Thursday when the IMF (which at this point is just going through the motions after telling the EU it would not participate in a third Greek program) sent its lead negotiators back to Washington.

EU officials, who have long contended that without IMF participation there can be no solution for Greece, followed the Fund’s lead, stepping up the pressure on Athens and telling Greek PM Alexis Tsipras that his government has 24 hours to submit a proposal that includes pension reform and VAT hikes. 

To be clear, that’s tantamount to saying Tsipras has one day to abandon Syriza’s electoral mandate and will come as no surprise to those who frequent these pages, as we’ve said for months now that come hell, high water, or "Grimbo," the EU is going to extract its pension cuts and VAT hikes from Tsipras, and not because anyone seriously thinks it will make a difference in terms of putting the country on a 'sustainable' path, but because the EU simply cannot afford for Syriza sympathizers in more economically consequential countries like Spain to get any ideas about rolling back austerity (of 'fauxsterity' as it were) and using EMU membership as a bargaining chip. Here’s a bit of color on the pension issue from Bloomberg:

For creditors, the pension system is still too generous. For the Greek government, it’s a system struggling to cope after five years of recession and dwindling contributions in a nation with the European Union’s highest unemployment. In the first quarter, the rate was 26.6 percent overall and 30.6 percent for women.

Creditors are asking Tsipras to implement reforms agreed to and deliver savings of as much as 0.5 percent of gross domestic product this year and 1 percent next year in part by immediately clamping down on early retirees. They also want supplementary pension funds — lowered about 5 percent last year — to be financed by contributions, not the state budget.

In parliament on June 5, Tsipras called the proposals from creditors “unrealistic” and said no lawmaker could agree to demands such as removing a stipend from the lowest-paid pensioners. Tsipras has agreed to merge funds to cut costs and close loopholes that allow early retirement.

He blamed five years of austerity for weakening the system, saying fund reserves fell by 25 billion euros through the 2012 debt swap and high unemployment. In the last five years, pensions fell as much as 48 percent, Tsipras said, while 45 percent of recipients get pensions that are below the poverty threshold.

In 2012, Greece spent more relative to GDP on pensions than any other EU nation. The 17.5 percent of GDP it spent compared with the EU average of 13.2 percent, according to the most recent Eurostat figures.

A wave of reforms begun in 2010, in the months after Greece agreed the terms of its first bailout with the European Commission, International Monetary Fund and European Central Bank, scaled back payments, introduced means-testing, raised the statutory retirement age and calculated pensions over the entire working career.

The result was Greece was able to move from having the weakest pension system in the world in 2011, according to Allianz Asset Management’s pension sustainability index, to cede that place to Thailand, Brazil and Japan in 2014.

Greece chased employers and employees to pay contributions. Bank of Greece Governor Yannis Stournaras said on June 2 that public pension expenditure is set to decline by about 1.9 percent of GDP by 2060, the fifth best performance in the EU, 

Still, the recession, with rising unemployment and a wave of company closures, has hit contributions.

(Greece CDS overlaid on the Greek public's bargaining stance preference)

“The program applied caused greater problems in terms of loss in contributions than the sum of money collected through the program itself,” said George Simeonides, a board member at the Hellenic Actuarial Authority, which monitors the pension system. “In some cases the cure was worse than the disease.”

Greece’s debt restructuring cut the nominal value of the bonds held by pension funds by 8.3 billion euros, Simeonides estimates. The funds may take further real hits when they’re forced to sell their holdings to pay pensioners, he said.

As you can see, further pension cuts will indeed be quite painful and there certainly seems to be something to the argument that calculating how “generous” a program is as a percentage of GDP can be somewhat misleading when GDP has contracted by a quarter over the course of just five years. 

But again, that doesn’t matter.

This is more about making a point than it is about an honest assessment of economic realities and as we discussed late on Thursday, EU creditors may now be concerned that Tsipras’ recent behavior — including a scathing op-ed and impassioned speech to parliament — may indicate he’s leaning towards siding with Syriza party hardliners, and that is simply unacceptable to Brussels and also to Germany, where economy minister Sigmar Gabriel has given up all pretenses that this is about Greece and not about Spain:

If Greece should leave the euro it may spark a wave of political separatism in the EU, German Economy Minister Sigmar Gabriel says today in speech in Munich at Ifo institute.

“As before, I hope that in these somewhat final days common sense prevails. If it comes to it that Greece can’t be kept in the euro that would be something of a disaster -- for Europe too:” Gabriel

An exit “wouldn’t just be much more expensive than many realize today -- not just financially -- for it would change Europe’s aggregate structure.” “Grexit today, Brexit tomorrow -- the debate about Catalonia and others:” Gabriel

EU officials are also beginning to be a bit more transparent about the fact that this was never really up to Tsipras in the first place. That is, even using the term “negotiations” might have been a bit disingenuous from the start. There are two options for the embattled PM: 1) become a technocrat puppet, or 2) attempt to stick an impossible dismount from the EMU balance beam knowing that the slightest slip-up could trigger political and social instability and risks plunging the country into chaos. For anyone still not convinced that this is the case, just ask Eurogroup President Jeroen Dijsselbloem: 

• GREECE REJECTING PROPOSALS `NOT AN OPTION': DIJSSELBLOEM

For her part, Angela Merkel is doing what she can to rally support behind the Greek cause. Why? Because she, perhaps more than any other EU official, fears the geopolitical fallout from a Greek exit. Unfortunately for the Chancellor, the political will is quickly fading in Berlin, thanks in no small part to FinMin Wolfgang Schaeuble who was finished with the Greeks long ago and who has now managed to rally the support of German lawmakers who are increasingly frustrated with Merkel’s bargaining stance. 

And it’s not just German MPs. The public, although largely ambivalent to whether Greece stays or goes, is overwhelmingly opposed to further concessions:

Poll finds 51% of Germans want Greece out of the euro area, compared with 55% in favor of keeping Greece in the euro in similar poll at the start of the year, German broadcaster ZDF says.

41% want Greece to stay in euro in poll published today

70% oppose further concessions to Greece by the European Union.

65% expect limited or no economic harm to Germany from a Greek exit.

Having said all of this, it's worth reiterating what we said on Thursday, namely that through it all, Tsipras likely believes he can buy a bit more time in order to cement an agreement with Syriza party hardliners. Accepting a 'deal' without first ensuring it can pass the Greek parliament could be a political disaster and may be followed, in relatively short order, by social upheaval. That is aggravating the troika in the interim is preferable to trying to push an extremely unpopular deal through parliament without first securing support. Underscoring this point is the following headline from Friday morning:

• GREEK GOVT WON'T ACCEPT ANY PENSION, WAGE CUTS: GOVT OFFICIAL

Well, yes, they probably will accept pension and wage cuts. But not yet.

Because why should Greece care that creditors are a bit more angry today than they were yesterday? The payment schedule is the payment schedule and unless the IMF decides to effectively execute the Greeks by scrapping the 30-day greace period (and thereby immediately triggering accelerated payment rights for other creditors), Athens can effectively drag this out for some time.

We'll close with the following rather amusing commentary from UniCredit's Erik Nielsen, who spoke to Bloomberg on Friday:

“I really don’t believe they have either the political or technical capability of starting their own currency. Money needs to be a commodity of trust, and I don’t think they have the trust in the population. I’ve never seen anything so completely ridiculous, frankly speaking, from a debtor country in the way they approach it.” 

http://www.zerohedge.com/news/2015-06-12/greece-refuses-blink-eu-says-noncompliance-not-option

Macedonia Central Bank Blocks Greek Bank Withdrawals "In Case Of Grexit"

The bank runs (and capital controls) begin. Macedonia Central Bank Governor Bogov states:

• *GREEK BANKS IN MACEDONIA CAN’T WITHDRAW CASH: BOGOV
• *MACEDONIAN BANKS PROTECTED IN CASE OF GREXIT: BOGOV

How long before the rest of Europe follows suit and a bank holiday is declared Monday to "Cyprus" depositors?

He further added:

• *MACEDONIAN CENTRAL BANK SEES MAJOR RISKS FROM POLITICAL CRISIS

Just to be clear, this withdrawal halt is protection against a worst case scenario... BUT, by imposing capital controls you are ASSURING a worst case scenario occurs!!

http://www.zerohedge.com/news/2015-06-12/macedonia-central-bank-blocks-greek-bank-withdrawals-case-grexit