YES! A Greek Exit From The EU is JP Morgan’s “Base Case”. In Other News, Cows Eat Grass.

A summary of the events that took place in Greece, and the specters of Uncertainty and Contagion about to be unleashed, was given by Slovakia’s finance minister Peter Kazimir in a series of tweets:

“The nightmare of the ‘euro-architects’ that a country could leave the club seems like a realistic scenario after #Greece voted No today. We will not go gently into this good night. We stand united and we need to respond to this situation as soon as possible”

The now confirmed “No” vote means that the Greek people will not accept the current “additional austerity for more high-interest debt” deal, which would have been completely unexpected if you had only relied on mainstream fodder. This  has brought some cretins out of the woodwork;  JP Morgans’s Malcom Barr states that the bank’s latest take on Greece is that a Grexit is JPM’s “base case”… and it only goes downhill from there:

“Hollande and Merkel are to meet tomorrow night to discuss the issue, and as we understand it, the Eurogroup is scheduled to meet on Tuesday. We expect that a split is likely to emerge in the coming days….. Others will find it more difficult to return to negotiations with a newly emboldened Tsipras in short order….

Second, there are reports of an emergency meeting between the ECB, Bank of Greece and Finance Ministry tonight, and at the latest the ECB will likely have to take a decision about ELA support tomorrow (if not tonight)….It is extremely difficult for the ECB to justify increasing the region’s exposure to Greece at this point….

This suggests that what we see next will be a race between two forces: political pressure to move toward an agreement despite resistance from a number of northern European parliaments, versus the increasingly unpleasant implications of a dysfunctional banking system on the other.

Our base case is that the pressures coming from a dysfunctional banking system in Greece will shorten the time horizon to negotiate a deal to a handful of weeks.

Meanwhile, we expect at least some countries in the rest of the region (not least Germany) will not hurry over the design of a new program, and will find it difficult to get parliamentary assent for any such program.  

This is a path that suggests to us that there is now a high likelihood of Greek exit from the euro, and possibly under chaotic circumstances… Perhaps the pressures of dysfunctional banks will force Mr Tsipras to stand down, and a deal is subsequently made. But for now, we would view a Greek exit from the euro as more likely than not.”

In short, JP Morgan is as usual last on the scene to make a prediction that should be obvious to everyone: Greece is likely to exit the EU. This is not to say that they had no prior knowledge, just that they need time to trade on that information before telling anyone else, because they are “credible” people will follow their lead rather than open their eyes and make their own decisions. Market manipulation 101.

Where my opinion differs from my esteemed banker’s, is that Greece’s departure from the Euro will be a long-run positive; an “agreement” on a “new” deal could mean better terms for Greece, OR a return to something unnervingly close to the original debt-slavery-austerity bargain- which is a less-than-ideal case scenario. A complete exit would give Greece its economic sovereignty back. And prompt OTHER EU nations to consider the same:

260,000 Austrians just signed a petition calling for an Aust-xit; as a well-off member of the EU, its exit would mean much more than Greece’s.  Creditor nations no longer wish to throw money at ailing ones, and debtor nations do not wish to suffer to pay off loans with high interest rates. The only beneficiaries so far, are of course the banks that make these loans with everyone else’s money and debt.
Unless of course the ECB does something that forces Mr Tsipras out,  I don’t see Greece falling into prolonged chaos… though I can see that they had already done something to  Yanis Varoufakis, his finance minister and right-hand man, to cause him to hastily retire. If Tsipiras is forced out of power, as the banker had predicted, then the scenario for chaos is as great as the one for an “agreement”.

Source: Zero Hedge

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