With Greek default, ECB may invoke 'Cyprus option' and induce bank bail-in on depositors

As the final day arrives for Greece to either pay, or default on their IMF obligations, the European Central Bank (ECB) is threatening a two-fold scenario that proves once again that the technocracy that is the European Union is interested only in protecting banks at the expense of the people.  And besides the given option of shutting off liquidity through their Emergency Liquidity Assistance (ELA) to Greek banks, the ECB is also threatening to invoke the ‘Cyprus option’ and demand depositor bail-ins at a time when the Greek banks are closed during a week long holiday.

Moments after the WSJ quoted a Greek official as saying that Greece will not make its IMF bond payment, the ECB struck back when Bloomberg reported that the ECB would review the legality of Greek aid should there not be a deal, i.e., on July 1 post an IMF default. According to Austrian central bank Governor and ECB member, Ewald Nowotny, on Wednesday’s governing council meeting the central bank will decide whether it can continue to provide emergency support for Greece once current bailout program expires June 30, as the Wiener Zeitung originally reported.

The subtext of what Nowotny just said is that absent a deal, Greek banks will have no choice but to impose a massive haircut on existing deposits, since the entire ELA will be yanked, and the Cyprus scenario would follow, one that would see existing deposits of under €120 billion, chopped off in half or probably much, more depending on the true state of Greek bank collateral. – Zerohedge

Bail-ins are just another way of saying theft, only at the highest level of finance.  And as the old axiom goes, steal $100 and you go to jail, but steal $100 million and they make you a banker.


After the 2008 credit crisis and the subsequent taxpayer and central bank bailouts of the banks, corporations, and foreign entities, governments within the G20 chose to pass legislation stating that during the next monetary crisis, it will be the depositors, stockholders, and bond holders who will bail out the banks, instead of simply allowing them to go bankrupt.  But with global debt now far greater than even the annual GDP of the entire world’s economy, there is not enough cash in the world to cover the trillions of dollars in obligations, much less the quadrillions of dollars in derivatives, so it is safe to say that the largest portion of private wealth and savings will be stolen to move wealth upward to the very people who will create the next crisis.

With China’s economy now in a bear market, and a new report by Wikileaks that shows France’s financial system is nearly insolvent, the Greek crisis may be just the beginning, and perhaps even the catalyst for the next global financial meltdown which will be salved over in the short term by the stealing of customer deposits, and a stealing of any savings entrusted to an account within a failed or failing bank.

Kenneth Schortgen Jr is a writer for Secretsofthefed.comExaminer.com, Roguemoney.net, and To the Death Media, and hosts the popular web blog, The Daily Economist. Ken can also be heard Wednesday afternoons giving an weekly economic report on the Angel Clark radio show.