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European banks lose €50 billion as Greek debt deadline nears

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The market value of European banks has shrunk by more than €50 billion after Greece shut down its banks until July, 6, the day after the referendum on the bailout deal is held.

The Stoxx 600 Banks Index fell by 4.4 percent, the biggest daily decline since November 2011, Bloomberg reports. Among the biggest losers is Portugues Banco Comercial down 9.1 percent, and Italy’s Banca Monte dei Paschi di Siena which slumped 7.2 percent. Spain’s Banco Popular Espanol has lost 6.5 percent and Banco de Sabadell was down 5.4 percent.

“In the short term we should see a very negative mood on markets…Sovereign bonds, banks of peripheral countries, will be the most affected by uncertainty,” the CEO of Milan-based brokerage Marzotto SIM Jacopo Ceccatelli told Bloomberg.

On Monday global stocks suffered their sharpest decline in about six months.

DAX of Germany has suffered the most, falling 4.17 percent this morning. In Asia, where trading finished by the time of publication Shanghai Composite showed the worst result, closing at 3.34 percent lower.

The Euro is also losing momentum against the US dollar, having gone down 0.74 percent on Monday as of 10:42 am MSK. By 06:59 GMT the euro was trading at $1.1089, still down 0.7 percent on the day but well clear of a four-week low at $1.0953 touched in Asian trading.

In Greece, the banks will remain closed for a week and cash withdrawals will be limited at €60 a day, as the government said it would hold a referendum this Sunday to let the people decide what to do with Athens’ multibillion-euro debt.

IMF chief Christine Lagarde told the BBC on Saturday that the planned referendum on the terms of any new bailout plan will be invalid, as on Tuesday the current program expires.

The Greeks would be voting on proposals that no longer exist, she said.

The ECB refused to expand its emergency liquidity assistance (ELA). As of June 23, the ELA program had lent Greek banks about €89 billion.

The EU Tax Commissioner Pierre Moscovici hasn’t lost hope of reaching an eleventh hour deal.

London-based market strategist Michael Ingram at BGC Partners told Bloomberg that a Greek default is almost inevitable.

“Without a complete capitulation from the troika, Greece will default on the IMF tomorrow and emergency liquidity assistance should be withdrawn on Wednesday. I can’t see anyone stepping in before Wednesday ahead of an ELA withdrawal,” he said.

Greece is due to repay €1.6 billion to the IMF by June 30. If it is unable to do so, the country could technically default.


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4 Responses to " European banks lose €50 billion as Greek debt deadline nears "

  1. MonMan Gotchas says:

    Payment Default
    DEFINITION of ‘Default’
    The failure to promptly pay interest or principal when due. Default occurs when a debtor is unable to meet the legal obligation of debt repayment. Borrowers may default when they are unable to make the required payment or are unwilling to honor the debt. The failure to perform on a futures contract as required by an exchange.
    ‘Default’ Explanation
    Defaulting on a debt obligation can place a company or individual in financial trouble. The lender will see a default as a sign that the borrower is not likely to make future payments. Defaulting on a futures contract occurs when one party does not fulfill the obligations set forth by the agreement. The default usually involves not settling the contract by the required date.

    According to The Guardian UK,
    A default occurs when a country, or other borrower, fails to meet its obligation to repay a lender on time. But it is not, technically, the borrower who defaults: it is the lender who declares that the borrower is in default.

    Who does really care, who declares whom a defaulter?
    No matter what the lenders say, The lenders can say anything what they want, the bottom-line is the borrower can not pay.
    Non-payment – failure to meet obligation to repay a lender is the key.
    But, still lenders can lend inspite of knowing borrower’s shaky situation.

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  2. Zomotosky says:

    It is 00:00:01 Wednesday, July 1, 2015 Local Time in Athens, Greece

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  3. Blow It Up says:

    Any latest statements from IMF Chief Christine Madeleine Odette Lagarde?
    How much did she blow up in meetings?
    Can any one publish her accounts for various expenses incl. meetings?

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  4. Burnati says:

    It’s not about money… its about sending a message.

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