- Title: MARKETS-GERMANY REAX Frankfurt stock exchange falls on news of the Greek 'no'
- Date: 6th July 2015
- Summary: FRANKFURT, GERMANY (JULY 06, 2015) (REUTERS) VARIOUS OF TRADING FLOOR AT FRANKFURT STOCK EXCHANGE BOARD SHOWING DAX GRAPH TRADER WITH TELEPHONE BOARD SHOWING DAX INDEX STARTING AT 10825.06 POINTS VARIOUS OF TRADERS VARIOUS OF BOARD SHOWING SHARE PRICES OF BANKS VARIOUS OF TRADERS BOARD SHOWING SHARE PRICE INDEXES (SOUNDBITE) (German) CAPITAL MARKETS ANALYST AT BAADER BANK,
- Embargoed: 21st July 2015 13:00
- Keywords:
- Location: Germany
- Country: Germany
- Topics: General
- Reuters ID: LVAAP30CL7EIBQLBW51IX97IOKMU
- Aspect Ratio: 16:9
- Story Text: European bank shares fell almost two percent on Monday (July 6) after Greeks overwhelmingly rejected conditions of a rescue package from creditors, throwing the future of its banks and its euro zone membership into doubt.
Greece's banks could run out of cash within days and the European Central Bank's (ECB) decision about whether to extend emergency liquidity will be crucial. The ECB is due to meet later on Monday.
One Frankfurt trader said that despite falls in the DAX, which opened at 10825.10 on Monday after a last close of 11058.40, he still expected the German stock exchange could weather the uncertainty.
"We are very relaxed as to the German stock exchange, whatever happens, whether we will see a Grexit or whether they will stay in the eurozone, we will manage it. We have the ECB, but share analysts would prefer it in the long term if we said: 'Ok, you voted no, now you have to take the consequences', and the consequences are that you are out for the next 10 years," capital markets analyst at Baader Bank, Robert Halver, said.
Banks across Europe were hit by the threat that Greece's problems could spill over to other countries and derail an economic recovery, especially in other peripheral euro zone countries. Spain's Santander and BBVA; France's BNP Paribas and Societe Generale, and Germany's Deutsche Bank were all down about 2 percent.
The resignation of Greece's finance minister could make a deal with creditors more likely and avoid the country's exit from the euro zone, analysts said. But Greece's banking system is on the brink of collapse, with estimates its four top banks have less than 1 billion euros of liquidity remaining, and could need nationalising.
"Varoufakis is a scapegoat of the Tsipras government, under the motto: 'This man who caused so much unrest is no longer with us, and his successor will be a bit softer and more inclined to speak to you', but that is just cosmetics, as before it is about facts, and the facts are that the Greeks are unable to stay in the eurozone in this status quo," Halver said.
The ECB is likely to maintain emergency funding for Greek banks at its current restricted level, people familiar with the matter said on Sunday, which will see lenders run out of cash soon.
"The ECB will continue to play its cards close to its chest, it won't raise its level of emergency credit any more - they can't reduce it, but they can't add any more to it, because that would then be covert state financing, and the ECB is not there to find an alternative funding for the creditors, they won't do that, they will say: 'We'll wait what will be negotiated'," Halver added.
That is despite capital controls being imposed last week to stem the outflow of cash from the banks, which have lost about 40 billion euros of savings this year, or a quarter of deposits.
Banks are expected to stay shut for the foreseeable future, and Athens could need to start printing money when they do re-open. A new financial system may need to be built, with banks nationalised and transformed into new lenders as part of a multi-year workout, analysts and restructuring sources said.
The exposure of overseas banks to Greece is relatively modest, after lenders, notably those from France and Germany, sold businesses and scaled back their Greek assets in the past four years. But investors are worried the crisis could drive up borrowing costs for governments and companies and increase losses from bad loans. - Copyright Holder: REUTERS
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