Who Gains, Who Loses As Greece Stumbles Towards Ruin? Asks Berenberg

Tom Burroughes

8 July 2015

Banks able to focus on risk-adjusted returns and which are therefore best able to deliver sustainable cash dividends are the long-term winners out of the eurozone turmoil, according to Germany-headquartered private bank and investment house will disappoint both the market and the boards of banks. Ultimately, bank business models are based on arbitraging the price of money across time and across markets. The more markets Balkanise (and quantitative easing persists), the fewer profitable opportunities there are; that is the real takeaway from events in Greece,” Berenberg continued.

“We believe the key to understanding the impact of the Greek referendum for European banks lies in the bigger picture: 1) debt burden remains key: Greece, like Puerto Rico in the US (and China?), shows that the fallout from the end of a 60 to 70-year debt supercycle is far from over. Greece is but a symptom of a much larger problem; it is not an isolated case,” it said.

The firm said that European institutions are “not permanent” and noted how it took a non-European in the person of William Dudley, president of the New York Fed, to point this out recently.

The notion, once floated in policy circles, of a European banking union is “dead”, Berenberg said.

“During negotiations with Greece, euro-area politicians showed a preference for their own national interests. Therefore, how can true banking union ever exist? Such a union requires a single rule book/supervisor, a single resolution/bail-in mechanism and a single deposit scheme,” it said.

A damning feature of recent events, Berenberg continued, is that Greece’s Alpha Bank had passed a set of stress tests with “flying colours” eight months ago but could be destroyed if the European Central Bank cuts off liquidity.