What the ECB's Move on Greek Government Debt Is Really All About - page 2

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morro
1502
morro  
whisperer:
Expect a flood of lies tomorrow : each Eu politician that wants to save his arse will come up with a fairy tale how Greeks are wrong. This must not stop on Greece. EU is planing slavery - the same as US

Wait - first it will be Juncker all in tears

thenews
28489
thenews  

ECB to Make Tough Decision: ELA Extension for Greece

The European Central Bank will have to make a difficult decision on Monday as it meets to consider whether to continue providing liquidity to Greek lenders.

All eyes are on the European Central Bank (ECB) on Monday as it is set to decide about continuous liquidity injections into Greek banks.

Greek voters said a resounding 'No' to further austerity imposed by the country's creditors, including the ECB, in the referendum on Sunday. The "No" campaign won with 61.31% of the vote, while "Yes" voters accounted for 38.69% of the ballots. Voter turnout was 61.2%.

Until the referendum was held, the ECB maintained the liquidity flow to Greek banks via its Emergency Liquidity Assistance (ELA) program and indirectly to the Greek economy.

However, the Greek government had to close Greek banks for the whole week ahead of the referendum, introducing capital controls limits set on cash withdrawals following the ECB's decision to maintain ELA but without any extension.

"In light of the outcome, the ECB is unlikely to raise ELA any time soon," analysts from Rabobank Financial Market Research wrote in their note for clients on Monday, adding that "the central bank will not want to make any political decision such as pulling emergency funding immediately, the situation has not improved either, which makes it hard for the ECB to lend any additional support to Greek banks."

However, other and more complex considerations will likely play a role in the ECB policymakers' reasoning, too.

"The ball now lies firmly in the ECB’s court as the prospect of Greek banks running out of money in the coming hours is likely to increase, with the prospect that the ECB will cut off Greek banks in the process causing a collapse of the Greek banking system, and in the process highlighting the significant structural flaws of the euro," Michael Hewson, chief market analyst at CMC Markets UK, wrote in a note to clients on Monday morning.

"In a proper monetary union it would be inconceivable for the US to cut off Florida or for the UK government to cut off Scotland from their lender of last resort, but if the ECB ends ELA then that is precisely what will happen to Greece, either later today, or later this week," he added.

source

thenews
28489
thenews  

It Begins: ECB "Adjusts" Greek ELA Haircuts; Full "Depositor Bail-In" Sensitivity Analysis

Earlier today we reported that as Bloomberg correctly leaked, the ECB would keep its ELA frozen for Greek banks at its ceiling level disclosed two weeks ago. However we did not know what the ECB would do with Greek ELA haircuts, assuming that the ECB would not dare risk contagion and the collapse of the Greek banking system by triggering a collapse in Greek banks if and when it boosts ELA haircuts. Turns out we were wrong, and as the ECB just announced "the Governing Council decided today to adjust the haircuts on collateral accepted by the Bank of Greece for ELA."

Full Press Release:
ELA to Greek banks maintained

    [*=1] Emergency liquidity assistance maintained at 26 June 2015 level

    [*=1] Haircuts on collateral for ELA adjusted

    [*=1] Governing Council closely monitoring situation in financial markets

The Governing Council of the European Central Bank decided today to maintain the provision of emergency liquidity assistance (ELA) to Greek banks at the level decided on 26 June 2015 after discussing a proposal from the Bank of Greece.

ELA can only be provided against sufficient collateral.

The financial situation of the Hellenic Republic has an impact on Greek banks since the collateral they use in ELA relies to a significant extent on government-linked assets.

In this context, the Governing Council decided today to adjust the haircuts on collateral accepted by the Bank of Greece for ELA.

The Governing Council is closely monitoring the situation in financial markets and the potential implications for the monetary policy stance and for the balance of risks to price stability in the euro area. The Governing Council is determined to use all the instruments available within its mandate.

What does this mean? Since it is almost certain that the haircut is being increased (as decreasing the ELA haircut makes no sense since Greek banks still have about €20 billion in ELA collateral buffer and instead the ECB would have simply raised the total ELA amount), it means that the ECB just took its first practove step toward launching a Greek bank bail in.

And for the convenience of our readers, previously we prepared precisely the sensitivity analysis showing what ELA haircut results in what depositor bail-in.

Here is the summary sensitivity analysis indicating what a specific ELA haircut translates to in terms of deposit haircut. Basically what the ECB just did is to increase the haircut from the existing level of about 50% which was unusable anyway due to the freezing of total amount of ELA at €89 billion, to 60% at which point the collateral buffer - unusable as it may be - was entirely eliminated from €24 billion to virtually nothing.

read more

thenews
28489
thenews  

Greece will not be getting any more cash from the ECB

Greek banks will not be getting any more help from the European Central Bank.

In an announcement on Monday afternoon, the ECB announced that it would keep its emergency Liqudity assistance, or ELA, to Greece unchanged at levels announced last Monday.

That level is believed to be around €89 billion.

The problem for Greek banks, as it stands, is that it looks like they are quickly running out of cash, and unless the ECB releases more money to them, the prospect of Greek banks re-opening on Thursday (at the earliest) for full use appears uncertain at best.

Also of note is that the ECB said that it will adjust the haircuts on collateral accepted by the Bank of Greece as part of the ELA.

This means, basically, that if the ECB increases the haircuts on collateral accepted by the Bank of Greece, the size of the ELA effectively decreases. If the adjustment is the other way, the ELA is effectively increased in size. The ECB was not totally clear on this measure.

Of course, given the circumstances, it seems likely that this haircut is an increase as Greek collateral is now probably seen as riskier.

According to The Financial Times, it appears that 2 members of the ECB's governing council objected to the decision, with those objectors wanting even stronger measures — read: larger haircuts — on Greek collateral.

n short, the ECB has just tightened the screws on Greece's banking system, which was already under significant duress as assets have steadily flowed out of the country.

Also in the statement, the ECB said that it is "closely monitoring the situation in financial markets" and stands ready to use "all the instruments available within its mandate."

Here's the full text of the ECB's announcement:

  • Emergency liquidity assistance maintained at 26 June 2015 level
  • Haircuts on collateral for ELA adjusted
  • Governing Council closely monitoring situation in financial markets

The Governing Council of the European Central Bank decided today to maintain the provision of emergency liquidity assistance (ELA) to Greek banks at the level decided on 26 June 2015 after discussing a proposal from the Bank of Greece.

ELA can only be provided against sufficient collateral.

The financial situation of the Hellenic Republic has an impact on Greek banks since the collateral they use in ELA relies to a significant extent on government-linked assets.

In this context, the Governing Council decided today to adjust the haircuts on collateral accepted by the Bank of Greece for ELA.

The Governing Council is closely monitoring the situation in financial markets and the potential implications for the monetary policy stance and for the balance of risks to price stability in the euro area. The Governing Council is determined to use all the instruments available within its mandate.

source

thenews
28489
thenews  

Greece faces last chance to stay in euro as cash runs out

Greece faces a last chance to stay in the euro zone on Tuesday when Prime Minister Alexis Tsipras puts proposals to an emergency euro zone summit after Greek voters resoundingly rejected the austerity terms of a defunct bailout.

With Greek banks rapidly running out of cash and the European Central Bank slowly tightening the noose on their funding, Tsipras must persuade the bloc's other 18 leaders, many of whom are exasperated after five years of Greek crisis, to open rapid negotiations for a major new loan to rescue his country.

The leaders of Germany and France, the currency area's two main powers, said after conferring on Monday that the door was still open to a deal to save Greece from plunging into economic turmoil and ditching the euro.

But Chancellor Angela Merkel, facing rising pressure in Germany to cut Greece loose, made clear it was up to Tsipras to come up with convincing proposals after Athens spurned the tax rises, spending cuts and pension and labor reforms that were on the table before its bailout expired last week.

From the Greek side, the key to making any deal politically acceptable will be to win a stronger commitment from Merkel and other lenders to reschedule Greece's giant debt burden, which the International Monetary Fund says is unsustainable.

Without some firmer pledge of debt relief, neither Greece nor the IMF are likely to accept a deal. But that may be more than Germany and its northern allies can swallow.

"The door is open to negotiations, but there isn't much time left and the situation is urgent both for Greece and for Europe," French President Francois Hollande said in a joint media appearance with Merkel in Paris.

At stake at the emergency summit beginning at 6 p.m. (2.00 p.m. EDT) in Brussels is more than just the future of Greece, a nation of 11 million that makes up just 2 percent of the euro zone's economic output and population.

If Greek banks run out of money and the country has to print its own currency, it could lead to a state leaving the euro for the first time since it was launched in 1999, creating a precedent and raising doubts about the long-term viability of an incomplete European monetary union.

thenews
28489
thenews  

July 20 shaping up as the next Greek 'deadline'

On July 20, Greece has to make a payment to the ECBWe know two things:

  1. European deals never get done without a deadline
  2. Even when there is a deadline, a deal still isn't made

Put it all together and the chances of a deal are awfully slim but we'll see what comes out of the latest meeting.

morro
1502
morro  

ECB is is the same as IMF and FED - don't expect solutions from them. They are not there to make solutions

thenews
28489
thenews  

Japanese Investors Lose Faith In Draghi - Dump The Most Foreign Bonds In History

Did the narrative just change? With the world's investors having entirely lost faith in China's ability to control its markets, it appears the omnipotence of global central banks is under scrutiny. First the so-called "contained" risks from Greek contagion are non-existent as despite the best efforts of The SNB (and ECB), European stocks and peripheral bonds have tumbled; and now Japanese investors have dumped over JPY 4 trillion foreign bonds in June - the most ever.

One can't help but wonder why, if Draghi's QE was successful, why are foreigners not piling into risk assets en masse... but instead selling the most ever as apparently Greece matters after all.

thenews
28489
thenews  

Germany repeats that debt cut for Greece is unacceptable

Bloomberg reporting govt official's comments from unnamed source

  • Germany to await creditor assessment of Greek proposals
  • sees tougher Greek terms than two weeks ago
  • EU summit to decide if Germany seeks mandate to restart talks on an ESM aid programme
  • three year programme could establish a lasting sustainable situation for Greece

Germany playing hard-ball still

thenews
28489
thenews  

What you need to know for the Greek talks this weekend

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