FRANKFURT, July 13 (Reuters) - The European Central Bank's decision to support Greece's shuttered banks by keeping its emergency funding line open gives the country's lawmakers a few days to seal reforms for an aid deal to keep it in the euro.
However, the lawmakers are under pressure to act fast as the ECB, facing resistance from Germany, would be unlikely to extend the funding line next week if Greece misses a debt repayment due to the ECB on July 20.
The lawmakers' support for tough reforms, agreed by leftist Prime Minister Alexis Tsipras on Monday after all-night talks, is crucial for starting the next phase of negotiations on a tentative aid deal, that will potentially unlock funds to help Greece make
the roughly 3.5 billion euros ($3.87 billion) ECB debt repayment.
Missing that payment would likely force the ECB to turn off the 89 billion euro Emergency Liquidity Assistance that it agreed to extend again on Monday."The Greek parliament is being asked to surrender unconditionally," said one euro zone central bank official, suggesting that the ECB could change tack on emergency funding if action did not come soon.
"If they don't deliver by Wednesday, it's going to be tough."
The ECB is expected to gather again on Wednesday evening in Frankfurt to discuss whether to extend the line again, sources said.
The 89 billion euro line is enough to keep the banks afloat but only barely. Without that funding, the banks would collapse immediately, dragging Greece further into chaos, a possibility if Greece misses Monday's repayment.
While the ECB is expected to cut the funding line altogether next week if the repayment is missed, it is unclear whether the ECB would reward Greece for fast-tracked reforms with an increase in the size of the funding line.
CAPITAL CONTROLS TO STAY
Volker Wieland, one of the 'wise men' who advise the German government on economic policy, said an increase was possible but even if there was one, money controls would stay.
"It gives them the opportunity to keep up the emergency liquidity assistance," he said. "They can maintain it, they can even increase it slightly but the Greek government can certainly not lift capital controls."
Even with an increase in liquidity, capital controls would only be lifted gradually, another official said.
One of the preconditions imposed on Greece for a deal is that it signs into law European rules that would put euro zone authorities at the ECB and in Brussels, rather than Athens, in charge of identifying and closing or breaking up sick banks.
This in turn could lead to a shake-up of the sector that could see some banks close, with losses pushed onto bondholders and possibly even large depositors. In such circumstances, there would be little that Athens could do to prevent this.
One European official had told Reuters that the number of big banks in the country could be reduced from four - National Bank, Piraeus, Eurobank and Alpha - to as little as two......
uk.reuters.com/article/2015/07/13/...ecb-idUKL5N0ZS0W520150713
......
Since the banks are undercapitalized by at least €25 billion, and realistically over €60 billion, if one takes into account NPLs which at 50% are a very optimistic estimate for a country in depression for 6 consecutive years, the first decision the ECB will do once it realizes the sorry state of financial affairs in Greece is to do precisely what the government could have done but did not have the guts when it still had control: overnight it will out about 50% of Greek depositors.-.......
Our only question, one we first asked in April, is whether as part of the deal, the 112.5 tons of official Greek gold will also be handed over to Frankfurt, Berlin or Brussels.
www.zerohedge.com/news/2015-07-13/...haircuts-are-still-coming
Zurück
Werbung
