The European Central Bank issued it Financial Stability Review today and made very important conclusions: that Default risk has increased for Greece and that the Greek banking sector has suffered substantial deposit outflows. “Wow,” as Finance Minister Yanis Varoufakis would say expressing his astonishment about the extremely surprising and nonplus ultra product of ECB’s thoughtful research and observation. At the same time, ECB’s Ewald Novotny reiterated that the ECB does not plan to loosen the funding to Greece and that the Greek bonds will continue to be not accepted as collateral.
Super Mario – Draghi
The ECB’s report says mainly two things:
1. Default risk expectations have increased sharply due to political instability [sic!] over the last six months.
2. 1. Greek banking sector has had substantial deposit outflows
…and chews the same creditors’ candy of structural reforms, while it draws a beautifully rosy Greek pictures under the previous government.
Generally speaking the ECB again stressed the need for structural changes saying that while monetary policy “can support the conditions for economic growth,” other policies, such as structural reforms “are needed to underpin sustainable economic growth in the euro area.”
The ECB’s Financial Stability Review of May 2015 was followed by a press conference by ECB’s vice president Vitor Constancio.
Congratulating himself and the other euro zone policy makers for the improvement of the financial stability in Europe saying “one can say that our policies are working,”
“It is difficult to build up a narrative where that extreme case can happen. A country cannot legally be expelled from the currency bloc. A rising share of Greek citizens have said they want to stay in the euro.”
Constancio and the other kids of the ECB underlined that the contagion risk for other EZ member state was limited.
The ECB’s Financial Stability Report is being published twice a year. The latest May 2015 report is here in pdf.
Nowotny: Greek bonds as collateral? No
At the same time, the ECB continues to strangulate Greece’s liquidity, with ECB’s Governing Council member Ewald Nowotny saying to CNBC television:
“For us, it is quite clear that we have certain conditions to be met. The one condition is … whether we can accept for instance Greek assets, Greek bonds, as collateral. The answer is, for the time being: No.”
Strictly between us I could tell you this: what the ECB writes and concludes in its Review is something that we all closely following Greece have been knowing for a long time. Haven’t we?
In a time machine nightmare he was held hostage: “First the Red Brigades tortured me with Italian Hardcore, then with Greek Crust”