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ECB chocks Greece: “ELA to Greek banks maintained, Haircuts on collateral for ELA adjusted”

The European Central Bank decided today to maintain and to not increase Emergency Liquidity Assistance to Greek banks, despite a request for an allegedly 3 billion ELA increase sent by Greek government on Sunday. Furthermore the ECB decided to “adjust” “haircuts on Greek collateral for ELA, although it did not reveal the haircut rate.

In normal English “Haircuts on collateral for ELA adjusted” means that the Greek bond value Greek banks give to Greek Central Bank is not paid in 100%.

ECB – PRESS RELEASE

6 July 2015 – ELA to Greek banks maintained

  • 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: ECB

According to Financial Times “two ECB governing council members opposed Greece’s haircuts adjustment and wanted tougher measures.”

Probably even higher haircut?

Hardly anyone was expecting that the ECB would increase ELA to Greek banks before the EU LEADERS Summit tomorrow Tuesday.

But “haircut on collateral”???

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By financial editor Mehreen Khan of Telegraph

Despite people’s decision on Referendum, Greece’s lenders will still try anything to economically suffocate the country and the bring the government down to its knees.

The ECB board will convene again on Wednesday, after the EU Summit.

Meanwhile Payment agencies like Western Union have stopped accepting payments not only from but also to Greece with the effect the money collected for charitable purposes in Greece cannot be sent.

In a request KTG’s request to @Western Union, the payment agency replied:

Hello. The system is down as per decision of bank of Greece, that established a bank holiday from the 28th June until the the 6th July. The bank holiday affects all banks, payment institutions (including the foreign ones operating in Greece), branches and representatives of payment institutions and electronic money institutions established in other Member States of the Union and operating legally in Greece. The above mentioned time period can be shortened or extended.

In March 2013 and after one week of Bank Holiday in Cyprus the ECB sent 5 billion euro to Nicosia per airplane directly from Frankfurt. But also Greece has allegeldy received trucks full of euro bank notes in summer 2012, when Greeks were zealously withdrawing money in the months before in a nice bank run between Papadimos government and the two elections in May and June 2012. If I am not wrong, at that time the Greek Bonds had suffered a huge haircut as well and not because of the PSI.
PS I heard Mario Draghi was about to send me €5,000 but found out the banks were closed. Me, no worries, though! The SPD will send me good German potatoes in form of humanitarian aid. I must keep in mind to write SPD a few words about the things I don’t like: Leberwurst, for example, or Maggi Sauce.

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21 comments

  1. Quote: Despite people’s decision on Referendum, Greece’s lenders will still try anything to economically suffocate the country and the bring the government down to its knees.

    One might argue, that it is also the people’s decision to withdraw the money from the greek banks that’ll suffocate the country.
    Some people don’t seem to have faith in the greek government…

    • keeptalkinggreece

      the bank run has been running since 2011/2012

      • Yes, but there was always at least officialy a plan to keep things running.
        But as things stand the greek people just said they dont want to keep it running like the last 5 years.
        I dont understand the surprise about this, anger yes frustration too but not surprise.
        There are now almost 90bn in ela, which are emergency loans that are supposed to be 1. short term and 2. be backed by proper assets, both of which arent given in this case.
        The ecb has stretched its mandate already.
        The logic is simple and unavoidable, 18 creditors say medium term money for conditions, now the greek people and government have said no to conditions plus the deadline for the 2nd package is passed which means a third new agreement needs to be passed somehow and that takes time because it needs to go through alot of democratic procedures in all 19 euro countries. At this point in time whether that even happens is complete speculation. Add to that the default on IMF, which is now strictly forbidden to give any further money. All this means that greek government bonds cannot be taken for collateral at 100%.
        If there is a substantial agreement on head of government/state level maybe, just maybe ecb will have enough grounds to bend their rules enough to raise ela levels. On the other hand if there is no agreement by I think 25.7 when the next payment to the ecb is due all ela automatically expires.

        Once again I understand frustration and anger but not surprise, because most of this follows from clearly written down rules(in case of ecb and imf) or is exactly what the politicians representing the euro group have said would happen.
        At this point in time Id ask you to go back and read those comments from Schulz a while back. Ignore for a moment that he shouldnt have spoken on inner greek issues and just read what he said.
        He clearly says there will be no money(not as a threat because he doesnt decide this but as an unavoidable consequence) and that that will be a huge problem for the greek people and economy. For now and unless a miracle happens tomorrow evening for at least days if not weeks there will be no money.
        I very much regret that is has come to this, but it is the predictable direct consequence of the no vote.

        • Giaourti Giaourtaki

          A German bank gets 50 billion ELA and runs amok when a whole country gets 90? Bullshit society! So one or ten buildings with some 1000 people living of the misery of a culture that isn’t free enough to live without the slavery of money are more worth than 11 million? Hopefully Kammenos is smart enough to give every refugee who wants to live in the mutant-land of weapons, cars, cannibals for wurscht and beer-pee-drunks and soccer-jerks some lessons in para-trooping and let’em visit one of these urban hells in that “summer in the city” definitely wasn’t written, only if they want to jump; it’s a good trick against Dublin II-terror.
          Beside Cyprus Greece is the only state the ECB isn’t buying bonds of to create inflation but as always the little man doesn’t know about it

  2. What exactly did you expect?

    It’s more than obvious that the ECB does not want to “pull the plug”, and in order to do that they (esp. Draghi) have bent their rules to the point of breaking. Which is probably good, as difficult issues can only be handled with some flexibility.

    But it was also obvious – at least to anyone outside Greece – that they can only go so far and that they will not openly break their rules. This is important too, given that the ECB is (or should be) independent from political interference, so they need a set of rules by which they work.

    At least since the non-payment of the IMF tranche, a Greek default has become much more likely. Political statements from both sides don’t give too much hope for a quick solution. Greece itself says that it will not be possible to repay 100% of the Greek government bonds, which the Greek banks used as collateral to get funds from the ECB. So how could they NOT increase the haircut? That would be illogical and probably also illegal.

    Many experts and politicians from various sides predicted that, but they were denounced as scaremongerers and criminals who should be put in jail for interfering with the referendum.

    So what does it mean? It means that there is damn little time left to turn things around. If the Greek proposal crosses too many red lines of the creditors, there will be no agreement.

    If the EU does not find a way to agree to some kind of debt restructuring/haircut for Greece, there won’t be an agreement either.

    I guess what we can hope for now is an agreement of reforms against haircut, but for that Tsipras will have to quickly build up trust with the EU “terrorists” and “crinminals” so they actually believe that reforms will be implemented.

    I know you don’t like to hear that and that you’d prefer a package of no more austerity, debt haircut, investment package and future support to stay in the EUR. It’s just not gonna happen.

    Let’s hope that the more reasonable and measured voices on both sides find the courage to come to an agreement (and get such agreement approved in the respective parliaments) and that the first steps in that direction allow the ECB to maintain the lifeline for the Greek banks long enough to avioid a complete collaps.

    • Giaourti Giaourtaki

      27 billion that mature are not given from Greek banks to ECB but ECB bought out very, very cheap from hedge-funds!
      Nobody said “terrorists” except from your Goebbels-media and racist government bastards (Gabriel: “Gorgopotamos!”) but they are, it’s genocide planned as revenge for that the Krauts lost too much time in Greece and came too late to the Eastern Front.
      The only reform is to nuke Berlin, let’s ask Israel if a Minutemen drops of the truck

      • KTG, sorry, in one of your posts you promised to block shit and racistic stuff…
        You have only one troll here and he is a Greek one.
        Tom

      • I wonder how you manage to find your way into your clothes every morning (hope you do…).

        Why? Because if you mean the above seriously (nuke Berlin etc.) then you should obviously not be running around free, but be taken care of in one of those places with cushioned walls. Nothing against a little polemic or hyperbole in a heated discussion, but the crude fantasies and theories you exude on this board is way below every minimum standard for civilized discussion.

        The only racist in this board seems to be Giaourti Giaourtaki. Don’t believe me? Then read your own comment slowly and think about it.

        BTW, I’m neither German nor from the “right wing”. If people don’t share your opinion (which obviously is the only valid truth – did you ever think about founding a religion?) this obviously makes them stupid, racist and worth destroying.

        That’s the sad thing about extremists from left and right. Always distorting facts and wanting to eliminate those who don’t share their opinion.

        What I’d find interesting to know. If you had to chose a country that should serve as a socio-political role model for the rest of the world, which one would you chose?

        • “That’s the sad thing about extremists from left and right. Always distorting facts and wanting to eliminate those who don’t share their opinion”

          The only people that have been openly for a grexit in ger and greece are the left wing of syriza/ the left left in greece and the right wing of the cdu/the rightright in germany.
          Somehow I wish those two groups could hold a meeting and find out just how much they have in common 🙂

          • keeptalkinggreece

            I am with some csu guys on twitter (ops!) and from cdu – but they’re aggressive

            • csu is even worse. dont get me started on these guys, always wanting extrawurst, like being the most pronuclear but not wanting to take even 1% of the waste. Plus the whole maut thing is a prime example of latent racism.

        • Giaourti Giaourtaki

          The big mistake was to not cut Germany in pieces and give it away to the survivors: Roma, Sinti, homosexuals, a(nti)-socials, Commies, Jews (Israel would be in Germany) and the people you like to get institutionalized; after WW 2 Germany has no right to exist.

          • Commies actually got a piece (it was called German Democratic Republic), but could not sustain it. Germany has been seen as one of the most gay friendly countries in the world. There are also German laws that encourage immigration of Jews (hence significant Jewish immigration from the former Soviet Union in the past 25 years). I do not think the Roma are as welcome, though, but I might be wrong.

  3. Corona Borealis

    Quote: Despite people’s decision on Referendum, Greece’s lenders will still try anything to economically suffocate the country and the bring the government down to its knees.
    That’s definitely not true. If they wanted to suffocate Greece, the ECB simply would revoke the ELAs. All greek banks would be immediately bankrupt. They *did* increase the pressure, but they did not suffocate you.

    • I do not agree, the ECB is not a democratic institution. They fear to be accused of destroying democracy etc. So they cannot just say : we suffocate the Greeks.
      After real sudden suffocation there can be some dead people (no medicines for some time etc. – not forever, in the end drachma can resuscitate, but it needs time) – so nobody wants to be the responsible one.
      They increased collateral – which probably means squeezing, but not yet totally suffocating.
      Just a hypothesis.

  4. KTG, sorry, in one of your posts you promised to block shit and racistic stuff…
    You have only one troll here and he is a Greek one.
    Tom

  5. I wanted to know more about the issue and my surfing landed me to your website for the first time. I’ve been trying not to write things in the matter because I may not know enough to make a comment on space where most affected Greeks are talking. However, here I am. I’d like to mention two fundamentals.

    For one, I hope Greek people can come to a common ground that only Greeks can truly revive the nation. Before crying out for some unfair terms for the loan, well…This is what I know. When I owe money to my credit card company at low interest rate, I must make back 3% monthly minimum payment to enjoy the rate. If I ever miss one payment, 20% interest rate kicks in. When it gets out of hand, they sometimes forgive the interest payment but never for the principle. I wondered at that time why the heck did I get the credit card at first place. Well, I asked for it, and I signed up for it. Yes, they tricked me with some goodies but in the end I was the one who signed it. I didn’t wanna say this but, perhaps, I should. When the Asian financial crisis hit South Korea back hard in 1997, I believe the general population donated gold (no tax receipt) and a lot of it for the country to pay back the IMF loan faster. I’m sure you can google it if interested. Anyhow, that’s for one.

    Next, the Prime Minister, Alexis Tsipras, seems to be immature with the referendum question. It was like asking people having a hard time a question of ‘would you like a deal that will certainly make your future life even harder?’ It would have been better if he instead focused on a better economic plan to boost the economy. More importantly, it seems to me that he is missing one important fact. The money that we use for daily economic transections is just a piece of paper that is worth virtually nothing unless people who use it give a value to it or blindly accept the number printed on the paper as the value. That is, money is only worth as much as the level of confidence that people give to it. In other words, Tsipras’ approach would worsen the Greek economy in either way whether he gets to keep the euro or not and whether he gets a better deal from EU or not in this weekend. Here is why.

    If he gets to keep the euro with further debt forgiveness, other members of EU would want a similar deal as well. If so, euro will be further weakened, reducing purchasing power in the world market. Furthermore, Greece would be in unfavorable position in the future EU table, further worsening the domestic economy.

    If he issues its own currency, the problem gets worse. As I mentioned before, the level of worthiness of a currency is highly contingent on the level of confidence that it provides to the users including the creditors. Because of Alexis Tsipras’ approach and his people’s rejection to the creditors offer not via negotiation but with the referendum, those creditors would likely lose a significant level of confidence on the Greek’s own future currency. If so, it would likely further worsen the Greek economy.

    In summary, what’s done is in the past. For now, once again only the Greeks can truly revive the nation no matter what happens in this weekend. I understand that it is very hard for the Greeks for time being. However, I would not focus on a sort of entitlement sentiment but rather a strategic plan to create jobs for the young. I hope more mature Greek friends can possibly buy-in a bit more for their future generations. In the end, I believe the Greeks have strength to pool this off. I promise you that I will go and buy green olives tomorrow and lots of it.