We said that the ECB held the trump cards in dealing with Greece, via being able to impose conditions on its access to the Emergency Liquidity Authority. We thought the ECB would send an initial signal as to how opposed it was to Finance Minister Yanis Varoufakis' bold proposals in whether it imposed conditions and how severe those were on the Greek Central bank's request to access ELA funds, which it is sure to approve to tomorrow. It turns out the ECB is not waiting that long to let its views be known.Naked Capitalism
The ECB Tightens the Choke Chain on Greece
Yves Smith
12 comments:
I just finished reading the post of hers. Pretty clear cut and ominous for Syriza and the citizens of Greece. Can see this coalition falling apart quickly unless we get a Hail Mary of some kind. Syriza and Greece itself has absolutely zero leverage if it wishes to remain in the euro. Was pretty naive to think otherwise, but hope springs eternal.
Syriza looks like it lost the short battle. Bankers win again. Tears.
I doubt that Yanis is surprised. Of course, they are going to say "ridiculous" at first. This is how negotiations start. First, one party makes an outrageous opening and the other party says it's ridiculous. If an initial proposal is accepted, it was not bold enough. Don't panic just yet.
Don't forget that Greece only said it wouldn't leave the Euro.
It didn't say it would fight against being expelled.
The politics here is making sure that the ECB is seen as the aggressor.
Hope Nail is right.
They should start working on an alternative currency, if they aren't (if they are smart they are working at it right now...). Regardless of what happens, it will help. A dual-currency system may be the lest harmful solution.
That and securing some strategic sectors operations, in any case there shouldn't be a problem feeding the population and securing energy supply (talks with Russia should be under way). Tourism should provide enough euro balances in the future, if they can keep the country stable and with deflated prices they can easily sell that.
There are many risks and the path is full of traps, but is not unworkable, in case the jerks do not come to reason.
There seems to be some worry about the 'dual currency' situation.
It's very simple in the ECB arrangement. If the ECB withdraws funding then all the Greek banks go into administration - including the Hellenic Central Bank.
All that means is that the shareholders and bondholders take a bath - including and in particular the ECB.
Then all that happens is the Hellenic Central Bank refinances all the banks in administration with its own liabilities and guarantees all standard deposits.
Administration doesn't mean closed.
Greeks within Greece carry on as though nothing has happened. They can still pay between Greek banks just as before and withdraw and deposit Greek notes. The Euro in their pocket doesn't change. The savings are the same Euros they had before.
The only difference is that the Greek Euros start to float against the ECB Euros, and you have to exchange via a bank rather than transfer via a bank.
Always remember that a currency system is just a set of pegs. If the ECB pulls the peg, then everything below it just starts to float automatically.
It could be managed pretty well by the central bank limiting cash withdrawals per day per account.
There will of course be some disruption, but the idea that a separate currency is the work of months is simply not the case. Unless pegged liabilities float automatically.
"Hope and change" is taking a beating in this article. Good.
There are always technicalities, more in the current world and how everything is digital, so to do it as smoothly as possible you need preparation. OFC they shouldn't go over the top because then it would get filtered to the media and it would be worse.
If there was some urgency sure, you can pull it off and improvise, but it would be more chaotic and cause more disruption.
The more I think about this the more I think the only solution is for Greece to leave the euro involuntarily. This would likely be the end of Syriza, but falling on their sword for the ultimate good of the millions of downtrodden Greeks would be the highest good. Enough of the battered wife syndrome. Get the hell away from those sadistic and psychopathic financiers once and for all.
By involuntarily, I mean engineering being forced out.
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