ECB uncomfortable with leading role in Greek funding drama By Paul Carrel and John O'Donnell (Reuters) - European Central Bank policymakers decamp to Cyprus on Wednesday wrestling with the uncomfortable fact that they may hold the keys to Greece's continued membership of the euro. With no political appetite for a 'transfer union' that could see wealthier countries subsidize Greece, the central bank figures prominently among the main options for staving off an impending funding crunch in Athens. This is awkward for the ECB, an independent central bank desperate to stay out of the political debate over Greece's future but whose lender-of-last-resort function may leave it as the only institution able to stop an economic collapse there. "The ECB is justified in being cautious because of the highly political exposure," said Richard Portes, professor of economics at London Business School, noting that the bank has just completed a sensitive, political debate over a sovereign bond-buying plan. After that debate, the ECB sought to remove itself from the political firing line. Observing its rules strictly, the ECB cut off Greek banks from its funding after Athens abandoned its bailout program, a condition for access to the ECB funds. The move forced Greek banks onto emergency liquidity assistance (ELA) from their national central bank -- a temporary facility that raised the pressure on governments to find a political solution before the banking sector tipped into crisis. ECB President Mario Draghi defended the move in an at-times heated exchange at the European Parliament last week, telling lawmakers: "The ECB had no choice". The discussion illustrated the ECB's sensitivity to the Greek question. Now another looming funding crunch, this time for the Greek government, means the 25 members of the ECB's policymaking Governing Council have little option but to enter the political arena due to their say over key funding operations. The Council meets in Cyprus on Wednesday and Thursday. Shut out of debt markets and faced with a steep fall in tax revenues, Athens is expected to run out of cash by the middle or the end of March. Without unlocking bailout funds by completing -- or at least beginning -- reforms it has vocally opposed, the government faces the prospect of defaulting in a matter of weeks. ROTTEN APPLE? With other options apparently closed for now, the ECB is central to the Greek government's only other prospective funding channel: raising a 15 billion euro ($16.82 billion) cap on Athens' issuance of Treasury bills, or short-term debt. The cap has already been reached, and the ECB has a veto over lifting it. The issue here is that Greek banks have used the T-bills to access central bank funding and then invest in more T-bills, helping the state cover its short-term needs. Raising the T-bill limit would be tantamount to putting central bank cash in the pocket of the Greek government. The ECB is prohibited from such central bank financing of governments. One person familiar with ECB thinking said that any extension of the T-bill limit was "very unlikely". Although they are eager to avoid playing a decisive role in Greece's fate, euro zone central banking officials fear Greece could stumble into an accidental exit from the bloc by defaulting without any form of back-up plan. Greek Finance Minister Yanis Varoufakis spoke at cross purposes with Draghi and other top ECB officials when they met in Frankfurt early last month. Hawkish euro zone central bankers are growing impatient with Athens and its reliance on central bank funding, with some wanting to restrict this financing to Greece regardless of the consequences. "I would agree with the theory that if you get rid of the rotten apple, then the others are more in line," one central bank official said.
Then we should fight the multinationals too, but not use it as an excuse to do the same thing. Everybody should pay taxes, multinationals and also Greeks.
Theater Of The Absurd: Spain To Provide 14% Of Funds For Third Greek Bailout The ink is not even dry on the much fought extension of the Greek bailout, so hated in Greece because it perpetuates the "austerity" memorandum conditions and already Spain, which as a reminder is suddenly not on very good speaking terms with the Syriza government, is stoking the anti-austerity fire in Athens even more when moments ago Spain's Guindos revealed that not only is a third Greek bailout imminent, and will cost Europe's (and America's via the IMF) taxpayers between €30 and €50 billion, but that Spain, whose banks were completely insolvent as recently as 2 years ago and were only "saved" thanks to the ECB's direct and indirect (repo) bond monetization pathways will provide between 13% and 14% of the funding! "THIRD GREEK RESCUE' TO BE EU30B-EU50B: SPAIN'S DE GUINDOS SPAIN TO PROVIDE 13-14% OF EU30B-EU5O 3RD GREEK RESCUE: GUINDOS What makes the announcement doubly ironic (the broke bailout out the insolvent, or is the bankrupt saving the liquidating?), is that after yesterday's allegation by Tsipras that there was a "conspiracy" between Spain and Portugal to derail the new Greek government, earlier today German Finance Ministry spokesman Martin Jaeger tells reporters in Berlin that "Tsipras’ remarks that Spain and Portugal took negotiations over Greece’s bailout to the brink of failure in a bid to avoid domestic political consequences was “a very unusual foul play.” He was further quoted as saying that “we should not interfere in the affairs of our partner governments" and that "we don’t do that in the euro group. This isn’t how we do business." Jaeger continued that “we have a very high recognition for what both countries have achieved in the past few years on their reform path." He concluded by saing that Greek govt’s behavior doesn’t correspond to the “usual pattern” which forms the basis of Eurogroup negotiations. “A lot of trust has been lost in past weeks.” And completing the comedy is that the "suddenly very concerned" Spain, just hours earlier Spain’s deputy minister for the European Union Inigo Mendez de Vigo said that "Greece should do less talking, do more reforms." But why if Spain will be so kind as to provide the funding needed for the next Greek bailout (one which we predicted in November is inevitable), and the bailout after that, and the one after. In fact, why reform anything if Mr. Draghi "will get to work" in perpetuity, making the old "democratic" model in which elected politicians decide how to fix the country dead as the dodo.
Greece Accuses Spain and Portugal of Conspiracy; 3rd Greece Bailout Discussion Under Way for €30-50 Billion Now that Germany has agreed to an extension, allegedly with no more money on the table, Spain confirms what we all knew would happen, Third Greek Bailout Under Discussion. Euro zone countries are discussing a third bailout for Greece worth 30 billion to 50 billion euros, Spain's economy minister said on Monday, as Athens sought to quell fears it might run out of money before the end of March. Speaking at an event in Pamplona, in northern Spain, Economy Minister Luis de Guindos said the new rescue plan would set more flexible conditions for Greece, which had no alternative other than European support. Prime Minister Alexis Tsipras used a televised address on Friday to deny his country would need another international program. "Some have bet on a third bailout, on the possibility of a third bailout in June. I'm very sorry but once again we will disappoint them," Tsipras said. Greece has acute and immediate funding problems to overcome, despite the four-month extension to its existing bailout it negotiated with the euro zone last month. To win that, Tsipras had to give up on key pledges made during his election campaign. The extension averted an imminent banking meltdown. But Greece still faces a steep decline in revenues and is expected to run out of cash by the end of March, possibly sooner. Options Limited Greece wants €1.9 billion in profits the ECB made on Greek debt. The ECB says reforms first. Greece wants to issue more short-term bonds, having reached a €15 billion cap. The ECB says no. €7.2 billion remains of the €240 billion bailout programs. Dutch Finance Minister Jeroen Dijsselbloem says reforms first. German Finance Minister Wolfgang Schaeuble says no further aid would be paid out until Athens fulfilled all the conditions Conspiracy Against Greece? Tsipras accused Madrid and Lisbon of leading a conservative conspiracy to topple his anti-austerity government because they feared the rise of the left in their own countries. "By European standards, this was very unusual foul play. We don't do that in the Eurogroup, that's not appropriate," a spokesman for Schaeuble told a news conference in Berlin. Countries that had to implement their own reforms in return for outside help, such as Ireland, Portugal and Spain, have joined Germany in arguing Greece should not get preferential treatment. War of Words Acrimony took a huge leap forward as Madrid hit back against Tsipras' conspiracy charges. The Guardian reports Alexis Tsipras Comes Under Fire from Spanish Prime Minister. Greece’s anti-austerity government has denied that it sees Europe through the prism of “hostile and friendly countries” as the Spanish prime minister Mariano Rajoy hit back at accusations that Spain and Portugal had deliberately tried to topple the new leftist-led administration. The war of words erupted when Greek premier Alexis Tsipras attacked the sabotage tactics that had, he said, been employed by Lisbon and Madrid in an effort to scupper the chances of a successful end to the negotiations over the eurozone’s extension of the Greek bailout programme. He accused the Iberian partners of deliberately taking a hard line in the talks because they feared the rise of radical forces in their own countries. “We found opposing us an axis of powers ... led by the governments of Spain and Portugal which, for obvious political reasons, attempted to lead the entire negotiations to the brink,” Tsipras told party members on Saturday. “Their plan was, and is, to wear down, topple or bring our government to unconditional surrender before our work begins to bear fruit and before the Greek example affects other countries… And mainly before the elections in Spain.” Rajoy responded angrily on Sunday, saying that Spain had stood by Greece in solidarity by contributing to the debt-stricken country’s €240bn (£180bn) bailout. “We are not responsible for the frustration generated by the radical Greek left that promised the Greeks something it couldn’t deliver on,” he said. Conspiracy or Political Ignorance? I disregard the conspiracy charges and instead plead political ignorance on behalf of Spain and Portugal. Spanish Prime Minsiter Mariano Rajoy is making a big mistake. His country country could use debt relief. And the citizens of Spain want debt relief. By taking a hard stance in favor of Berlin, Rajoy add fuel to the rise of Podemos. Playing with Fire Tsipras is a close friend and political ally of Pablo Iglesias, the former political science lecturer who founded Spain’s anti-establishment Podemos movement. Podemos is currently in the lead in Spanish polls. Elections are later this year. One of the platforms of Podemos is to abandon the euro. Siding with Germany is the wrong thing to do if Rajoy wants to win reelection. The next set of polls will be very interesting. It's possible the charges by Tsipras unite a rally behind Rajoy. But if not, it's all over for the current prime minister. Mike "Mish" Shedlock http://globaleconomicanalysis.blogspot.com Blog Archive
Well, it looks like the Greeks have voted a politician willing to defend Greeks' interests at all costs. So far, Greece has not paid one euro of its external debts: this fact alone is an exploit. Without forgetting that they even dare to remind their main creditors that they owed them unpaid money from the 2nd world war! Not only that, but their new strategy seems to be about exciting the other EU local population: soon we'll be having people asking for simple debt amnesty. lol Every indebted person should be studying carefully these Greeks' strategies on how to avoid repaying debts.
Of course has Greece repaid already a lot of external debt via the bailouts and funding from the Euro zone members and IMF. Most of the money in the previous bailouts was used to rightfully service existing debt. That precisely is the reason German banking institutions are now minimally exposed to event risk in Greece. As you can see in this thread, stories and hearsay is one thing, facts and truth are another. Germany has as a matter of established fact (please check previous exchanges in this thread where I provided all the facts and references) repaid every last penny legally owed to Greece. That Greece believes each lost Greek soldier soul in WWII is worth 1 billion euros is of course a matter of opinion. But according to the Marshal plan and agreement as well as London debt conference and confirmed payments by Berlin, Greece has received every last penny that it agreed with signature to receive. Sure you might have other left parties in Europe come to power, and if they are bound to break the European model at worst Germany may at some point pull out but the economic chaos that will result from that in other Southern European countries will almost surely lead to a new war and chaos in Europe, catapulting the region back to where it started after 1945.
Do you call EU money used to repay Germany, Greeks putting their hands in their own pockets to pay up the debts incurred ( no matter which Greek took the money) by Greece as a country? In my views, Greece has actually not paid one penny. Yes Germany received the money, but this was paid by others, not Greeks. Regarding Greece claims of Germany's debts : I find it singular for a country that owes money to go and accuse the creditors to be debtors. What I am learning from Greece case is : * how to get others to pay your debts * how to turn creditors into debtors * how to use the other debtors for leverage in negociations with creditors. Just for these skills, Greek politicians deserve a deep study on their techniques and methods - behind it mindset of course.
yes, of course, if you want to learn to become a tax cheat, debt crook, lazy individual, and parasite then a deep study of the Greek mindset at the moment would yield an incredible wealth of schooling. No doubt about it.
Look at the bright side : Greece will give european most productive youngsters a less violent alternative to their pilgrinage in Syria.