Funding as Long as Banks Stay Solvent
The amusing headline of the day comes from ECB Executive Board Member Benoit
Coeure who told Greek newspaper Kathimerini on Wednesday in an interview ECB to Fund Greek Banks as Long as They Stay
Solvent.
The European Central Bank will continue
to provide liquidity to Greece's banks as long as they remain solvent and
have sufficient collateral, ECB Executive Board Member Benoit Coeure told
Greek newspaper Kathimerini on Wednesday in an interview.
He said imposing capital controls was "not a working assumption"
for the ECB, while speculation about Greece leaving the euro was "out of
the question."
Coeure
failed to say that Greek banks are "solvent" (using the word
loosely) only as long as they get funding.
Humorous Lies of the Day
- Capital controls not a working
assumption
- Greece leaving the euro "out of
the question"
Does Coeure really believe he is fooling anyone with such nonsense?
Greek Leaders Under fire for Ordering Councils to Hand Over Cash
Greek mayors are upset (and no one can possibly blame them) for the
government ordering cities to turn all their cash over to the central
government.
The Financial Times reports Greek Leaders Under fire for Ordering
Councils to Hand Over Cash.
Greece’s anti-austerity government faced
the first serious rebellion over its handling of a deepening fiscal crisis
after it caved in to international pressure and ordered local authorities to
hand over their spare cash.
A group of prominent mayors reacted furiously to the move on Tuesday, which
followed repeated demands from Greece’s official creditors, saying it
amounted to an illegal seizure of municipal funds by the Syriza-led central
government. The mayors said the order by decree violated the constitution and
they threatened legal action in Greece’s highest court.
George Kaminis, the non-partisan mayor of Athens, said the order was a blow
to the independence of local government and could “asphyxiate” the normal
running of the capital. “Apart from the fact that this move is clearly
unconstitutional, it takes local authorities by surprise . . . and threatens
their capacity to contribute to social cohesion and urban development,” Mr
Kaminis told a meeting of EU mayors in Vienna on Tuesday.
ECB Squeezes Greece on Collateral
Rounding out our trifecta of Greek news, ECB Squeezes Greece on Collateral.
As Greece scrambles to secure a financing
deal with Europe before running out of cash, the European Central Bank is
tightening the vise on the country’s ailing banks by curtailing access to
desperately needed emergency loans.
The European Central Bank is now demanding that the value of the collateral
that Greek banks post at their own central bank to secure these loans be
reduced by as much as 50 percent, according to people who have been briefed
on these discussions but who were not authorized to discuss them publicly.
With the value of the collateral being reduced so significantly, banks will
be hard pressed to obtain the money they need to survive.
For more than three months, Greece’s largest banks have been forced to borrow
short-term, higher-interest money from their central bank — a process called
emergency liquidity assistance — because the E.C.B. deemed it too risky to
extend credit to the banks itself.
The banks, in turn, have to provide adequate collateral to obtain these
loans, which now stand at 74 billion euros, $79.7 billion, or more than half
the amount of Greek domestic deposits.
Controversially, Greek banks have even begun to issue bonds to themselves
and, after securing a government guarantee, have used the securities to
secure short-term financing — a practice that was excoriated by Yanis
Varoufakis before he became the Greek finance minister.
On April 8, for example, the National Bank of Greece self-issued €4.1 billion
of six-month bonds that carried state backing. But with Greece on the verge
of default — Mr. Varoufakis has frequently said his country is bankrupt —
those guarantees are no longer worth much.
Under E.C.B. rules, the central bank of Greece assumes full responsibility
for the credit risk when it issues these emergency loans.
But the E.C.B. carefully monitors them, setting limits and scrutinizing the
collateral.
Capital Controls Likely Soon
What's that collateral that the ECB already has on deposit from the Bank of
Greece really worth?
Regardless of the answer, we now have an official denial on capital controls.
If you have money deposited in Greek banks, get it out now. Capital controls
seem all but certain, perhaps within days.
Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot
