ELA to Greek banks maintained at its current level
- ECB takes note of decision on Greek referendum and the non-prolongation of the EU adjustment programme
- ECB will work closely with Bank of Greece to maintain financial stability
- Emergency liquidity assistance maintained at Friday’s (26 June 2015) level
- Governing Council stands ready to review decision
- Governing Council closely monitoring situation and potential implications for monetary policy stance
The Governing Council of the European Central Bank today welcomed the commitment by ministers from euro area Member States to take all necessary measures to further improve the resilience of euro area economies and to stand ready to take decisive steps to strengthen Economic and Monetary Union.
Following the decision by the Greek authorities to hold a referendum and the non-prolongation of the EU adjustment programme for Greece, the Governing Council declared it will work closely with the Bank of Greece to maintain financial stability.
Given the current circumstances, the Governing Council decided to maintain the ceiling to the provision of emergency liquidity assistance (ELA) to Greek banks at the level decided on Friday (26 June 2015).
The Governing Council stands ready to reconsider its decision.
Mario Draghi, ECB President, said: “We continue to work closely with the Bank of Greece and we strongly endorse the commitment of Member States in pledging to take action to address the fragilities of euro area economies.”
Yannis Stournaras, Governor of the Bank of Greece, said: “The Bank of Greece, as a member of the Eurosystem, will take all measures necessary to ensure financial stability for Greek citizens in these difficult circumstances.”
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.
https://www.ecb.europa.eu/press/pr/date/2015/html/pr150628.e...
- ECB SAID TO SEE EXISTING GREEK ELA INADEQUATE FOR BANKS' NEEDS
- ECB SAID TO VIEW BANK HOLIDAY FOR GREECE AS NECESSARY
What Would Greek Capital Controls Look Like?
http://www.bloomberg.com/news/articles/2015-06-01/how-greek-...
http://twitter.com/suttonnick/status/615112479828348928
edit: scratch that. http://twitter.com/yanisvaroufakis/status/615127339102531584
So we have a democratic nation potentially forced to leave Euro, after democratically deciding it no longer wants the austerity imposed, being forced to leave by non democratic ECB while the democracies that appoint the ECB think it is going too far.
What's that quote from Hunt For Red October - "with all these planes in the sky, it's only a matter of time [before we start a war]"
The lesson for democracy - force governments who are going to adjust fiscal measures past a certain point to get referendum approval
- and look how well that works in California...
So, the only similarity seems to be the ECB threatening to pull ELA. There has alreay been debate that the ECB is already overstepping their mandate, but I can't find an English source for that.
0: http://www.irishtimes.com/business/economy/o-reilly-hits-out...
But wow, the Grexit is painful even when put into the train wreck category. It's going on and on, and the invective, hate, and hard feelings linger and fester. The amount of misery this has produced seems vastly out of proportion to the incident itself. I wonder if severe, immediate action taken at the beginning of the crisis wouldn't have resulted in something much less painful than this. 25% shrinkage in the economy and then massive bank closings? Good grief. It's becoming reminiscent of post WWI Germany.
That's a very easy target. Probably easier to ignore the high cost of hiring, bureacracy, corruption,...
However if the ECB follows through on this, the end result may be the same and it's only a matter of time before the entire ELA bailout is unwound like in Cyprus.
Put another way, there will be no further increase in ELA and the Greek banks have used the previous allotment, so their coffers are running dry. It will be a very tough week in Athens.
No decision has been made yet, so this is just misinformation. Expect more of this over the next days.
- Can I attribute it? "Minister speaks out"?
- No, no, no.
- Then, where did I get the story? I can't say, "Officially announced."
- "Government spokesman"?
- How about, "Sources close to Minister"?
- Hold on, I don't want everybody to know I told you! Couldn't you do,
"Speculation is growing in Westminster"?
- A bit weak.
- "Unofficial spokesman"?
- Used that twice this week already!
- The Cabinet's leaking like a sieve, isn't it?See http://www.bbc.co.uk/guidelines/editorialguidelines/edguide/... (I would make a clearer distinction between unnamed ("we know who (s)he is, but cannot tell you") and anonymous ("we don't know who (s)he is, so we cannot tell you") sources)
If you've been following the greece coverage, there's been lots of documents leaking from various sources on both sides of the negotiations. Last week when the initial greek proposal and the IMF "red-lined" version were in discussion, both were leaked on the day...
> in many countries where politicians and civil servants
> want something out without having it tied to them
> "unnamed sources"
To me all these conflicting reports smell like panic; decision makers just don't know what to do now, and the BBC does not know what to report. Sounds like 2008 all over again.
If Greece exits the Euro, I wonder if that will embolden other countries to do the same.
My understanding of this was that the greek banks are (without ECB help) insolvent and have been for some time. They are unable to raise capital on the open market, as the open market has decided that they are not confident enough in those banks to lend them money.
As a result the Emergency Liquidity Assitance from the ECB has been used, but that was only provided on the basis that the greek banks were solvent but had temporary liquidity problems.
As far as I understand it, as soon as Greece is no longer in a bailout Program (Tuesday by current reckoning) those banks will not be solvent any more (they hold large amounts of Greek government debt), and ELA can't (without some form of change of rules for the ECB) continue.
The ECB is just following it's rules and it's been known that this approach is where they would likely need to go for some time, absent a political intervention from the Europgroup or the IMF.
while the democracies that appoint the ECB
think it is going too far.
I'm sure France and Germany can put up the money to cover profligate Greek public spending if they want to. But if they've decided Greece needs to be cut off, I'm sure they'd much rather have an anonymous non-german non-french bureaucrat deliver the bad news than do it themselves.
"I'd love to give you a raise, but corporate is making big cuts everywhere... I'll do what I can for you, but I can't make promises."
To address your other point: I think the horrible situation that will arise in Greece in the following weeks/months will make other countries certainly think twice about getting out of the Euro.
Most countries have growing anti-EU nationalist movements, and ass-raping Greece isn't going to make them less popular.
But the IMF have no interest in a strong Europe, because before 2008 European policy was heading in an aggressively anti-corporate direction.
A bleeding and uncertain Europe with a population terrified of poverty and old age is much more to their liking.
Remember total QE lending to banks is the far side of $2.5tn, and most of it is secured against assets that are clearly worthless.
The IMF itself is happy to agitate against austerity when it suits its political aims, and to hand out money that's unlikely to be repaid: see also, Ukraine.
So this is a purely political pantomime. Greek solvency is simply a pretext for political power plays - another attempt to enforce the usual neo-liberal "reform" agenda which aims to destroy the last century's traditions of socially responsible government spending.
You have a limited understanding of the situation. And you don't need to be that insulting toward Greece.
I know here it is apparently ok to make fun of people in a dare situation and talk about them like they are fool and idiots yet in that case the responsibility is shared across many parties and the EU itself has a huge responsibility in that fiasco.
What the point saying what you just said? does it make you feel smarter or like you belong to a superior class? Would you want others to talk about you or your country that way when things turn south? no, so have a little respect. We are talking about people here who are mostly victims. Or do you think people here will laught at your speech because that's what they do in real life when you say horrible things?
Greece is not a person, Greece is a nation state. It has implemented severe fiscal cutbacks after being forced to by its creditors. Cutbacks which have ruined the country's economy, massively increased poverty, and made it more difficult to pay back its debts.
Now its people have voted in a government that wishes to make different reforms. Ones that also keep the book balanced, but do not hurt the weakest in society as much or destroy economic productivity.
This entire mess started with Greece not having its finances in order, and essentially lying about this for years to the rest of the Eurogroup. After it became clear how dire the situation was, the Eurogroup stepped in and helped Greece by giving them money (LOTS of money). Had the Eurogroup not done this, Greece would have defaulted on its debts years ago, and the country would have gone bankrupt.
Now if someone offers to help you by giving you money, provided you meet certain conditions, you can either accept and comply with the conditions, or you can refuse. The fact is that Greece gladly accepted the billions upon billions of euros, and the conditions that money came with.
I am fully aware that the measures demanded by Greece's creditors are tough. Some would say it is doubtful whether they are actually effective at all. And the demanded measures are certainly driven partly by political motives. All this is true.
But it is mind-boggling to me that after the Eurogroup provided several hundred billion euro's in aid to Greece, anyone would turn around and claim the current crisis is in no way the Greeks' own fault.
It frigthens me to think such a line of reasonning could pop up on security or war matters.
It is about pensioners and state employees.
There is, however, deep structural or cultural issues that causes Greece to have such a massive tax gap: http://www.imf.org/external/pubs/ft/scr/2013/cr13155.pdf.
People may well be working hard, but a significant enough number of people are not contributing enough to the state, yet are demanding (by voting) ever more from it, and leaders seemed to have always been relaxed about it (I can't find the source again, but I remember reading that there is even a significant tax cap in the civil service itself).
Edit: yes, this makes commerce difficult. A finance correspondent I follow on twitter says to expect petrol rationing.
No, instead of cutting that, they should squeeze even more money on taxes. Even EC is criticizing Greek government for collecting too much money on income tax and VAT.
Just for illustration VAT tax on heating oil is 60%, most houses I know just do not order it. Last winter had a few weeks bellow freezing.
This is a problem caused by a fixed exchange rate (single currency) at the wrong rate for Greece and co. Without a mechanism to adjust prices for differences in cost and productivity Euros looked really cheap to borrow from germane but olive oil looked really expensive to buy in. (Germany presses and bottles and exports more olive oil from Greek olives than Greece does)
The only way to solve the problem long term is to move the money from richer (urban) parts of Europe to poorer rural parts. Stupid ideas like the CAP don't really help. Redistributive taxation across Europe (ie Federal taxes and Federal government) are the next step. But that is waaaaay out of the ECBs remit.
Syriza is basically saying - fine break my legs, but only if you can promise a European wide discussion on how we got into this mess and what a federal Europe will look like
[0] Actually, here is some data for the EU (German): https://upload.wikimedia.org/wikipedia/commons/1/1b/Nettozah...
[1] And here is more: https://en.wikipedia.org/wiki/Budget_of_the_European_Union#N...
The Greeks are not lazy. Suffering is not lazy.
So I guess the question is who should be paying for Greece's poor financial planning because Greece do not appear to think it should be them.
http://www.economist.com/blogs/charlemagne/2010/02/greeces_g...
We should bail them out, but they should also retire at 67, the (existing) final salary pensions should be cut back and they should start paying their taxes.
EU data: Greece 64.4 years, Germany: 65.1.
OECD data: Greece 61.9 years vs. Germany 62.1
So it is actually the same.
I don't agree with much of the fiscal and financial structures, strategies and ethos of the world at the moment however this is the path we are on and pivoting out of it will cause huge disruption and suffering. Austerity and measures forced by her creditors have so far failed Greece. It doesn't look bright in the future so they are correct to question the strategy however if they don't get their own house in order it will all be in vain. I think they realise this.
The ECB let them keep their current lifeline for a few more days, but it looks like it's still not sure yet whether the banks will open. (which means they probably wont - see above).
http://www.bloomberg.com/news/articles/2015-06-28/running-ou...
edit: updated with the fact that the current emergency aid from the ECB might not be enough to keep the banks open.
He can just say "See you all decided not me."
We have all of these safeguards in place to ensure our leaders neither go off the rails completely, nor simply follow the popular opinion du jour with the predictable disastrous consequences.
If we would do that in the rest of Europe, aid to Greece would have stopped a long time ago.
However in reality it is no decision because without EU membership there is no money anyway so austerity is happening to Greece one way or another.
A large portion of the Greek people recognizes this for what it is: an extremely cowardly opt-out for Tsipras for taking responsibility
- The EU was aware that Greece's finances were not as portrayed. This was an open secret. However, Germany and France were breaking max deficit rules at the time, and they would look like huge hypocrites if they complained about Greece's numbers. So they didn't. Rose colored glasses and political expedience played a huge role here.
- A country can't go bankrupt. They can simply refuse to pay their debts, and because they're a sovereign nation they're in their right to do so.
- When banks lend money to a country it isn't charity. They get interest payments and in exchange risk not getting paid back at all if things go sour. It was astoundingly unwise for banks to lend money to Greece at practically zero interest (as they did during the boom period). Had the banks been responsible, or had the oversight institutions not been asleep at the wheel, this crisis would not have happened.
- The banks who lent to Greece got 90% of the bailout package. Not the people of Greece. So it's not true Greece received "several hundred billion in aid".
- "Some would say it is doubtful whether they are actually effective at all.". It's certain beyond a shadow of a doubt that the austerity policies enforced by the troika were actively harmful. It's delusional to pretend otherwise, given that the GDP shrank so much the debt burden INCREASED as a result.
> When banks lend money to a country this isn't charity.
> They get interest payments and in exchange risk not
> getting paid back at all if things go sour
> The banks who lent to Greece got 90% of the bailout
> package. Not the people of Greece. So it's not true
> Greece received "several hundred billion in aid"
If Greece was a person, they'd have gone through bankruptcy and been discharged by now, and the banks who'd imprudently lent to them would have taken a haircut.
Nobody is denying that fact. But it seems you are forgetting that Greece made a lot of tough decisions for its people when asked by its creditors to "reform" yet it is just not sustainable, it's like asking the greeks to commit suicide.
> and essentially lying about this for years to the rest of the Eurogroup
And who do you think helped cook the books? Goldman Sachs
If a country gets out of the Euro, it will set a precedent and other countries might do that in the future. The euro is an insane experiment anyway. It cannot work. Too many structural and economical differences between euro countries. UK was smart enough not to get into that mess. It seems that the only country really profiting from this is Germany. While they are obviously not responsible for that mess , there is a lot of resentment against Germany in southern European countries and France. For these countries the Euro is just the Deutsche Mark 2.0.
Did GS get any "punishment" for this? And does this take away all guilt from Greece?
> The euro is an insane experiment anyway. It cannot work. Too many structural and economical differences between euro countries.
As someone without an economics background, I'm interested to know what these insurmountable differences are?
I guess the punishment is that former GS executive Mario Draghi now runs the ECB.
No, I am not forgetting this. The Greek people are certainly suffering from the reforms. But this suffering would have happened anyway, with or without the Euro.
Greece has made such a mess of its finances, in a number of ways, that even if it had never joined the Euro, it would have gone bankrupt at some point anyway.
> The euro is an insane experiment anyway. It cannot work. Too many structural and economical differences between euro countries.
Perhaps, but I hope you're wrong :).
> It seems that the only country really profiting from this is Germany.
There is free trade between all EU countries, not just the Euro countries. It is this free trade that Germany is profiting from, not the Euro currency.
Once again a blatant falsehood.
When economically strong and weaker countries share a currency the stronger countries benefit, because it pushes the value of their currency down. This means they can export effectively, especially to the countries who suddenly have a stronger currency with more purchasing power than they otherwise would have had.
To what extent is any one person responsible for the actions of their government?
Does this mean Greece (let's stick to them) was predetermined to get hit the moment they joined the Eurozone?
If yes, could you please elaborate how that wasn't visible to them? Or, if it was, what motivated them to take this road anyway?
I can only speculate about what motivated Greece to join the Eurozone.
My guess would be that Simitis' believed his reforms (Eksynchronismos) fundamentally transformed the Greek economy. Politicians take bold action to ensure their legacy, and it must be tempting to go down in history as the man who fixed his country's economy and led it down a road of mutual prosperity.
Perhaps he understood the economic risks, perhaps he didn't. He was certainly warned by economists. Perhaps he simply didn't believe the rest of the Eurozone could be this obstinate and cruel. It's hard to say for sure. We certainly can't take the politicians' words at face value.