jeudi 5 février 2015
Greece's endgame is finally coming into view
Posted on 04:36 by nice news
The European Central Bank (ECB) decided Wednesday to stop Greek banks from being able to use the country's government debt as collateral for loans, in a move that many see as a shot across the bow for Europe's politicians. What it has undoubtedly done is brought forward the date at which a final decision over Greece's future in the eurozone must be taken.
Here's what we know has been happening. In December, Greek banks saw a €4 billion drop in deposits as their clients pulled money from their bank accounts. Estimates suggest that the figure for January could be as high as €11 billion.
The outflows have sharply increased the banks' reliance on loans provided by the ECB with over €70 billion being received in January, according to Moody's ratings agency.
Moody'sGreek bank funding mix.
These loans are guaranteed against government bonds or government-guaranteed assets that the banks hold. And they've become a key source of funding (see thick black line on the chart above). As the loans come directly from the ECB rather than Greece's central bank meaning that the risk of them not being paid back is shared with the rest of the countries in the Eurosystem.
However, with Greece's government debt and the debt of its banks currently rated "junk," it technically falls below the ECB's minimum standards to access this facility. In order to allow Greek banks to continue to use this lifeline while the country undertook deep budget cuts demanded by its European partners, the central bank issued a waiver effectively suspending its minimum requirements for collateral.
The condition was that Greece was obliged to "comply with the conditionality of the financial support and/or macroeconomic programme" agreed with the European Union and
Here's what we know has been happening. In December, Greek banks saw a €4 billion drop in deposits as their clients pulled money from their bank accounts. Estimates suggest that the figure for January could be as high as €11 billion.
The outflows have sharply increased the banks' reliance on loans provided by the ECB with over €70 billion being received in January, according to Moody's ratings agency.
Moody'sGreek bank funding mix.
These loans are guaranteed against government bonds or government-guaranteed assets that the banks hold. And they've become a key source of funding (see thick black line on the chart above). As the loans come directly from the ECB rather than Greece's central bank meaning that the risk of them not being paid back is shared with the rest of the countries in the Eurosystem.
However, with Greece's government debt and the debt of its banks currently rated "junk," it technically falls below the ECB's minimum standards to access this facility. In order to allow Greek banks to continue to use this lifeline while the country undertook deep budget cuts demanded by its European partners, the central bank issued a waiver effectively suspending its minimum requirements for collateral.
The condition was that Greece was obliged to "comply with the conditionality of the financial support and/or macroeconomic programme" agreed with the European Union and
Greece's endgame is finally coming into view
Categories: Greeces endgame is finally coming into view
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