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Monday, July 6, 2015

Greece news live: Banks to remain shut for another two days as Greeks told 'reform or it's over'

European Central Bank takes unprecedented move to squeeze the Greek banking system as Dutch tell Athens to reform or go bust







Demonstrators hold plates reading 'Austerity debt' and wear masksAlexis Tsipras, Angela Merkel and Francois Hollande during a demonstration in Paris against austerity measures in Greece
Photo: AFP



We have also compiled this handy article on everything you need to know about the Greek crisis.


Here is the Telegraph's front page splash: Germany refuses to let Greece off the hook.


Dutch PM to Greece: accept reforms or "it's over"

The Dutch have come out fighting ahead of tomorrow's emergency EU leaders' summit. A member of the creditor bloc of nations, Dutch PM Mark Rutte has warned Greece in pretty stark language that their referendum backing will not make the slightest bit of difference to creditors' demands.
Mr Rutte said that if the Greeks went to Brussels on Tuesday demanding changes because they felt supported by the "No" vote and refused reforms, "then I think it is over".
He told his parliament today: "If things stay the way they are, then we're at an impasse. There is no other choice, they must be ready to accept deep reforms."



Haircuts and why they matter

Today's ECB decision to keep emergency liquidity frozen but tighten lending rules for Greek banks is a classic Rumsfeldian "known unknown" when it comes to assessing Greek banking liquidity.
On the one hand, as Bruno Waterfield of The Times notes, the decision to hike the haircut on collateral is in itself a tightening of the noose.

But, the ECB has yet to reveal what haircut they've actually applied. Barclays estimates the current discount is around 50pc. Plenty of people cleverer than me are noting that the central bank, which has been loathe to pull the trigger on Greece, is likely to have shifted its lending rules knowing full well that such action alone will not precipitate full blown insolvency.

There's also the additional tool in the ECB's armour which is actually increasing the pool of assets that can be considered as eligible collateral in return for ELA. No hints as of yet that the ECB has taken such action. This would act to off-set the haircut hike. Confused? Yes me too.
But that's probably the point. The ECB does not want to be seen as the villain. In taking action at the margins on Greece's banks, it can simultaneously apply pressure on the government and its creditor partners to secure a deal, while also washing its hands of the whole thing should it blow up in their face.


Who is the new Greek finance minister? Euclid Tsakalotos In 60 seconds


Tsipras: lift capital controls immediately

Alexis Tsipras has told told Mario Draghi that there is an immediate need to lift capital controls in Greece, a government official has told Reuters.
Mr Tsipras also discussed the liquidity situation of Greek banks with the ECB chief over the telephone, said the official, speaking on condition of anonymity.
Greek banks have been closed and the level of withdrawals from cash machines has been limited for more than a week, after the government imposed capital controls in an effort to prevent a collapse of the banking system.
Outgoing Greek Finance Minister Yanis Varoufakis, left, speaks as the new Finance Minister Euclid Tsakalotos listens to him during a hand over ceremony in Athens (AP)


A new Franco-German rift?

Henry Samuel in Paris has been keeping an eye on that very short press statement from Chancellor Merkel and President Hollande. The two leaders weren't exactly singing from the same hymn sheet, with Ms Merkel saying that Greece had yet to show enough commitment to start new talks about a fresh bail-out.
Fran├žois Hollande said: "The door is open for discussion. There is urgency for Greece, there is urgency for Europe. We respect the Greek vote because Europe is democracy."
Ms Merkel took a different line: "We say very clearly that the door for talks remains open and the meeting of euro zone leaders tomorrow should be understood in this sense. But at the same time we say that the requirements for starting negotiations about a concrete ESM programme are not present at the moment."
"We respect the decision of this referendum...but we must see what is the position of the 18 members of the eurozone.
"If we want to progress through negotiations we're going to have to have basic conditions. These conditions are not yet met. But that is why the prime minsiter must say tomorrow how he wants to proceed and what concrete proposals he is going to make for a mid-term plan that will allow Greece to know growth and prosperity. Time is of the essence."
"We are displaying great solidarity with Greece. We have already made very generous proposals.
We respect the decision of the Greek people but we must also listen to the position of the 18 members of the eurozone. This is about democracy. We have a common sovereignty that we share, we have a common currency that want to keep, which is why everyone must assume his responsibilities so we can show solidarity."


Greek parties issue join statement

Just in case you missed it, earlier today saw all the main parliamentary parties in Greece issue a joint statement of their unity following yesterday's landslide referendum victory.
It reads in full:
The recent verdict of the Greek people is not a mandate for a rift but for the continuation and bolstering of the effort to achieve a socially just and economically sustainable agreement.
It is in this direction that the government assumes the responsibility for continuing negotiations. And every party leader will contribute within the context of their institutional and political role.
The joint aim is to reach a solution that will secure:
- adequate covering for the country's funding requirements
- credible reforms based on the fair distribution of burdens and the promotion of growth with the least possible recessionary impact
- a strong, front-loaded growth program aimed at dealing with joblessness and boosting entrepreneurship
- a commitment to the start of an essential discussion as regards tackling the problem of the sustainability of greek public debt
The immediate priority is to restore liquidity to the credit system, in coordination with the ECB.



Mr Varoufakis has been replaced in the big news of the day. But the leader of the New Democracy opposition, who resigned yesterday, has also been replaced by Evangelos Meimarakis who will act as interim chief of the centre-right conservative party.


Two hawks on the ECB board

Claire Jones at the FT reports that two members of the ECB's governing council called for tougher measures on Greece. The toughest would be a full on withdrawal of ELA, which would push the banking system to collapse.
Any guesses on the hawks?


What does this mean?

The ECB has made it harder for banks for to access the emergency funding they need to stay alive. Those funds have been frozen for a while, but by raising the "haircut" on the assets the banks use, will tighten their cash squeeze..
The chart below from Barclays explains how increasing the percentage haircut reduces the collateral buffer of the banks. The ECB have not disclosed what exactly the haircut has been hiked to but every incremental raise results in futher tightening on financial system, although it's almost impossible to know the full effects.
More significant is the political signalling from the ECB to the Greek government. In taking such a move, Mario Draghi and his board are acting in concert with European leaders who have all made it very clear that the Greeks will be given no leeway on economic reforms or debt relief if they want to stay in the euro.


ECB keeps ELA frozen but increases haircut

Statement from the ECB has just dropped. The ECB has taken the maximum degree of action it could have done after yesterday's No vote. The ECB have declined to say what the collateral requirement has been raised too but this will make the liquidity position of the banks much tighter.
The Governing Council of the European Central Bank decided today to maintain the provision of emergency liquidity assistance (ELA) to Greek banks at the level decided on 26 June 2015 after discussing a proposal from the Bank of Greece.
ELA can only be provided against sufficient collateral.
The financial situation of the Hellenic Republic has an impact on Greek banks since the collateral they use in ELA relies to a significant extent on government-linked assets.
In this context, the Governing Council decided today to adjust the haircuts on collateral accepted by the Bank of Greece for ELA.
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.


Merkel: now is not the time for new bail-out talks

The German Chancellor is done with dinner and given a very short statement.
She says she awaits new reform plans from Mr Tsipras tomorrow, but says now is not the time to talk of new deals as government's are still reacting to last night's vote.


Tsipras gets backing from...Fidel Castro

He needs all the friends he can get right now, so this missive from the Cuban leader Fidel Castro will have bought a smile to Mr Tsipras's face we imagine.
Castro wrote to his counterpart today congratulating him on last night's referendum vote, saying Cuba has learnt the 'art & science of politics' from Greece. Greek bravery "has won admiration across Latin America" accpording to Twitter's Spanis/Greek linguists.

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