If Greece is playing the Russia card, the EU is playing the bank-run card. One of the things that brought Greece to the table a month or so back was the increasing outflow of deposits from Greek banks. Under the circumstances, it wasn’t very tactful of Jeroen Dijsselbloem (the Dutch minister of finance and, critically, the president of the Eurogroup of euro zone finance ministers) to say this yesterday (EUObserver reports):
Greece could be forced to resort to Cypriot-style capital controls in a bid to prevent depositors taking their money out of the country, the chairman of the Eurogroup has warned. Speaking on Tuesday (17 March), Jeroen Dijsselbloem told Dutch broadcaster RTL Nieuws that “the pressure on Greece is growing,” adding that “the amount of cash, money – at least this is what I’m told – is declining by the day”…..
The Greek government reacted angrily, with spokesman Gabriel Sakellaridis stating that “it would be useful for everyone for Mr Dijsselbloem to respect his institutional role in the Eurozone.”
“We don’t easily understand the reasons which motivate him to make statements which do not fit with the role with which he has been trusted. Everything else is fantasy. We believe it is unnecessary to remind him that Greece cannot be blackmailed.”
But Dijsselbloem’s remarks will do little to halt the flow of bank deposits out of Greek lenders.
And that’s probably the idea. This sort of talk is not what Greek bank depositors, nervous of finding their money trapped in Syriza’s socialist paradise (and maybe converted into drachmas) want to hear. A renewed bank run might concentrate minds most usefully in Athens.
Back to EUObserver:
Savers removed €12 billion from Greek bank accounts in January – figures which were likely replicated in February – dropping bank deposits to their lowest level since 2005, on the back of fears that Alexis Tsipras’ Syriza government will be unable to re-negotiate the terms of Greece’s bailout. Greek banks are now increasingly dependent on emergency funding from the European Central Bank after the Frankfurt-based bank withdrew a waiver that allowed Greek banks to access its cheap loans using government bonds and government-guaranteed assets as collateral. In total, the ECB is currently providing around €80 billion in support for Greek banks.
And then (Bloomberg reports) there’s this:
The European Central Bank raised the maximum amount of emergency liquidity available to Greek lenders by 400 million euros ($435 million), less than the Greek central bank requested, people familiar with the decision said. The increase was approved by the ECB’s Governing Council on Wednesday, the people said, asking not to be identified as the council meeting was private. Greece requested about 900 million euros, one of the people said.
Greek banks were cut off from regular ECB funding operations in February, forcing them onto Emergency Liquidity Assistance from the Greek central bank. The Frankfurt-based ECB has the power to curb ELA and is reviewing it weekly amid concern that banks will use it to finance the Greek government and so violate European Union law.
The increase should take ELA to about 70 billion euros. Policy makers raised the limit by 600 million euros on March 12, after a boost by 500 million euros to 68.8 billion euros on March 5. Greek banks haven’t used all their ELA and have a total of about 3 billion euros in liquidity available, one of the people said.
Meanwhile, Barack Obama, a man guaranteed to be on the wrong side of almost every issue, has been in touch with Angela Merkel:
[ Obama and Merkel] also reviewed recent developments in Greece and efforts to reach a pragmatic agreement that builds upon recent reforms to return the country to growth within the euro area.
“Pragmatic” as in surrender to Tsipras, presumably.
And as usual, the clock is ticking.
Bloomberg:
The newly elected government could run out of money as soon as this month as it tries to agree the terms under which euro-area governments will disburse aid payments. The region’s finance ministers are urging Greece to draw up a plan to fix the economy in exchange for emergency loans, while Greek Prime Minister Alexis Tsipras is challenging the nation’s creditors to blink first.
The country faces more than 2 billion euros in debt payments on Friday, and government salaries and pensions must be paid at the end of March. As bailout disbursements have ceased, the Greek state covers its cash deficit by rolling over treasury bills, forcing the country’s banks to make a choice between participating in liquidity-draining auctions or letting their sovereign default.
In a must-read over at Ekatherimini, Alexis Papachelas wonders what the Hellas is going on. He sees no few than four possibilities. The first is that Tsipras is setting the stage for a compromise, but then:
The government knows that in around a fortnight the state will run out of money and commitments will not be met. It is afraid of the political and social consequences of such a development and is intentionally creating an atmosphere of hostility to incriminate Berlin if banks collapse and the state stops paying salaries and pensions.
The government has decided that a compromise cannot be reached with the country’s creditors and is playing a double game: It is negotiating and bringing technical teams to Athens to show that it’s conforming, but is actually preparing for a velvet exit from the eurozone via a dual currency or payment of obligations with special bonds.
The government is in the grips of the amateurism and fanaticism that is occasionally evident in the ruling SYRIZA party, and is pushing the country to the edge without even Tsipras being aware of it. The tension with Germany, meanwhile, is building into a self-perpetuating nightmare.
Papachelas also ponders what the creditors are playing at and concludes “we are in a chaotic balance of terror”.
ECB president Draghi recently took a different view, referring to the euro zone as an “island of stability”.