“Without a clear prospect of an immediate bailout deal that could prevent a full-scale sovereign default…it is very hard for the ECB to authorise continuing emergency support for Greek banks, let alone to allow an increase in such support”, said Berenberg Bank economist Holger Schmieding. “I don’t think they are going to throw us out” of the eurozone, he said. Banks in Greece will remain closed until the ECB raises the level of capital it is willing to commit for emergency funding.
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The government in Athens broke off negotiations on a rescue plan proposed by creditors just days before Greece was due to repay Euro 1.5 B to the International Monetary Fund on Tuesday.
‘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, ‘ it said.
Merkel said the conditions for a discussion on a programme involving the European Union’s bailout fund were not yet in place and urged Greece to put proposals on the table this week.
All this, plus keeping a watch out for more announcements from the European Central Bank, and on the markets – on which the result of the referendum had surprisingly little effect.
The White House intervened again last night, as President Barack Obama spoke by phone with Francois Hollande and Treasury Secretary Jack Lew spoke with Tsipras and new finance chief Euclid Tsakalotos, urging a constructive outcome. Basically, if the solvency of the Greek state is in question, then the bonds which the Greek banks give to the ECB as security have a higher risk attached. Sakellaridis said the people’s message can not be ignored that viable deal must be fair to the poor and deal with Greece’s debt issue while pumping liquidity into the ailing banks.
Outgoing finance minister Yanis Varoufakis said he hoped to have banks open as soon as Tuesday, but that always looked hugely ambitious.
The earlier decision by the European Central Bank to freeze its ELA ceiling – which came one day after Greek PM Alexis Tsipras announced the referendum -intensified the country’s cash-flow crisis. A total shut-off of the facility would likely cause the country’s banking system to collapse. Other officials, however, cautioned that there was a lot of reluctance to commit to debt relief as long as trust between Greece and the rest of the eurozone hasn’t been restored.
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Greece has asked for a delay on the payment from the European Central Bank, but such delays are rarely granted, the analysts said.
