The Strategist

ECB is Not Inclined to Help Greek Banks

04/21/2015 - 15:32

The European Commission does not work on the possibility of a default by Greece, and on its way out of the Eurozone, told spokesman of the European Commission to reporters.
- We will not comment on any assumptions about Greece’s default or exit of the Eurozone. We are not working on it - he said.

On the eve of the Euro group’s meeting, which will take place in Riga on April 24, publication that Greece allegedly refused to pay the debts, the government has no money left and the country is going to default, are constantly emerging in media.

On Friday, April 17, Greek Finance Minister Yanis Varoufakis and Mario Draghi, head of the European Central Bank (ECB), discussed in detail the progress of the negotiations before April 24 during the hour-long meeting in Washington.

Later on Friday, Greek Ministry of Finance’s press service has denied reports of news agencies about the issue with the available funds in the state treasury, calling them unfounded.

The International Monetary Fund is still looking for reference points in cooperation with Greece, offering a series of economic reforms as a condition for financial assistance. However, Greek Finance Minister Alexis Tsipras recently rejected the list of reforms, as both he and the government consider them detrimental to the country. Tsipras is not categorical and expects to reach a compromise on those issues.

The IMF also refused to grant Greece a delay in the payment of debt in May, citing a lack of productive results in such cases. Greece, meanwhile, in the framework of the restructuring of the economy, transferred all the government agencies’ money in a special account in the Bank of Greece for them to be distributed and expended more rationally.

At Eurogroup’s meeting, Greece hopes to agree to continue funding for aid programs until new agreement with creditors will be reached.

Meanwhile, Euro declines against Dollar on the news about the possible Emergency Liquidity Assistance (ELA) to Greek banks. Euro/dollar pair dropped to 1.0704 from 1.0739 dollars per euro. Dollar/yen pair rose to 119.38 yen from 119.19 yen per dollar in the previous closing.

The European Central Bank (ECB) is considering measures to limit Greek banks’ access to ELA, reported Bloomberg, citing unnamed sources. Upon receipt of liquidity through the ELA, banks bear much higher costs - they are paid at the rate of 1.55% instead of 0.05% with conventional financing.

At the same time last week, the ECB increased the ceiling value of loans, provided by Greek banks under the ELA, for 800 million euros - up to 74 billion euros.

The information has intensified fears that Greece is moving to cash crisis, which will lead to default, kicking the country out of the currency union.

- The negative news on Greece, in the absence of something more meaningful, forcing investors to lower Euro’s positions, - told currency strategist at UBS Geoffrey Yu to Reuters.