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THERE ARE THREE absolutely crucial meetings for Greece’s financial future going on today.
The outcome of pretty much all of them will have to be positive, or at least neutral, for markets to keep taking a positive view of Greece’s new plans for restructuring its huge debts.
The first meeting is at the European Central Bank today. A Reuters exclusive yesterday revealed that two Greek banks have tapped the emergency liquidity assistance (ELA) mechanism for €2 billion.
That comes from the ECB and the governing council have to assess and approve or deny the assistance every two weeks. They’re doing that this morning.
Here’s Lloyds’ research team on the subject, emphasis ours:
The ECB holds the key to Greece’s survival until the completion of the negotiations through the liquidity provided to Greek banks. Today’s non-rate setting meeting is expected to extend the ELA for another 2 weeks but the post-February situation looks still unclear. As already discussed next week’s EU summit is key and there is a high probability of an extraordinary Eurogroup early next week (the Eurogroup is a summit of all of the eurozone’s finance ministers).”
Then there’s finance minister Yanis Varoufakis’ meeting with ECB chief Mario Draghi.
Draghi has previously said that the ECB’s liquidity assistance is subject to Greece sticking to its bailout agreement, which Varoufakis wants to scrap.
The debt gap
There’s a big gap between the official end of the bailout – if it isn’t extended – at the end of February, and a full deal on debt, which likely wouldn’t come for months – if it comes at all – so it’s crucial for the new Greek government that the ECB still acts as a backstop for the country’s banks, Varoufakis will likely need Draghi’s tentative agreement for that.
The headline meeting is between Greek prime minister Alexis Tsipras and EU Commission president Jean Claude Juncker.
Tsipras is continuing his tour of Europe in Brussels, and Juncker is the most important person he’s met yet in terms of his plans for Greece’s debt.
It might be a little bit awkward: Just a few months ago Juncker said if Tsipras was elected it would be a “major risk” for Greece, that he had “not adequately understood what the problems are in Greece”.
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Let the compromises begin…
The New Economics Foundation have made an interesting proposal on how Greece and the other Eurozone countries can access funding while avoiding profiteering by the bond market speculators.
“When it cannot be sure of the long term co-operation of the central bank, the Government can easily implement an alternative by ceasing the issuance of government bonds and borrowing instead directly from the commercial banks in the form of long-term loan contracts. This has the advantage of increasing bank credit creation, as well as strengthening the banking system by improving the quality of its loan book. Such a policy is the potential solution to many of the problems faced by countries such as Spain and Ireland presently: the prime rate, i.e. the interest rate banks charge borrowers with the best credit risk is often far lower in Spain, Ireland, Portugal and Greece than the sovereign bond yield of similar maturity. The reason is that bank credit is not tradable and hence not susceptible to speculative attacks, or downgrades by rating agencies- while being eligible as collateral with the ECB, not required to be marked to market and not requiring new capital from the banks, according to Basel rules.”
http://www.neweconomics.org/publications/entry/where-does-money-come-from
The commercial banks create most of the new money in circulation today when they issue loans. In issuing credit, banks simultaneously create new electronic deposits in the recipient’s bank account via computer keystrokes. Governments borrowing directly from the commercial banks is not prohibited under the current treaties of the EU. So this capability of the private banks to create new money can be legally harnessed by Greece as a source of funding if they chose to do so.
Coddler – more lefty yawn
Any original thoughts coddler? Stop the copy & paste stuff.
PD. Try reading. You might learn something. When you wake up that is.
Thanks for the points Coddler.
I wonder if Coddler is in breach of intellectual property law as he does not seem to have an original idea
Charlie/ I’m well able to read and I’m not surprised with your comments! We all know about your support for the leftwing/Marxist & populist looneys. The problem with you & your mob like coddler etc is that you just want everyone else to pay!
Fair play Charlie. It’s enjoyable to see the undercover party hacks swarming around any ideas which challenge the status quo.
Coddler, it’s certainly interesting but I haven’t heard of Greece actively pursuing this. Much as it may seem attractive superficially, I can’t see it being successful in practice.
I disliked this AAA comment because it’s too long
Jurgen,
The proposal was made by the very well respected economists and financial professionals below who believe it to be a practical alternative funding model.
Tony Greenham is Head of Finance and Business at nef. He is a former investment banker, a Chartered Accountant and regular writer and media commentator on banking reform.
Professor Richard Werner is Director of the Centre for Banking, Finance and Sustainable Development at the University of Southampton and author of two best-selling books on banking and economics. He is credited with popularising the term ‘quantitative easing’ in 1994 whilst Chief Economist at Jardine Fleming Securities (Asia), following a spell as visiting research fellow at the Japanese Central Bank.
Josh Ryan-Collins is a Senior Researcher at nef (the new economics foundation) where he is leading a programme of research on the history and practice of monetary systems. He is studying for a PhD in finance at the University of Southampton.
If the AAA had a vote for every Coddler post they wouldn’t be polling less than 1%!
Coddler & Charlie – paid up members of the lefty wing looney brigade !
Fair enough, but why isn’t Greece pursuing this avenue?
If I had a euro for every time Business Cat and Protect Capital etc attempt to distract and avoid dealing with the topic, the AAA would have an election fund to rival the blueshirts.
The problem with your mob P.D is you never really worked for anything in your life. Handed everything of your Daddy. Try going out the real world and working for a living.
Protect democracy= paid by daddy to sit on ones face. Get a REAL job you sad sad animal.
Jurgen,
Greece may well be pursuing this funding option behind the scenes. I certainly hope they are.
Or maybe they are simply unaware that the option exists after 40+ years of neo liberal propaganda which presents money as a scarce financial market resource when it is in fact created at will on the computer keyboards of the world’s central and commercial banks.
@PD You would think with a name like ‘Protect Democracy’, you’d have some knowledge of political ideology instead of spewing out fox news buzz words.
It only improves the bank’s loan book if there’s a realistic prospect of it being paid back – the banks themselves will decide whether or not they think this is the case…
Or the Greeks could simply follow Ireland’s lead and have a 99% state owned, but nominally still private bank like A.I.B.
Then the state owned bank would be deciding if the loan to the state itself has a realistic prospect of the loan being repaid. The loan ‘application’ is certain to be approved in that scenario as the pet bank will do exactly as instructed.
And the terms and interest rates payable would be very favorable indeed as they would be ‘negotiated’ between the government and the bank it controls.
And where does AIB get a few billion to lend to the exchequer?
Let them go down , we pay our taxes , hurt and pain .
hope they dont come back spouting crap like seismic shift and game changer when they got f. all like Kenny and Noonan
Howlin loves to use Sphere, the first quarter will be measured by the influx of a 15% increase compared to a deficit in the second half of the the first quarter in the fiscal “Sphere”
Why shouldn’t Greece get a deal. Have the people not suffered enough. It was not the average citizen that caused Greece problem in the first place. It was the Greek government that cooked the books that amazingly the experts missed letting Greece join the euro. It was not the people of Greece who made the laws on the tax system in Greece it was the government of Greece. Why should ordinary people have to constantly pay the price of incompetent governments in countries.
But it’s the people of Greece who have a pretty one sided idea of tax. They want it’s benefits, just don’t want to pay it!
Littleone- it was the people of Greece who elected the government because of the little or no taxes etc etc!
Did the people make the tax laws or was it the government. Did the people cook the books or was it the government. It was the government they were the ones running around he country not the people.
The Greek government were running the country . meant to say.
with the syriza party now in practical majority they have entered a phase that has not been achieved before. The tax evaders were in bed with the government and vice versa. They now have a position where they can go after tax evaders without having to worry about ministers being bribed.
Funny how its always blame the people never the incompetent governments . the people don’t run the country or its systems . blame the incompetent government who allowed all of this to happen.they are the ones who make the decisions after all not the people.
Perhaps they can get a deal to hold the Olympic games for the next hundred years and the European Football chamionships too.
You can’t spout on about not my fault when you benefit from low taxes and retire as a hairdresser on €50k pension at 55!
I fear for Greece with this crowd
Why? A week into power and they’ve achieved more than Ends et al have in 4 years.
Absolutely.
However Syriza are backtracking rapidly from pre-election rhetoric.
Their changed position is almost aligned with that of the troika.
except they don’t recognise the troika and will not deal with them
We’ve exited bailout, recession, turned from loosing jobs to making jobs, and slowly but surely the country is returning to normal. And we’ve done nothing??
It’s that mentality that’s holding this country back. Get some rationality into your head.
“Don’t recognise troika”
But still have their hand out begging for their money…. makes sense.
What did they achieve ? Why should European tax payers fund them when they initially cooked the books & payed lip service to collecting even the basic taxes- public servants retired before they were 50 etc Greece is a basket case
They have achieved massive capital flight from banks.
Their other “achievements” are just ideas so far.
The bar for the far-left is very low here it seems.
Brian . your missing the huge debit hanging over our heads that is taking 1/5th of our tax monies 8bn a year in interest. , we are still massively in debt, a debt that is unsustainable. wait until the next crash and we will be rightly screwed. The debt deal that Greece is looking for is the same deal that Germany relieved post war, its based on exporting, they also got a debt write down. And if you think this country is returning to normal, I can only assume that the recession did not effect you very much.
only this week it was shown that the nearly 5% growth they tout was over rated. a couple of pharmaceuticals that were skewing the data, which when taken out brought our growth to 3%, and then if you remember drugs and prostitution were added to growth which again when taken out brings our growth to less than 2%. now growth is growth. but we are far from returning to normal.
You wish BC.
Our debt is at 124% of GDP and rising, a totally unsustainable figure. If you think an unemployment rate of 11% not even taking into account emigration, scambridge etc. is something to cheer about then you are the one who has the low expectations.
But if the news is reporting that Enda was there for the launching of 3 new jobs at a jam factory in Ballymehole yesterday I guess things are all dandy.
Actually juninho, they have achieved nothing yet, let’s wait and see how they get on, but good luck to them
@BrianO’Regan all of the “achievements” you mention were won at the expense of the poor. If you’re proud of that then no wonder our society is fractured
Putin friendly communists.. what could possiblie go wrong.
Juninho, the Greek govt have achieved absolutely feck all yet. Only time will tell if all the noise converts to real life results. I hope for Greece’s sake it does…
James, are you referring to Syriza or the ECB? Either way your point has some validity.
The real issue is why have germany resisted EU printing money like the rest of the world..
Simple they are earning too much interest from the PIGS at 7+% as they control the money supply in EU and pushing up price of debt. It suits Germany to be earning vast amounts of money on interest such that the likes of Greece have to borrow more just to pay the interest. Rich get richer , modern day slavery or as Germany like to call it ….austerity.
Funny how Germany weren’t preaching that mantra when they flooded market with cheap credit back at start of Euro…
That’s just incorrect. When the price of debt goes up the yields and borrowing costs fall. Germany don’t want rapid inflation as they want to protect citizens who behaved responsibly and didn’t bet the house on rising asset values, but saved instead.
I;m reading Timothy Geithner’s autobio at the moment, and it is eye-opening how the IMF saw the behaviour of un-named “European partners” over 15 years of various crises in Mexico, Brazil, Russia, Thailand and South Korea. These European partners have a pathological fear of moral hazard, and will sacrifice the end-game in defence of the ideology.
Meanwhile, the Americans are much laxer on moral hazard (as seen in their bankrupcy laws), and as a result not only has the America recovered much more quickly from the recession, but Washington has received back every penny it lent to its banks and more. QE has proven to have been the right course of action. The Germans may hold the high moral ground, but they are killing the European economy which is slipping into destructive deflation, and the EU’s world standing is falling rapidly.
Pity the greece ECB meeting isn’t televised. Would be an entertaining spectacle.
Definitely the ff fg labour governments at fault here telling lies to get into power then going against the people in the name of greed they are all corrupt and afraid of change…leeches of our society
Greece hasn’t even got enough lighter fluid to burn the bondholders
You all need to read the Economist today. Can’t link it as it’s subscription but effectively either Greece compromises or it requires another bailout in the Summer. If they play hardball now, who will give them money later? There’s no point blaming Germany or anyone else.
If they breach borrowing limits for short term debt by issuing 25 be instead of 15bn, they are effectively holding up a neon sign saying that they are not worth investing in.
and the EU will not let them default or leave the Euro so they stay. bit of a mexican stand off. What’s greece got to loose though,, It can reprint drachma and align itself with russia. short term pain or decades more austerity
Its all going to get very real for these populist clowns very soon. i cannot wait to see this all go up in smoke
Absolutely mrgillhouley it is time the EU / IMF/ went up in smoke. People have had enough of these clowns.
sounds like you’re afraid that there might actually be some other way than what we were sold and forced to do.
It’s not fair yet to compare them to kenny and co, our guys are as smooth as a Ken doll ffs
They shouldn’t get a penny written off . The problems in Greece where cause by themselfs . Why should the world reduce there debts when they don’t even have a proper taxes system in place . They want the world to take the hit for there incompetents.
Well Tommy, I could also ask why we, as one of the most debt ridden nations in the world, were forced to borrow money to lend to Greece.
The whole system is bonkers.
tommy if greece get a deal, then the card will be on the table for us to get a deal. its about time they started tackling that massive debt hanging over our kids heads.
Growth is the cure for debt and we have that . In 1995 we had 100% gdp debt ratio by 2007 it was 25% and we never paid a cent off . No they are going to give wholesale debt relief to Greece if they did they would have to give it to ireland Spain and the Portuguese and maybe Italy and France who’s going to pay for this
The rest of the wold has said all along that ireland has no real problem when you see how much they hand out like confetti in welfare payments. I have always tended to agree. a massive minimum wage and a crazy generous welfare system has meant our problems were never really that serious in the first place.
No Denis, that is not how it will work.
If we look for a deal now, when we clearly do not need it, then they’ll hike the cost of future borrowing as we will be deemed a risk.
It will cost us more in the long run.
We have (like it loathe it ) built up a reputation for repaying debt, we don’t want to be associated or connected with Greece.
Most of our debt is not bank related debt.
It’s borrowings over the years, at least 8 billion a year to simply keep going.
One absolute fact: only the Troika will provide Greece with low cost finance. Being the buchaill mor and spouting that you won’t be doing business on their terms is fine. But NOBODY is investing in Greece.
Amazingly while Ireland and Portugal cottoned on quickly, Spain arrived late to the game and yesterday posted it’s sixth consecutive quarter of growth. Spain also acknowledged much sooner that there was profligacy. Italy is still slightly in recession but didn’t contract the way Ireland, Portugal and Spain did. Italy will most likely exit recession in Q1 2015.
as long as the rich are ok then, don’t worry about unemployment figures or under 25 employment rates or overall debt. as long as it looks good on paper eh!!!
I think this is shaping up to be a great result for Syriza and I will re-iterate that they will ultimately take the same path as Ireland.
It has to be remembered that Greece will never be in a postion to repay the full debt – it is and will remain unsustainable.
A new path has to be found and that includes compromise and restructing.
For Greece it is about the affordibility of any deal. For the markets it’s about the appearance of the promise and committment to meet the repayments and not threaten to default of seek write downs – which is exactly what they did yesterday (clarified that the didnt want a write down).
For the Greek people it’s about continueing to restructure their tax systems and making other vital changes without leading to more destruciton of the fabric of society,
The last Government screwed the Greek people over and protected the wealthy at the expense of the poor.
The last Government screwed the Greek people over and protected the wealthy at the expense of the poor.
same as what our government are currently doing. so how is that in anyway ultimately take the same path as ireland, when did we get a debt restructuring. Only restructuring we got was turning promissory notes into sovereign dect that’s some guff you posted there, just like your landlords can keep money from tenants for not paying their utility bills.
here Patlyndo . just to clear up the tenants deposits and landlords. You are misinterpreting what you read
from threshold which explains it better for you
http://www.threshold.ie/download/pdf/chartered_surveyors_of_ireland_deposit_guide.pdf
Reasons why a security deposit
may be withheld
▪ Utility Bills and other charges
If the tenant owes money for utility bills, such as gas or electricity, and the utility bill is in
the landlord’s name, the landlord may withhold part or all of the deposit to cover these
costs. The tenant should always retain a copy of the bills to ensure that payment is
applicable to what is being owed.
Notice that it say’s if the bill is in the landlords name. other than that there is no way the utility company will ask the landlord to cough up. The bill ALWAYS follow the account holder ALWAYS.
But hey don’t take my word for it over your 40 year of experience. Just phone any utility company up and they will say the same thing.
Denis, there will always be the marginalised in every country, no matter how wealthy.
Not only did we protect the wealthy, but we protected people who took out mortgages that they can no longer pay and these people, for the most part remain in their homes.
We protected landlords who are bust.
We protected normal depositers in the banks – who didn’t lose a cent.
Our welfare system?
http://www.irishexaminer.com/ireland/man-on-euro840-welfare-a-week-309736.html
Man with 8 kids collects 840 a week net, add in 10 medical cards, add in rent allowance and all the rest – yes he was also protected.
As to “my guff”….
http://www.citizensinformation.ie/en/housing/renting_a_home/landlords_rights_and_obligations.html
Deposits
As a landlord, you may withhold a deposit (or part of a deposit) only if:
The tenant has not given you proper notice when leaving
You have been left with outstanding bills (for electricity, gas etc.) or rent
The tenant has caused damage beyond normal wear and tear
Go and educate yourself about the law and if it ain’t my guff – so take it up with someone else.
Denis, if the tenant leaves and disappears, for example, then the bill could revert back to the property or the supply cut off, leaving the landlord with the charge, that is what the deposit is used for.
The BILL does not follow the customer if the customer cannot be found.
The MRPN is the key, not the tenant because that is the unique meter number and that is where the charge origniates so if a tenant moves on and doesn’t settle then the next person who tries to connect to that will find a balance or a disconnection fee.
I have no issue with landlords witholding deposits for outstanding utility bills – my problem yesterday was with the threat of rent increases based on something that some people might do and punishing those of us who are complaint to the letter of the law when it comes to our obligations as tenants.
patlyndo give up before you make more of a bigger fool of yourself.. phone up any utility company and they will totally disagree with what you’ve said. i have first hand experience on this twice with utility companies who have cut me off and at no point was i or the landlord charged for reconnection or expected to pay any of the outsanding arrears . I was explicitly told that i was not responsible and neither was my landlord. why do you think they ask for a deposit if you are not the owner of the house.
better still phone your beloved citizens advice and ask them to explain that sentence you love so much as it is pure guff
Go get em Greece because all we have are lick arses
Sh*t just got real for the Greeks tonight.
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