Category Archives: Greek ELA

15/6/15: Next Step: Cyprus.

Next stop for Greece:
... or in simple terms: Cyprus.

Anyone surprised by Draghi not mentioning any of this anywhere today, shouldn't be. Il Capo does not do the work of Soldati... But Dr. Draghi did say he thinks ELA underwrites solvent banks... presumably in an insolvent state... which, of course, makes banks insolvent too.

How? In two steps: Step 1 - banks hold 'insolvent' state bonds. As long as they do, the state remains 'solvent' but once the state becomes insolvent, banks go too. Step 2 - Greek banks have tax offsets. Once the state goes, so do the offsets and banks.

Source: Raoul Ruparel ‏@RaoulRuparel

2/6/15: Greece: Back to the [Groundhog Day] Future

Couple of weeks back I posted a detailed list of ECB ELA hikes since February 2015. So here's an updated table:

- Feb 5, 2015 = EUR59.5 bn
- Feb 12, 2015 = EUR65.0bn
- Feb 18, 2015 = EUR68.3 bn
- Mar 5, 2015 = EUR68.8bn
- Mar 12, 2015 = EUR69.4bn
- Mar 18, 2015 = EUR69.8bn
- Mar 25, 2015 = EUR71.0bn
- Apr 1, 2015 = EUR71.7bn
- Apr 9, 2015 = EUR73.2bn
- Apr 14, 2015 = EUR74bn
- Apr 22, 2015 = EUR75.5bn
- Apr 29, 2015 = EUR76.9bn
- May 6, 2015 = EUR78.9bn
- May 12, 2015 = EUR80.0bn
- May 21, 2015 = EUR80.2bn
- May 27, 2015 = EUR80.2bn
- Jun 2, 2015 = EUR80.7bn

Now, that implies 3 weeks cumulative ELA rises of EUR700mln and reserve cushion on ELA below EUR2.5bn by my estimate. And for all that, Greek Central Bank recoverable assets are currently at EUR41 billion. Ugh… Oh… the proverbial nose is tightening… but on who's neck?

The neck is somewhere in here - within the Greek Target 2 liabilities debate, liabilities that continue to rise, prompting a fine, but esoteric debate:

I side with Karl Whelan on this. What is material is Sinn's assertion that the Greek residents' "stock of money sent abroad and held in cash having already ballooned to 79% of GDP". And Greece is facing big bills on debt redemptions and wages and pensions in the next 3 months (see timeline here: or:

One thing is clear from all of this: Credit Swiss estimate of 75% chance of a deal being done this month on Greek 'programme', while the CDS markets are pricing in 75% probability of Greek default over the next 5 years:

And we have equally conflicting 'proposals' on how such  programme might be arranged: which can be summarised as "the bottom line seems to be that, fed up Syriza's unwillingness to concede its election mandate, the troika will now write the agreement for Greece and Tsipras can either sign it or not. Apparently, the IMF has scaled back its demands for EU creditor writedowns (another loss for Athens) but remains skeptical of the entire undertaking."

If this is true, the entire 'new deal' being offered to Greece amounts to a new can being kicked down the same road.

Map of the road? [note: the below table excludes short-term debt]

h/t to @NChildersMEP 

So to sum up today on the Greek front:

  1. ELA is running tight, just as deposit flights goes on;
  2. Target 2 liabilities continue to mount;
  3. Probability of default remains material at present;
  4. Choices available to Greek authorities are Plan A: horrible and Plan B: terrible; and
  5. Absent debt write down, even the best case scenario still leads to high risk of a political crisis in the short run and a default in the medium (3 years) term. 
It's Back to the Future, in a Groundhog Day-like sorts of the Future...

15/5/15: Greece on a Wild Rollercoaster Ride

Greece has become a BitCoin of Europe in terms of volatility, and, man, things are soaring and crashing on a daily basis now. Here are three snapshots of Greek Credit Default Swaps:

End of last week:
Mid-week this week:
Closing yesterday:

Meanwhile, the entire financial system of Greece is now on a weekly timeline courtesy of the ECB approvals of ELA:
One move by ECB down on ELA or laterally on collateral requirements, and the house of cards can come crashing.

Note: Sources: CMA and @Schuldensuehner.