Not after the Greek, all eyes on ECB

ecbNot after the Greek referendum, eyes were focused Monday on the ECB: while European leaders are working to find a political solution, it alone can prevent the Greek economy to go into the wall, by violating its rules .

A telephone meeting of 25 members of the Governing Council of the European Central Bank was to be held to decide the fate of emergency lending to Greek banks ELA, from 14h (Eastern time), indicated to the AFP several sources close to the central banks of the euro area. The ECB has not confirmed.

The Greeks overwhelmingly Sunday said no to budget cuts and reforms demanded by creditors of Athens in exchange for a new bailout.

“I fear that developments in Greece does not make our task easier,” responded Monday Ewald Nowotny, Governor of the Bank of Austria, broadcast on Austrian radio ORF.

Until the referendum, the ECB had agreed to dive into an artificial coma domestic banks deciding June 28 to maintain these emergency loans, without increasing the ceiling.

Temporize

According to several analysts, the ECB could again put paused pending political decisions on the eve of a summit of the countries of the eurozone expected in Brussels.

“We expect the ECB to procrastinate by not reducing (loans) ELA, but eventually telling European leaders that without a clear political signal, it will soon stop,” said Holger Schmieding, economist at Berenberg.

An analysis shared by his colleagues Natixis. “We believe (the ECB) will not take any decision on the ELA without the unanimous and strong political support of the European Council,” they say.

“It means so much that there are negotiations, the ELA ceiling will stay stuck at 89 billion euros,” they said. But without an increase in emergency lending to Greek banks, asphyxiated, “there is no guarantee that they can hold up to 20 July”, when Athens has to repay 3.5 billion euros at the ECB.

Political statements chained themselves Monday on the follow-up to the choice of Greek citizens. Chancellor Angela Merkel is to visit Monday evening to French President Francois Hollande before a special summit of the euro zone on Tuesday.

Pending a political solution, “is still on the ECB to do the dirty work,” Carsten Brzeski fell, ING.

In his role as funder of the banks and the Greek economy, the guardian of the euro is in an untenable position. The formal conditions for granting ELA are ready to jump: banks, closed for a week, are on the brink of insolvency and guarantees needed to borrow from the central bank are dwindling.

“Plus if necessary”

Athens still seeking an increase in the loan ceiling ELA only way to reopen the banks and avoid the “Grexit”.

The implosion of the euro area figure is a foil for the ECB. But for many of its members, to override the rules is also a form of sabotage of the euro area. This is the case of the President of the German Bundesbank Jens Weidmann, supported by his Slovak counterpart and perhaps the Baltic. The board makes decisions on ELA majority of two thirds.

“In the circumstances of great uncertainty in Europe and at international level, the ECB has been very clear, if necessary we will do more,” Benedict reiterated on Sunday Coeuré, member of the institution’s management board.

It could inflate its debt repurchase program giant, called “QE”. Or switch to high gear by engaging the OMT program, never used, the “bazooka” of monetary policy that would see no ceiling buy government bonds of countries whose borrowing rates would flame. This was not the case Monday.

However, no question of restructuring the Greek debt held by the ECB, said the Governor of the Bank of France: it is a debt that “by nature can not be restored because it would be monetary financing of a State ‘contrary to the European treaties, Christian Noyer said on Monday.

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