The Greek Bluff May Be Working: ECB Does Not "Haircut" ELA Collateral

Tyler Durden's picture

Following our post yesterday, in which we calculated the levels of ELA haircuts that would result in corresponding deposit haircuts, we - and the rest of the world - were patiently waiting to see if the ECB would commence using its nuclear option, first with a small increase in haircuts, then as we got closer to Sunday, with larger ones.

Even Goldman this morning wrote that "we see a sharp increase in haircuts as unlikely." but as we showed, even a modest increase, for example from 50% to 65%, would promptly impair Greek deposits and require deposit haircuts.

 

Of course, the far bigger question in any ECB haircut decision was whether the central bank would tip its hand that it is indeed a political entity, and perhaps tip the scales either way in Sunday's referendum.

Moments ago we got the answer, when the ECB not only kept the ELA frozen as expected, thus requiring the continuation of the Greek capital controls, but decided against a collateral haircut.

  • ECB SAID TO KEEP GREEK EMERGENCY LIQUIDITY CEILING UNCHANGED
  • ECB SAID TO TAKE NO DECISION ON GREEK COLLATERAL HAIRCUT

In other words, so far Varoufakis' thesis remains intact, and the ECB has refused to push the "nuclear option" launch button.

Recall what the finmin said last April:

... the real battleground will be the banks. As they did with Cyprus, where they threatened the government with an immediate suspension of the island nation’s ELA, so too in the case of Greece they will threaten to pull the plug on the Greek banks. Two points need to be made here. First, the Greek banks no longer hold any Greek government debt, which means that their collateral with the European System of Central Banks cannot be downgraded legally. Secondly, Frankfurt will have to think twice before it issues the threat of bending its own rules to close down Greek banks – since doing this would threaten to engulf the whole of the Periphery’s banking system into another cascading panic.

So far he has been proven correct, which may mean that his final bluff will ultimately pay off, namely that "Berlin will prefer to accommodate the Greek government and to look with a great deal more ‘kindness’ the ‘request’ for a debt relief conference. And if it does not, and wishes to bring the Eurozone down with it, let it do its worst, I say. "

As to whether today's ECB decision boosts the "No" vote on Sunday because it validates the hardline taken by Tsipras and Varoufakis, it may be best to let the next round of polling answer that question.

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kaiserhoff's picture

Why would the ECB move and take the heat/responsibility?

The run on the banks is doing the job for them.

disabledvet's picture

This is NOT a "Bank Run."

The Government FORCIBLY closed the Banks and called it a "holiday."

Collateral still good?
That won't be decided until markets re-open on Monday...at a MAASIVE discount I might (it at all.)

So, sure...who wouldn't want to say the collateral is still good?

"I offer ten cents now!"

Tall Tom's picture

There is NO LAW which allows for the ELA.

 

The Greek Banks hold NO GREEK GOVERNMENT DEBT.

 

They cannot legally do it. Read Varofakis' essay.

 

(Of course they CAN break the law...My bet is that if the Referendum is not passed then the ECB will break the law. Who is to hold them accountable as they are TBTF?)

LawsofPhysics's picture

At this point I think most greeks know that the government buildings have more value.  Please, the ECB has been breaking their own law on so many fronts (including allowing Greece into the E.U. to begin with) it really doesn't matter.  Fuck em, let the Greeks fix Greece.

Tall Tom's picture

Either we live by Rule of Law or by MOB Rule.

 

Now you know that it is the MOB that rules, the Crime Families that rule.

 

I agree that it really does not matter...with the small exception that...IT WILL COLLAPSE THE ENTIRE WORLD MARKET AND PERHAPS BE FATAL FOR YOU AND I ACROSS THE OCEANS.

 

So you are right. YOUR DEATH and MY DEATH DOES NOT MATTER.

 

Do you know that this will IMPLODE THE DERIVATIVES MARKET? EVERY SINGLE BANK IS INTERCONNECTED.

 

Your BANK WILL FAIL. There will be CHAOS in AMERICAN STREETS due to the FRADULENT ACTIVITIES OF CRIMINALS. Many Millions will be starving, form groups, and TAKE EVERYTHING THAT YOU OWN in order TO FEED THEIR INGRATES.

 

Yeah. I agree. Let the fucking Greeks fix their own Nation.

 

We have another major PREDICAMENT, AS A RESULT OF THIS, headed our way.

 

Yeah!!! NO BIG DEAL.

Inthemix96's picture

Correct Tom mate.

The only thing they didnt count on, was people like you and I.  Let them, throw the first punch mate, I am here, all fucking day.  And I know for a certifiable fact they know who I am.

Come and get it.  Give the cunts war mate, they deserve nothing less.

96

LawsofPhysics's picture

^^^this.  To think that the fight for survival ever "stops" is to believe that gravity or evolution can simply be "shut off".

LawsofPhysics's picture

That you will face adversity in life is not the question.  It is how you will overcome it that is important.

Welcome to life asshat.   Truly a nation of worthless cowards.  It wasn't always like this.

Tall Tom's picture

You have no clue as to what obstacles have been placed in my path and that which I have overcome.

 

I am a walking, talking and thinking miracle.

 

But you FAIL to understand the adversities that are about to affect YOUR LIFE.

 

BUT YOUR DENIAL and YOUR ARROGANCE will DOOM YOU.

 

As for cowardice?

 

Some of what I write can be construed as TREASON and SEDITION.

 

And you are more than welcome to find out just what a supposed "coward" that I am any time that you'd like.

 

Come and visit...

 

12223B Woodside Ave. Lakeside, CA USA.

 

I have only had ONE VISITOR from ZH.

 

Looking forward to some more.

Sirius Wonderblast's picture

I do not keep money in the bank. I do have weapons and land. Bring it on.

BullyBearish's picture

The parasite will do anything to keep the host alive...just

KnuckleDragger-X's picture

The Greek banks are already dead and hanging them again won't change a thing. I get the feeling that the ECB etal might just be a teensy bit worried.....

disabledvet's picture

Well...they'll just have a HORRIFIC inflation...

Then it's back to "Banking As Usual...

nickels's picture

"Make me chaste-but not yet."

ANestIOS's picture

The greek government is asking the greek citizens through a referendum. Kinda straight forward right? 

LawsofPhysics's picture

This is precisely what happens when people forget what the fuck real collateral is.

and scene;

 

ECB:  We think these imaginary bullshit paper/digital promises have real value!!!!

GREECE:  Okay, we agree!!!

Deathrips's picture

"You arent wealthy enough to obtain debt."

 

Physical for the win.

 

RIPS

rwe2late's picture

 It is difficult to interpret

any deal

as meaning that the TROIKA has lost or folded,

so long as Greece remains on the financial hook.

 

Has Greece's opportunity been squandered?

 

The cynical view vs. the hopeful view

another sell-out by a two-faced politician:
http://www.globalresearch.ca/greece-tsipras-surrenders-to-troika-demands...

OR

expedient politicking against the 1%:
http://www.counterpunch.org/2015/06/29/the-greek-debt-crisis-and-crashin...

http://www.counterpunch.org/2015/07/01/wall-street-and-the-greek-financi...

Kaniption's picture

This is what Greeks Get?

 

when They have plenty of money in their banks?

 

that Brussel Sprouts shuts down the ability to "transfer money"?

 

THATS IT?-they simply CLOSE the "enforced system of transfer????

 

 

Fuggin weaklings DO SOMETHING ALREADY, ECB

 

 

I inquire because I KNOW its coming home to the US banking system..-just watching.

 

first post

zenon's picture

Two points need to be made here. First, the Greek banks no longer hold any Greek government debt, which means that their collateral with the European System of Central Banks cannot be downgraded legally. Secondly, Frankfurt will have to think twice before it issues the threat of bending its own rules to close down Greek banks – since doing this would threaten to engulf the whole of the Periphery’s banking system into another cascading panic.

Varoufakis is lying out of both sides of his mouth. The collateral of Greek banks may not be govt. paper; it's even worse: bullshit packaged vehicles that were put together hastily (with both the issuer and the buyer being the same entity) and send over to the ECb for funding.

As for the second problem with the periphery, his kamikaze theory that 'by threatening to blow up your own system you will win because others stand to loose to much' is getting a little tiring. Draghi can perform QE to paint over any problems brewing.

I personally am beginning to suspect whether this Motley group that runs the Greek govt. may be Soros-funded.

LawsofPhysics's picture

"Varoufakis is lying out of both sides of his mouth. The collateral of Greek banks may not be govt. paper; it's even worse: bullshit packaged vehicles that were put together hastily (with both the issuer and the buyer being the same entity) and send over to the ECb for funding." --  Yes, but it is the ECB that is insisting that these bullshit digital/paper promises have real value.  The Greeks know that the government buildings themselves have more value.  (when fraud is the status quo, possession is the law). 

 

"his kamikaze theory that 'by threatening to blow up your own system you will win because others stand to loose to much' is getting a little tiring. "  --  Okay, fair enough.  Then let the fucking Greeks fix Greece and fuck off already!!!

Sirius Wonderblast's picture

For a long time it's been clear the winner in all of this (and I mean well beyond the EZ/EU) will be the least bad loser. It looks to me like to usual suspects are lined up to come out best/least badly.

Skateboarder's picture

Greece will continue to get bailed out as long as the collective global CB can kicking keeps on. Tsipras is merely a small pawn in the game of M&A: Earth Edition - he likely does as he is told by his overlord.

Iam Yue2's picture

Yes Vote -  Implied Probability Currently: 69%  (Average of UK betting market odds). 

blackbeardz's picture

Sorry but you may have too much Implied Probability there. 

REUTERS :

Greece's Tsipras digs in against bailout

...Tsipras abruptly switched back into combative mode in a television address.

Greece was being "blackmailed", he said, quashing talk that he might delay the vote, call it off or urge Greeks to vote yes.

 

Soul Glow's picture

And YV said he isn't playing game theory.

HA!

Youri Carma's picture

Yes, Merkel and Schäuble really have lost their minds and Lagarde really is so insane!

On Sunday, the ECB froze the emergency lifeline at around €89 billion http://blogs.wsj.com/briefly/2015/06/30/whats-the-timetable-to-a-grexit-...

Unable to get more cash to give to depositors, banks shut Monday. To reopen the banks, that lifeline needs to be turned back on. Will it? (So now it has.)

So here you have it folks Greece get’s the second knife blow after forbidding Greece to issue it’s treasury bonds.

This now has become a National Emergency Situation which could provoke Greece to seek honest help elsewhere.

The IMF is making even more blunt proposals for a Greek takeover than the Troika.

Both want to pirate Greece like the IMF did with the Ukraine which war is directly sponsored by them.

The IMF didn’t want to further finance Greece which Germany insisted on in the beginning.

With the IMF sponsoring a NATO war in the Ukraine and both Germany and Greece in it, NATO alliances become a bit murky.

I am sure that Merkel and Schäuble are not happy with the Ukraine war and IMF’s money in it while refusing to back NATO Greece.

This could have been an huge mistake https://youtu.be/2LCggmsCXk4?t=2m19s

Yen Cross's picture

  What collateral?

 The ECB is gaming the situation so they can re-hydrate the banks with QE as European bond yields rise.

 We all know there's a shortage of collateral, and yields are too low for the mandated floor.

 The ECB will use this downplay the effects of a Grexit. It's all bullshit of course, and just kicks the can further into the black hole.

HowdyDoody's picture

We actually are living through Groundhog Day.

besnook's picture

the banksters have inadvertently given away their god given right to wage war on a difficult to corral nation. iraq was easy. libya was easy, egypt was a little more difficult. syria is very troublesome. ukraine is a disaster. they can't do anything about greece that won't destroy the eu and the empire so i suspect a coupla of well placed lead pills will be administered. the banksters will not be denied. someone is trying to "take" their money.