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Greek Financial Advisor Suing "Politically Motivated" ECB For Crushing Greek Banks
The European Central Bank's decision to reject the Bank of Greece's request for increases in Emergency Liquidity Assistance (ELA) has, in a nutshell, crushed Greek banks for what appears to be purely political, nogitating-based motives. Greek financial advisor Alcimos (infamous for their heretical comments on the referendum) commenced proceedings before the General Court of the Court of Justice of the European Union, requesting the annulment of the ECB decisions.
The global and European economies are increasingly dominated by bureaucrats taking arbitrary decisions on capital allocation, with little regard for rules or process. The decisions of the ECB to reject the applications of the Bank of Greece for additional funding under ELA could have only been politically motivated, and therefore in clear violation of the ECB’s independence as enshrined in Article 123 TFEU. It is time for EU bureaucrats to stop acting as autocrats.
Today Alcimos commenced proceedings before the General Court of the Court of Justice of the European Union, requesting the annulment of the decisions of the Governing Council of the European Central Bank taken, on 28 June 2015 and 6 July 2015, rejecting the Bank of Greece’s requests for increases in Emergency Liquidity Assistance (ELA) offered to Greek banks. We have requested that the case be decided under an expedited procedure and have filed an application for interim relief seeking suspension of the ECB’s decision until the matter is decided. The text of the application can be found here.
In summary, Alcimos argues that the ECB, by rejecting the requests of the Bank of Greece, acted beyond the powers conferred upon it by virtue of paragraph 14.4 of the Statute of the European System of Central Banks (ESCB), which allows National Central Banks (NCBs) to perform functions such as extending ELA, unless the ECB Governing Council finds, by a majority of two thirds of the votes cast, that this interferes with the objectives and tasks of the ESCB. The ECB has previously accepted that ELA is granted by NCBs independently and at their full discretion to solvent credit institutions; the only constraints to a decision by an NCB to dispense ELA are any potential interference with the implementation of the single monetary policy and the prohibition on monetary financing per Article 123 of the Treaty on the Functioning of the EU.
Indeed, if an NCB were extending credit against insufficient collateral and the recipient of ELA was not able to repay the credit in full, this would result in the NCB having created new money, thus influencing the implementation of the single monetary policy. As long as Greek banks remain solvent, the extension of ELA simply replacing deposits can have no effect on the single monetary policy; in any event, the amounts involved are trivial compared to the Eurozone’s money supply.
As regards the prohibition on monetary financing , since the ECB had already put a limit on purchases of T-bills by Greek banks as early as 24 March 2015, no breach of Article 123 TFEU could have taken place, had ELA to Greek banks been increased in line with the requests by the Greek NCB.
In its decision of 8 July the ECB has further decided to adjust the haircuts on collateral accepted by the Bank of Greece for ELA purposes. Alcimos argues that collateral was a necessary condition for ELA operations only when the ECB was not the supervisory authority for the ELA recipient institutions. The ECB at the time could have no view on the solvency of these institutions, and therefore needed to request adequate collateral to ensure that credit extended under ELA would indeed be repaid and thus no new money would be created. Now that the ECB (through the Single Supervisory Mechanism—SSM) is the ultimate arbiter of the solvency of systemic European banks (including the four Greek banks which account for more than 90% of the assets of the Greek banking system), collateral could not be a decisive factor—a solvent bank should, by definition, have adequate collateral to underpin all its liabilities, not just those under ELA. The head of the SSM maintained as recently as 7 June 2015 that “[Greek] banks continue to be solvent and liquid”. If Greek banks have since ceased to be solvent, the ECB should have acted in its supervisory authority under Article 16 of Council Regulation (EU) No 1024/2013.Like Schrödinger’s cat, Greek banks cannot be both solvent and insolvent at the same time.
In any event, the application of ELA rules by the ECB has been inconsistent at best. For example, according to press reports, “Belgium’s central bank accepted Fortis’ branch network as collateral for an ELA advance back in 2008”. In an email from July 2012 Mr. Benoît Coeuré, member of the ECB’s executive board, suggested to the Governor of the Cypriot NCB as a potential measure “revising the ELA valuation and methodology, in particular for credit claims (non-tradable instruments)”, while further noting that “[t]he Central Bank of Cyprus has in principle the possibility to apply less stringent valuations and haircuts compared to the approach followed by the Eurosystem in credit operations”.
Furthermore, since the promotion of the smooth operation of payment systems per Article 127(2) TFEU is one of the four basic tasks to be carried out through the Eurosystem, it can be argued that the ECB’s decision which led to the disruption of payment systems in an entire Eurozone country fails the proportionality test. The extension of additional ELA to Greek banks with its potential minute effect on the implementation of the single monetary policy would have certainly interfered less with the tasks of the ECB.
The global and European economies are increasingly dominated by bureaucrats taking arbitrary decisions on capital allocation, with little regard for rules or process. The decisions of the ECB to reject the applications of the Bank of Greece for additional funding under ELA could have only been politically motivated, and therefore in clear violation of the ECB’s independence as enshrined in Article 123 TFEU. It is time for EU bureaucrats to stop acting as autocrats.
We are doing this solely on a pro bono basis, because, rather astoundingly, neither the Bank of Greece nor the Greek government bothered to do it (despite Mr. Varoufakis having said on 29 June: “The Greek government will make use of all our legal rights. We are taking advice and will certainly consider an injunction at the European Court of Justice”).
* * *
As Alcimos concluded previously, neither Greece’s ailment, nor its cure, is its currency, be it the euro or the drachma, or its pensions—whether too low or too high. Greece’s cancer is the purely domestic cleptocracy which has been sucking the country dry for at least thirty-five years (that’s as far back as I can remember, older people may argue this may have been going on for much longer).
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Just send the greek army to level the ECB.
See....that's why we always let you post first.
Hell of a plan. Send the 300!
Leo!!!! We missed you!
What is going to do, next? File suit against the Chinese government for not propping up the solar company stocks?
they dont play that shit in chino land. side note, ZH article tittle graphics are getting pretty damn hilarious!!
It is all about shopping the venue. I recall that most of Leo's customers are in Canada.
ACROPOLIS NOW! When The Trojan Horse Meets Achilles’ Heel
NEVER lend money to corrupt a$$holes with lawyers - (Life lesson number three after never marry a woman who calls herself Butch)
Is that the place where the currency is suddenly collapsing too?
yea they r fooked.
"And now Chino Land is fucked too."
Good luck with that lawsuit. Those judges have been bought and paid for a looong time ago in the EU court system.
pretty sure that about the biggest prerequisite for judgship.
my thoughts exactly - the rules were foregone to make all this happen in the first place, wtf makes you think any rules will be followed so long as those rules might result in bankster losses?
Greece’s cancer is the purely domestic cleptocracy which has been sucking the country dry for at least thirty-five years (that’s as far back as I can remember, older people may argue this may have been going on for much longer).
That has been the problem all along. Almost every Greek is involved to some extent. That cleptocracy is regularly described as Socialism or Communism. The Trioka requirements simply involve some rollback of the socialist programs.
The ELA does require posting of acceptable collateral. Since the Greek banks are stuffed with Greek govt. debt that the country is about to renounce, and there has been large ELA assistance already, what additional high quality collateral could the banks have left?
They could say something very...."anti Italian" here.
The USA might decide to "forward deploy" to the "Greek Shield" where the English already are and Russia wants in as well...
Meanwhile in Milan.
good luck with that. as if the european counts won't put its central bank first.
"It is time for EU bureaucrats to stop acting as autocrats"
Hu? The Greek Banks are not eligible for ELA anymore, why should they allow more ELAs?
There can only be one thing better than an army of out of control Eurocrats, an army of out of control lawyers.
I fail to identify a clear distinction between the two.
Sue the EU in its own courts. OK then.
Some people still aren't getting it: the rule of law is gone. Best thing to do is prepare for the worst and hope we get a shot at tearing these cunts limb from limb once TSHTF.
Have the Greek PM send another proposal for more money. I am sure he can BS another deal.
"It is time for EU bureaucrats to stop acting as autocrats."
You've got to be kidding me. Autocracy is in it's ASCENDANCY, not in it's decline. Good luck with your little lawsuit. Only the lawyers are going to make money off that turd.
bail-ins are the recipe for an epic depression
He who controls the money also controls the politics.
Follow the money.
Hollow, the money.
Draghi was with Goldman and fudged the Greek books to get them into the EU. Now he wants to fix it. After Goldman made lard sums of cash.
I hope he's not going to the ECJ with the expectation of getting justice...
YeeeeeeeHaaaaaaaaa here come the arrest warrants for Dimon and Blankfein.
good luck. ain't happening. once control is owned it will not be relinquished peacefully.
Democracy in Greece (birthplace of western civilization and democracy) connotes a referendum, open debate and the weighing of facts as to who incurred the debt and who owns the debt. Were there corruption, bribery, and coercion of government officials involved in incurring the debt? What liability do the Greek People have for criminal debt? Is the loaner of money as responsible as the borrower of the money to fulfill reasonable completion of the contract? If the loaner of the money knew that the Greek government could never pay back the money; why did they loan them the money? Was criminal bankster entrapment involved to blindside the borrower by deceitful contracts? How much money was lost by bankster bond, securities and mortgage fraud?
If bankster criminal fraud, debt and chaos is behind the Greek financial crisis, arrest them and bring them to trial as criminals to society and if found guilty; hang the criminals and repudiate the debt.
That is what democracy is about: government of, for and by the People.
NO TO TOTALITARIAN fascism: government of, for and by the multinational corporate monopolies.
"Let me issue and control a nation's money and I care not who writes the laws."
Whata typical demagogic piece of excrement. Everything is "political." Everything in life...just look at the US and her fundamental transformation in a few short years, with much more to come. Babies to toilets to God...everything is political.
Where is Johnny Cochrane when you need him?!
Or Tspiras can channel "Oliver North" wrap him in the Greek Flag & hire Brendan Sullivan...
Or...wait for it...ERIC HOLDER wearing an Scalia t-shirt...hahaha!
ask for a loan for the lawsuit