As we have consistently shown over the past month, the battle between Greece and the Eurozone is all about leverage, and specifically who has more of it. Furthermore, as we laid it out previously, the best way to quantify this duel of leverage is through two easily observable metrics: the level of Eurozone risk asset prices (if Greek contagion fears were dominant, the Eurostoxx would be tumbling), and the pace of deposit outflows from Greek banks (if the Greeks fear the ECB is about to yank all money they would pull their cash from the bank, in the process forcing Tsipras and Varoufakis to the negotiating table willing to sign anything Europe throws at them).
ECB leverage measured in Greek ATM lines;
Greek leverage measured inversely in the level of the Stoxx 50
— zerohedge (@zerohedge) February 5, 2015 [10]
Which is why in a Eurozone in which all price levels are now controlled by the ECB, it is not surprising that no amount of huffing and puffing has managed to derail the Stoxx or the Dax even briefly from their relentless surge to all-time highs.
But one thing was missing: a flush of Greek deposits outflows, despite the "best wishes" of the ECB and the Eurogroup to achieve just that, as photos of lines of people desperate to withdraw their cash from Greek ATMs would promptly lead to a collapse of all negotiating leverage Greece has, and promptly put it in its place... at the very bottom of the European "democratic" food chain.
As such, it was only a matter of time before stories citing anonymous source "who asked not to be identified because the information is private" emerged, warning that finally the Greek bank run has arrived, even if one can't actually document it with actual ATM lines.
And sure enough, here is Bloomberg reporting [11]that "deposit withdrawals picked up after talks between Greece and its euro-area creditors on extending its bailout ended in acrimony in Brussels Monday night, said the people, who asked not to be identified because the information is private."
Any questions whether these "sources" originate at the ECB, Germany or Dijsselbloem's office will remain unanswered indefinitely.
So once that strawman is set, the rest writes itself: bank runs, deposit outflows, funding shortfalls, banks crawling to the PM office demanding he succumb to ECB demands just so they can continue operating one more day, everyone else praying to Saint Mario to be merciful, etc.
Stournaras meets European Central Bank Governing Council colleagues in Frankfurt tomorrow as Greek banks exhaust their current allocation of emergency funds, the three people said.
The lenders, unable to tap investors for funds, are bleeding deposits amid uncertainty over their country’s future in the euro area and concern capital controls might be used to stem outflows. Banks are being kept afloat through the Emergency Liquidity Assistance lifeline extended by the Bank of Greece, subject to approval by the ECB. The ELA pool, which currently stands at 65 billion euros ($74 billion), is extended to solvent lenders as a temporary measure to cover liquidity shortages.
Which means that as soon as tomorrow, the Greek funding situation may go from simmering to a full-blown inferno, if the ECB accelerates its plan to induce a forced bank run in Greece and yanks the Greek banks' access to Emerging Liquidity during tomorrow's non-monetary policy meeting in Frankfurt [12]:
"The ECB will likely provide ELA to Greek banks as long as there is a chance of an agreement between Greece and its creditors to extend the current bailout, economists at Barclays Plc including Antonio Garcia Pascual and Thomas Harjes wrote in a client note after the meeting ended Monday. If Greek authorities don’t take up euro area finance ministers’ offer this week, ELA funds to Greek banks would likely be shut down, they wrote."
Sadly for Greece, the ECB is hardly in a generous mood. As Kathimerini reported [13], the Frankfurt institution is now prepared to fight the Greek government over bank appointments! The European Central Bank (ECB) has issued a terse warning to Greek banks, and particularly to the government in Athens, via its Single Supervisory Mechanism (SSM), over plans to overhaul lenders’ management. In a letter to Greek banks, the SSM stressed that any changes to their management can be implemented only after receiving the SSM’s approval.
The letter emphasized that all candidates for the top position in each bank would have to go through an interview before the SSM can give its approval.
The letter reached the banks a few hours before a scheduled board meeting at National Bank, which was expected to address the issue of management changes. The meeting did not take place after all, with National Bank sources attributing the postponement to technical reasons rather than to the letter.
Sources, however, said that it was the government’s insistence to move ahead with changes in National’s administration – though it does not have the right to do so according to recapitalization rules and the bank’s current share structure – that provoked the ECB’s reaction. One of the names said to be slated for the top spot at National is former Economy Minister Louka Katseli, with Giorgos Michelis as chief executive. The ECB is said to have certain objections toward Katseli.
In short: anyone betting that tomorrow the ECB will extend the Greek last-ditch source of liquidity no questions asked, may want to not hold their breath. And once Greek ELA access is withdrawn, well... Cyprus was called a "blueprint" for a reason.
