Over the weekend, JPM made it clear that absent some deal (or at least framework thereof since optimism for a deal today just crashed) being finalized today, Tuesday could be a very difficult day for Greece [8]if and when the ECB finally revises the ELA calculation (a calculation which according to JPM may have already seen the ECB overstep the limits of its Greek borrowing base) or simply refuses to increase the emergency liquidity for Greece in what, thanks to the accelerating bank run, is becoming a daily routine.
Then, earlier today, the ECB confirmed that the entire emergency ELA boost from Friday had already been used up, and with the previously noted €1 billion in Greek deposit withdrawals ahead of Monday (and according to unconfirmed reports [9]another €1.7 billion already withdrawn today), it was forced to hike the ELA once again this time by what is still an unknown amount. However, this time the ELA boost came with an explicit ultimatum, when ECB's Nowotny said that the latest round of funding was enough only to last Greek banks for the day. From Reuters [10]:
Emergency Liquidity Assistance (ELA) for Greek banks has been extended until the end of today, the head of Austria's central bank said on Monday, signalling that what happens to it in the future depends on the outcome of negotiations with Athens.
"(ELA) runs precisely for one day because there is a summit meeting (of leaders) to deal with the Greek question and the ECB, sensibly enough, did not want to anticipate the result," Ewald Nowotny told journalists on the sidelines of a conference.
"That is why credit has been extended for one day. Then we will see what the result of the summit is," said Nowotny, who also sits on the decision-making Governing Council that sets ECB policy.
Will the ECB be as generous tomorrow when the Greek banks demand another €1-2 billion following today's latest bank run whose official tally we estimate to come in via Reuters "sources" any second remains to be seen, but if JPM is correct, the result may not be good for Athens.
However, for now the can has been kicked for literally 24 hours, and the proof comes courtesy of a reader at Arnie's Place restaurant [11]in Nidri Greece, where moments ago the ATM machine was generously refilled as seen on the photos below.
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So where is the money coming from? Recall that also over the weekend we showed something troubling, namely that as deposit flight picked up over the past few months, so has Greek "money" printing, and Barclays calculated that Euro banknotes in circulation surged by €13 billion over the same time frame.
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As per further Barclays calculations, the money printing has also added to Greek Target 2 liabilities:
The amount of banknotes in excess of the quota for Greece (about €27bn) represents a liability of the Central Bank of Greece to the Eurosystem in addition to the net liabilities related to transactions with the other Central Banks in the Eurosystem (Target 2 liabilities). As of the end of April, net liabilities related to the allocation of euro banknotes were €16.2bn and the Target 2 balance was negative by about €99bn. Therefore, the total exposure of the Eurosystem to Greece was around €115bn. This corresponds to the amount of borrowing of Eurosystem liquidity (OMOs + ELA), as shown in Figure 4. Taking the increase in the ELA ceiling as an indication of the deposit outflows/usage of banknotes and the increase in Eurosystem funding, such exposure might have increased to about €125bn currently, we calculate.
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Did today's ATM "refill" come courtesy of banknotes whose serial number begins with the letter Y for Greece [18](or perhaps X for Germany)? The surprising answer: neither. Instead, as the following photo of a €50 withdrawal shows, the generous source of the latest (if not final) ATM replenishment was V... for Spain.
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In short: today Greece dodged the bullet with what may have been the ECB's final round of ELA generosity. Now the question on everyone's mind: what happens tomorrow, and how much higher will the stock algos climb the 5-year-old wall of an "imminent" Greek deal?