Back in February, when the ill-fated Greek attempt to renegotiate its existing bailout (instead culminating with a new, €86 billion bailout program 5 months later) was launched, Eurogroup chief Jeroen Dijsselbloem rejected a request for a short-term financing agreement to keep the country afloat while it renegotiates the terms of its bailout program. "We don’t do bridge loans", Dijsselbloem told reporters in The Hague, when asked about Greece’s request. [6]Turns out "we do" after all.
After last night's full capitulation vote by Greece which will push its debt beyond 200% just so the insolvent nation can repay its creditors, the next step would be of course finding a funding solution until the terms of the full ESM bailout are ironed out. Which means, coming up with a bridge loan just so Greece has the funds to repay its default to the IMF now amounting about €2 billion as well as the ECB's €3.5 billion payment on Monday.
Sure enough, moments ago Bloomberg reported that Euro-area finance ministers agreed in principle to extend a €7 billion($7.6 billion) bridge loan to Greece, citing an official familiar with the decision. The loan is due to be announced tomorrow once technical details are sorted and national parliaments vote on the bailout deal, the official said, and since this loan has to be funded ahead of the ECB's maturity, this is one deadline the Eurogroup will keep.
Furthermore, with the sanctity of the ECB's balance sheet in question it meant that even one of the staunchest opponents to a 3rd Greek bailout, Finland, would have to promptly fall in line, and so it did:
- FINNISH PARLIAMENT GRAND COMMITTEE APPROVES GREEK BAILOUT TALKS
Meanwhile, if Greece had hoped that just by voting through yet another "deal" which it has no credible way of adhering to it would immediately get an ELA increase from the ECB, it was sorely mistaken.
As Bloomberg also reports, the ECB met earlier today to review the Greek ELA and while it hasn't yet announced a decision, the current opinion in the ECB’s Governing Council favors keeping the cap on Emergency Liquidity Assistance for Greece on hold at the current 88.6 billion euros, people familiar with the matter say.
As a result, the ECB’s Executive Board recommended the limit stay in place, one person says even though the Greek central bank asked for an increase of 1.5 billion euros, two people say.
In other words, the Greek capital controls will remain for far longer even after Greek funding as a pass-through vehicle, whereby the Troika pays Greece so it can repay the Troika (although with the IMF on its way out, it will soon be the Dvoika).
And without any substantial money circulating through the Greek economy, it means that Greek GDP will likely have a double digit decline pushing the country even deeper into depression while its banks, unable to collect on loan payments, will see their NPLs rise at a rate of 1% per day until not only is there no Greek economy, but no Greek banking system either.
But at least Greece still has the euro.
