Greece Comes Up With Collateral Loophole, Has Enough Cash To Roll €5 Billion Bill Maturity

Over the past several days there had been concerns that even if Greece managed to roll its maturing €5 billion in Bills with a new Bill issuance (which it did earlier today), it would be unable to actually obtain cash for this worthless paper, through a repo with the European Central Bank. The reason being that last week the ECB allowed a temporary extension in Greek ELA collateral eligibility to expire, enacted on August 2, which in turn reduced the amount of repoable T-Bills from €7 billion to just €3.5 billion, in the process reducing the amount of cash Greece can obtain in half from the Bill roll. And while there had been lots of speculation and rumors that the ECB would, as in the case of Spain, either make a "mistake" or extend the collateral pool exemption once more, this did not occur. Instead, as we have just learned, the ECB has allowed Greek banks to use "asset-backed" securities to plug the collateral gap. Needless to say, one can only conceive just what unencumbered assets still can be found on Greek bank balance sheets (here is one artist's impression) but it was largely expected that in the race to debase its currency, the ECB would once again admit that when it comes to perpetuating the Ponzi, especially at a marginal cost of a token €3.5 billion, anything goes (just don't tell Germany). And so, Greece kicks the can once again.

From Bloomberg:

Greek banks will keep receiving the same amount of emergency central bank aid despite a reduction in the amount of treasury bills they can offer in exchange, a euro- area central bank official said.


The European Central Bank’s Governing Council last week allowed a temporary increase in the amount of T-bills Greek banks can pledge for so-called Emergency Liquidity Assistance to lapse, reducing it to 3.5 billion euros ($4.4 billion) from 7 billion euros, said the official, who was briefed on the decision. However, other acceptable collateral including asset- backed securities on banks’ balance sheets have increased in value enough to make up the difference, he said.

This is where Jean-Claude Juncker solemnly says "I was not joking"

It goes on:

Spokespeople for the ECB and the Greek central bank declined to comment.


Greece today sold a total of 4 billion euros of four-week and 13-week T-bills before a redemption of 5 billion euros of similar securities on Nov. 16. After the ECB’s decision to reduce the total amount of T-bills acceptable as collateral, banks could have faced funding difficulties unless they were able to find other acceptable collateral. Overall, Greece is trying to plug a financing gap of as much as 32.6 billion euros.


German newspaper Die Welt reported yesterday that the ECB would widen the pool of acceptable collateral to help Greek banks over the financing hump. The ECB later issued a statement denying the report, saying the collateral list hasn’t changed.

Bottom line: good enough to avert a default. The problem is that soon Greece will find itself needing to fund far greater bond maturities, in addition to rolling short-term debt, at which point the hilarious excuse that Greek "assets" have gone up in value will no longer cut it. And the worst news for Greece is that Europe's AAA club, in this case mostly the Netherlands (because Germany will kick and scream but in the end never jeopardize the ultimate beneficiary of the endless Greek bailout - Deutsche Bank) just said that not one additional penny of money will be given to Greece as there is a "big risk Greece will cost us extra money."

Of course it will.

The question, however, now is - just what creative shadow banking accounting gimmicks will Greece and the ECB use to literally hand over to Greece money for which there is no eligible collateral pledge, unless of course going forward the ECB demands a strip lien on Greek real estate, thereby starting to "sequester" Greek sovereign territory in exchange for payments that ultimately go to pay off debt held primarily by the... ECB.

One can also only hope that the Greek population never understands the true insidious nature of this creeping "bailout" which for three years now does absolutely nothing for Greek society as not one new penny enters the Greek economy, but all the money is merely recycled back into banker pockets with ever more liens being imposed on whatever Greek assets are still available.