16 Jun 2015
Greece creditors playing the brinkmanship game – BBH
FXStreet (Barcelona) - As the Greek saga continues, the Brown Brothers Harriman Team share their view on the ongoing negotiations and how the official creditors would be playing the same ‘brinkmanship’ game which Greece is playing.
Key Quotes
“The reports that Greece may be forced to institute capital controls seems partially a scare tactic which serves to exacerbate the capital flight from Greek banks. It seems part of the campaign to exert as much pressure on Greece as possible. If Greece is playing a brinkmanship game, what are the official creditors playing? Brinkmanship, after all, is like the tango--it takes two.”
“There is some faint hope that the Eurogroup of finance ministers meeting later this week could produce a breakthrough. However, the lack of trust, if not outright animosity is likely to prevent a deal then. There is some suggestion that the European heads of state, which are to meet next week, could have an emergency meeting this weekend. Recall that there is no mechanism to evict Greece from the monetary union.”
“Officials, primarily through the ECB, could squeeze Greece hard enough to make it more tempting, even though the latest polls show some 80% of Greek voters want to stay in EMU.”
“The ECB could refuse to raise the ELA ceiling and claim that Greek banks are no longer solvent. Their solvency was a function of the government's guaranteeing certain collateral. The ECB could argue that the government's guarantee has lost much of its validity. Capital controls could indeed be introduced, but as the Cypriot precedent shows, capital controls in themselves do not push a country out of EMU.”
Key Quotes
“The reports that Greece may be forced to institute capital controls seems partially a scare tactic which serves to exacerbate the capital flight from Greek banks. It seems part of the campaign to exert as much pressure on Greece as possible. If Greece is playing a brinkmanship game, what are the official creditors playing? Brinkmanship, after all, is like the tango--it takes two.”
“There is some faint hope that the Eurogroup of finance ministers meeting later this week could produce a breakthrough. However, the lack of trust, if not outright animosity is likely to prevent a deal then. There is some suggestion that the European heads of state, which are to meet next week, could have an emergency meeting this weekend. Recall that there is no mechanism to evict Greece from the monetary union.”
“Officials, primarily through the ECB, could squeeze Greece hard enough to make it more tempting, even though the latest polls show some 80% of Greek voters want to stay in EMU.”
“The ECB could refuse to raise the ELA ceiling and claim that Greek banks are no longer solvent. Their solvency was a function of the government's guaranteeing certain collateral. The ECB could argue that the government's guarantee has lost much of its validity. Capital controls could indeed be introduced, but as the Cypriot precedent shows, capital controls in themselves do not push a country out of EMU.”