19 Jun 2015
Emergency EU Summit to deal with Greece, Grexit risk high – KBC
FXStreet (Barcelona) - Summarizing the key developments surrounding the Greece bailout negotiations, the KBC Bank Research Team believes that the ELA arrangement might used as a leverage to force the Greeks into accepting an arrangement as Grexit risk heightens.
Key Quotes
“The eurogroup meeting on Greece ended without agreement. Eurogroup president Dijsselbloem said that too little progress has been made and that no agreement is in sight.”
“European president Tusk said in a statement that he summoned heads of state to meet on Monday night for an emergency Summit to discuss Greece at the highest political level.”
“IMF Lagarde added that was time to prolong the dialogue “with adults in the room”. Greek FM Varoufakis still believed there was time to reach a cash‐for‐reforms deal but also warned that “an accident was drawing dangerously close”.”
“Deposit outflows sent a stark warning. Between Monday and Wednesday they amounted around €2B, forcing the Greek central bank (according to rumours) to request an emergency ECB meeting to raise the amount of ELA funding. On Wednesday, the ECB raised ELA liquidity by €1.1B but deposit outflows outpace the ELA availability.”
“The extraordinary ECB meeting is expected to take place today. If the ECB doesn’t raise ELA or if an increase proves to be insufficient, the Greek government might impose capital controls over the weekend to stem outflows.”
“According to sources, ECB Coeuré said that he wasn’t sure whether or not Greek banks would be open on Monday.”
“We believe that ELA could be used as leverage to “force” the Greek government into accepting an agreement as spelled out by international creditors. Nevertheless, such event risk is binary with chances on a Greek default/Grexit still high.”
Key Quotes
“The eurogroup meeting on Greece ended without agreement. Eurogroup president Dijsselbloem said that too little progress has been made and that no agreement is in sight.”
“European president Tusk said in a statement that he summoned heads of state to meet on Monday night for an emergency Summit to discuss Greece at the highest political level.”
“IMF Lagarde added that was time to prolong the dialogue “with adults in the room”. Greek FM Varoufakis still believed there was time to reach a cash‐for‐reforms deal but also warned that “an accident was drawing dangerously close”.”
“Deposit outflows sent a stark warning. Between Monday and Wednesday they amounted around €2B, forcing the Greek central bank (according to rumours) to request an emergency ECB meeting to raise the amount of ELA funding. On Wednesday, the ECB raised ELA liquidity by €1.1B but deposit outflows outpace the ELA availability.”
“The extraordinary ECB meeting is expected to take place today. If the ECB doesn’t raise ELA or if an increase proves to be insufficient, the Greek government might impose capital controls over the weekend to stem outflows.”
“According to sources, ECB Coeuré said that he wasn’t sure whether or not Greek banks would be open on Monday.”
“We believe that ELA could be used as leverage to “force” the Greek government into accepting an agreement as spelled out by international creditors. Nevertheless, such event risk is binary with chances on a Greek default/Grexit still high.”