ECB ‘Blackmails’ Greece – Bail-Ins, Bank Runs and “Grexit” Likely

from Gold Core

  • ECB ‘blackmails’ Greece – “Grexit”, bank runs, capital controls and bail-ins likely
  • Shock announcement yesterday led to volatility in markets; turmoil in Greece
  • Stocks, commodities including oil and Greek investments fall
  • Euro gold surged from EUR 1,104 to EUR 1,126 per ounce or 2 per cent
  • Greek government bonds will not be accepted as collateral in accessing cheap ECB liquidity from February 11
  • Greek banks are believed to be heavily exposed to Greek government bonds
  • Banks in difficulty will have recourse to Emergency Liquidity Assistance (ELA) from Greek central bank but ECB has authority to block ELA
  • Greece now shut out of markets
  • ECB putting interests of banks over those of people … again

The shock ECB announcement that it is to remove vital funding to Greek banks and financial system led to volatility in markets yesterday and demand for safe haven assets – including German bunds and gold. Euro gold surged from EUR 1,104 to EUR 1,126 per ounce or 2% in minutes after the announcement. goldcore_1_05-02-2015 People Versus The Banks The ECB manoeuvre which came 15 minutes before the end of trading in New York caused the ETF which tracks to Greek stock market to plunge 6%, led by losses in Attica Bank and Piraeus Bank SA. Greek 10-year bond yields rose to 10.8%. Financial carnage for Greek assets continued today. Greek borrowing costs leapt and bank shares were hammered this morning after. The Athens Stock Exchange FTSE Banks Index plunged 23 percent at the open before recovering somewhat. Three-year government borrowing costs leapt more than three percentage points to nearly 20 percent, leaving Greece utterly shut out of the markets. The ECB decision to cancel its acceptance of Greek bonds in return for funding shifts the burden onto Athens’ central bank to prop up its banks and marks a further setback for the government’s attempt to negotiate a new debt deal. The Greek government has rightly protested the move and called the ECB’s abrupt pulling of the plug on its funding for the Greece’s already very vulnerable banking sector blackmail and an act of coercion. Just hours following a meeting between Greek finance minister Yanis Varoufakis and ECB Chairman Mario Draghi yesterday – which Varoufakis had described as “very fruitful,” – the ECB made a pre-emptive strike on the new government of the Hellenic Republic. Following the meeting Mr. Varoufakis described the bank bailout program as it currently functions as “fuelling a debt deflationary crisis in our nation, thus causing a major humanitarian crisis.” He said the meeting “gives me great encouragement for the future.” However, late in the evening at 21:36 (European central time) yesterday, the ECB suddenly announced that from next Wednesday February 11 it would no longer accept Greek government bonds as collateral used by struggling Greek banks to borrow from the ECB. A statement from the ECB read, “The Governing Council decision is based on the fact that it is currently not possible to assume a successful conclusion of the programme review and is in line with existing Eurosystem rules.” The Financial Times said the meeting was arranged so that Greece could get a bridging loan while Greece began to implement reforms. In a fascinating interview with Germany’s Zeit newspaper published yesterday morning, Varoufakis put forward his reasons for insisting that the bailout system had to be reformed. He stated unequivocally:

I’m finance minister of a bankrupt country.

He explained that currently he had access to €7 billion from “ongoing European aid programs” of which he was not going to avail. Continue Reading>>>

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