Given the self-admitted lack of ‘rules’ around emergency funding from The ECB, today’s (latest) threats to withhold Greek funding “due to politicial events” are perhaps the most ominous non-blackmail warning yet by the entirely independent Mario Draghi and his henchmen…


After 2 days of not increasing the ELA limit for Greece:

  • Feb. 5 Set at EU59.5b
  • Feb. 12 Raised to EU65b
  • Feb. 18 Raised to EU68.3b
  • March 5 Raised to EU68.8b
  • March 12 Raised by EU600m
  • March 18 Raised by EU400m
  • March 25 Raised to just over EU71b
  • April 1 Raised by EU700m
  • April 9 Raised to EU73.2b
  • April 14 Raised to EU74b
  • April 22 Raised to EU75.5b
  • April 29 Raised to EU76.9b
  • May 6 Raised by EU2b to EU78.9b
  • May 12 Raised by EU1.1b to EU80b
  • May 20 Raised by EU200m to EU80.2b
  • May 27 Unchanged at EU80.2b
  • June 2 Raised by EU500m to EU80.7b
  • June 10 Raised by EU2.3b to EU83b
  • June 17 Raised by EU1.1b to EU84.1b
  • June 19 Raised by ~EU1.8b to ~EU85.9b
  • June 22 Raised by ~EU1.9b to EU87.8b

…and following today’s total farce in Brussels, ECB Governing Council member Luc Coene warned today that The ECB stood ready to reassess its decision to continue providing liquidity assistance to Greek banks.

“If for any reason market conditions and more let’s say political events would have to lead to a reassessment of this, the governing council will do so,” he told reporters at the central bank in Brussels Thursday.

Which perhaps explains why amid all the exuberance, Greek bank bonds are not recovering…


As Reuters reports, this comes on the heels of general disgust at The ECB funding insolvent Greek banks via their taxpayers…

Bundesbank President Jens Weidmann on Thursday gave his strongest criticism yet of the use of emergency credit to prop up Greece’s banks. Weidmann said those banks should not continue to buy the short-term debt of their government.


“The Eurosystem must not provide bridge financing to Greece even in anticipation of later disbursements,” said Weidmann, who also sits on the European Central Bank’s Governing Council, which approves such funding, dubbed Emergency Liquidity Assistance (ELA).


“When banks without access to the markets buy debt of a sovereign which is likewise locked out of the market, taking recourse to ELA raises serious monetary financing concerns,” he said at a conference in Frankfurt.


Earlier this week, politicians in Ireland and Germany voiced similar concerns.

*  *  *

Which should be no surprise given that The ECB basically now owns The Greek banks...


As we warned previously:

Why is this important? Because if overnight the ECB says “no more”, and pulls a Cyprus, forcing Greek banks to procure liquidity in other ways, those Greek “assets” which have collateral value only because the ECB is backstopping them (and which would fetch at most pennies on the dollar once all Greeks stop paying their interest expense on outstanding debt in a default situation), then suddenly the reality of a Greek bail-in which could amount to up to 100% of total Greek deposits, becomes all too real.

Will the ECB use such a scorched earth approach, one which could potentially wipe out virtually all Greek deposits in the biggest “bail in” in history? For the sake of the Greek people, we certainly hope not but then again there are those record Goldman bonuses to think of, and remember: the ECB does not a catalyst to boost QE even more

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