Trying to force Greece into compliance


Remember, the U.S. really wants this negotiated, because China and Russia are waiting with bailout funds if Greece leaves the EU — and they really don’t want that. So the battle continues. Ian Welsh:

So: the ECB has both decided not to extend any more money to Greek banks AND appears to have increased the haircut they give on Greek collateral to 45%.

I agree with Edward Harrison: this is an attempt by the ECB to force a decision—Greece can deal or leave.  And pretty much now.  The haircut is particularly brutal, reducing the amount of credit already available.

If the ECB wanted Greece and its creditors to have time to make a deal it could do so.  All Tsipras asked for 3 billion.  Pocket change.

This is an abrogation of the ECB’s responsibilities as lender of last resort, and appears to me to be a blatant political act.  It will be noticed not just by Greece but by all other countries who use the Euro.

Greece’s one possible fudge is to start producing Euro denominated notes itself.  They won’t be worth what the official ECB ones are, but it can buy some more time to see if a deal with “institutions” is possible.

In other news, Varoufkis stepped down as finance minister at Tsipras’s request because he was hated so much by the negotiators on the other side.  If negotiations fall thru, however, Tsipras might want to bring him back.