Greek Debt Crisis: ECB Raises Emergency Liquidity And Pushes For Debt Relief - As It Happened
Almost forgot. Here’s the other news story of the night:
Related: George Osborne backs down on use of EU bailout fund in Greece crisis
Updated at 7.34pm BST
That’s probably all for today. An earlier finish than in recent weeks, as the Greek crisis becomes a little calmer....but nowhere near a resolution, of course.
But for now, we’ll take the early cut.
Here’s our news story covering the day’s events:
Related: Greece debt crisis: new ECB cash lifeline could reopen Greek banks
Back tomorrow to see how German MPs react to a third Greek bailout. Goodnight! GW
Greece’s banks will stay closed until the close of play on Sunday, the finance ministry just announced.
That tees up the possibility of reopening on Monday, with limited services, if a bridge loan for Greece is signed and sealed on Friday (as seems likely).
#Greece MoF said bank holiday extended until Jul 19. #economy #ecb #ela #banking— Manos Giakoumis (@ManosGiakoumis) July 16, 2015
A couple of late photos: Angela Merkel and Wolfgang Schäuble at a meeting with their party MPs this afternoon, ahead of tomorrow’s vote on whether to open talks on a third Greek bailout:
Merkel apparently told MPs it was “definitely right” to have examined all scenarios, including a potential short-term Grexit.
Updated at 7.33pm BST
Over in Berlin, Wolfgang Schäuble has told German MPs that the International Monetary Fund won’t be involved in the first bailout payment to Greece.
He made the comments in a letter, ahead of Friday morning’s Bundestag debate on the Greek deal.
Over to Reuters:
That tranche is due to be paid in mid-August 2015, according to the letter, seen by Reuters, in which Schaeuble requested that parliament agree to open talks on a third Greek bailout.
The letter said the IMF would make its further involvement dependent on a successful conclusion of the first programme review in autumn 2015 and a confirmation of Greece’s debt sustainability.
The IMF cannot advance any more money while Greece is in arrears, and it has already made its views on debt sustainability very clear:
These quotes kind of sums up Greece really http://t.co/wTd1tiDSpA pic.twitter.com/oMEgVGaJOG— Tony Tassell (@TonyTassell) July 16, 2015
As we flagged up yesterday, the UK government has succeeded in indemnifying itself against potential losses from Greece’s bridging loan.
Chancellor George Osborne declared:
“We have today secured a significant victory and strengthened the protections for the UK in the latest Greek bailout and any future bailouts of Eurozone countries.”
However.... that victory was only needed because the EU tore up an agreement that the EFSM fund would never again be used for eurozone bailouts, due to Greece’s urgent need for cash.
Osborne says UK contribution to Greek loan will be fully protected http://t.co/yMovagFS2t— Reuters UK (@ReutersUK) July 16, 2015
5.54pm BSTEuro markets hit six-week high on Greek relief
European stock markets ended the day strongly, as investors reacted to signs that the Greek crisis was easing, for now at least.
The main indices all finished higher, with European markets hitting their highest level since late May.European stock markets, close, July 16 2015 Photograph: Thomson Reuters
The €900m increase in Greece’s emergency liquidity levels raised hopes that Greece’s banks will reopen on Monday, although capital controls will stay in place.
Jasper Lawler of CMC Markets explains:
The ECB’s willingness to raise the ceiling on the ELA puts to bed the immediate risk of a banking collapse and paves the path towards the reopening of Greek banks and the eventual end to capital controls.
Mr Draghi saying that the need for debt relief in Greece is “uncontroversial” puts the ECB’s stance on the issue alongside the IMF. It increases the odds of a more substantial haircut than has been admitted by Eurozone finance ministers.
Last night’s vote in the Athens parliament to accept the bailout (through gritted teeth) was also cheered by traders, as it means a bridge loan is also imminent.
5.26pm BSTWorkers replacing the broken window of a fur shop in central Athens today, after last night’s clashes. Photograph: Louisa Gouliamaki/AFP/Getty Images
Over in Athens, Alexis Tsipras has been meeting with key aides this afternoon, plotting his next move.
A government minister says that a reshuffle won’t be announced on Thursday, though.
So the up-and-coming stars of Greek politics should stay by their phones (and those who rebelled last night needn’t rush to clear their desks)
Greek gov reshuffle won't be announced today. Courage to all colleagues there..#Greece #Agreekment https://t.co/HQ79bq4Ut0— Efi Koutsokosta (@Efkouts) July 16, 2015
Hallo..... German tabloid Bild is reporting that senior social democrat Peer Steinbrück will vote against the Greek bailout package on Friday morning.
Thats big news: Ex-SPD-chancellor-candidate @peersteinbrueck will vote NO tomorrow in german parliament @BILD #grexit http://t.co/wN9DsyAMWz— Paul Ronzheimer (@ronzheimer) July 16, 2015
Steinbrück ran against Merkel for the chancellorship in 2013, and was finance minister in her first coalition.
It appears that he believes Greece would be better off outside the eurozone:
Steinbrück no longer has skin in game politically and seems to genuinely believe #Grexit best scenario for Greece as will mean debt relief— Pawel Swidlicki (@pswidlicki) July 16, 2015
Here’s some required reading before tomorrow’s vote in the Bundestag on the new Greek bailout package.
Jürgen Habermas, one of Germany’s leading intellectuals, has heavily criticised Angela Merkel for her handling of the Greek crisis.
Rather than acting in Europe’s best interests, he told the Guardian, Merkel gambled half a century of political capital to bring Alexis Tsipras into line.
As Haberas puts it:
“Forcing the Greek government to agree to an economically questionable, predominantly symbolic privatisation fund cannot be understood as anything other an act of punishment against a leftwing government.”
Related: Merkel 'gambling away' Germany's reputation over Greece, says Habermas
4.09pm BSTGreek banks may reopen on Monday Photograph: Yiannis Kourtoglou/Reuters
The ECB’s decision to pump another €900m of emergency liquidity into the Greek banking sector means banks could open next week, after a three-week hiatus.
One senior banker has told Reuters that:
“They will open on Monday.”
A ministerial decision on the bank holiday could come later today.
3.23pm BSTSnap Summary: Masterful Mario joins call for Greek debt relief Mario Draghi arriving at today’s press conference. Photograph: Michael Probst/AP
A vintage performance by the European Central Bank governor there.
Mario Draghi deftly set the agenda for the next few weeks, while also stoutly defended his role in the crisis and putting his critics - at home and aboard - in their place.
The top line news is that the ECB has accepted a request to provide an extra €900m to the Greek banking sector. That emergency liquidity will keep the cash machines churning out €60 per day for the next week.
It’s a relatively small rise, and it won’t allow the banking sector to fully reopen. But it’s a signal that Greece could be inching back to relative normality.
I did not expect the #ECB to raise ELA for #Greek banks already today. The decision shows willingness to support a fragile process #Greece— Nick Kounis (@nickkounis) July 16, 2015
Most of the questions at today’s press conference focused on Greece. Draghi threw his considerable muscle behind calls for Greece to receive debt relief, echoing the IMF, the US Treasury, and Athens, of course.
But the beautiful thing about Draghi’s intervention, is that he made it sound like the most natural, obvious thing in the world:
“It’s uncontroversial that debt relief is necessary and I think that nobody has ever disputed that. The issue is what is the best form of debt relief within our framework, within our legal institutional framework.
I think we should focus on this point in the coming weeks.”
Not, I suspect, what Angela Merkel wanted to hear a day before she asks a restless Bundestag to vote on the package.
Draghi also calmly declared that he expects Greece to repay the ECB on Monday, suggesting that it will get a bridge loan (perhaps even today).
Criticism of the ECB’s actions were swept to the boundary, with Draghi insistent that the governing council has simply followed its mandate. The drip-drip-drip of criticism that he’s been “asphyxiating” the Greek banking sector may have hit home.
Criticism has been “quite unwarranted”, he declared, explaining that the ECB had steered a sensible course between fuelling a bank run and crashing the whole system.
Draghi dealt just as firmly with suggestions that he could be more skeptical of Alexis Tsipras’s government, and its ability to do its job. That is hardly the role of an independent central bank chief (indeed, Berlin has already got this role covered).
There was mixed news for Greeks who can’t access their banks. Capital controls are going to be around for a while, until the threat of a bank run has receded.
But on a happier note, Draghi hinted that Greece could soon share in the ECB’s QE programme, if it sticks with its latest bailout programme.
In the meantime, we’ll:
“continues to act on the assumption that Greece is and will ... remain a member of the euro area.”
And that won’t be shaken by any talk of ‘temporary Grexit’ from the likes of Wolfgang Schäuble.
In short, it was a picture of a central banker dutifully following his mandate, and quietly steering the eurozone through a mess that is not of his making.
Shorter Draghi; Thank God you've got me and not one of those other clowns. I will cut you though— World First (@World_First) July 16, 2015
Another tantalising development.... Draghi hints that Greece could soon benefit from the ECB’s quantitative-easing scheme, if it delivers on what’s been demanded.
#ECB's Draghi: Greek QE eligibility depends on debt rating. Greek ECB repayment would leave room for QE purchases.— Holger Zschaepitz (@Schuldensuehner) July 16, 2015
#Draghi: If SMP bonds re-payed on Monday, #Greece will become QE-eligible. BUT #ECB can't purchase without good implementation of program.— Maxime Sbaihi (@MxSba) July 16, 2015
Draghi also gives Alexis Tsipras a nudge:
Draghi: There are questions about implementation: will and capacity, up to the Greek Government to dispel these doubts— ECB (@ecb) July 16, 2015
How can the European Central Bank be so confident, given that prime minister Alexis Tsipras says he doesn’t believe in the bailout deal?
Draghi knocks this one out of the ground, in a manner that would have been applauded at the other ECB.
Do you really want us taking decisions based on political uncertainty? Or raising doubts about a government’s ability to implement its decisions? No, we follow our mandate.
Was the decision to give Greece more emergency liquidity unanimous?
Draghi claims that such decisions are never unanimous, as it takes a two-thirds majority to reject a request from a national bank.
Hmmmm me thinks it was not unanimous at all.
Decision not to object to BoG was approved, question of unanimity irrelevant, Draghi says. (*cough* Weidmann *cough*)— Frederik Ducrozet (@fwred) July 16, 2015
Draghi says the ECB didn’t take a decision on the ELA haircut (which is applied to the assets provided on Greek banks when they get emergency liquidity).
Draghi’s confidence on getting repaid on Monday means he is certain that Greece will get its bridging loan in time.
What will happen if Greece defaults on the ECB on 20 July?
My information is that repayment will be met, and the IMF repayment too. So that is off the table, Draghi replies.
He’s getting positively insouciant now!
#Draghi: all my evidence leads me to say we will be repaid as well as the IMF, so that is off the table— Open Europe (@OpenEurope) July 16, 2015
Draghi also reveals that the ECB will change the way that ELA changes are announced. Currently they are not, but leak out to journalists.
That’s going to stop, now that we’re dealing with a systemic, macroeconomic problem.
When will the Greek banks reopen and operate normally?
It would be good to reopen them soon, Draghi agrees. It’s a decision for the Greek government.
But we need to avoid a bank run, which would leave all the depositors being hit.
Capital controls have protected depositors, who are generally now all “small depositors”, says Draghi pointedly (a reference to the bank scamper in Greece this year)
What’s Draghi’s take on Wolfgang Schäuble’s idea that Greece could temporarily leave the eurozone?
I am not going to comment on politician’s statements. I only know our mandate, says Draghi, which is to work on the assumption that Greece is and will remain a member of the eurozone.
Is a €900m increase in ELA enough to help Greece? Will cash machine withdrawals remain at €60 per day?
Draghi rejects the suggestion that he’s being stingy with Greece - we have “completely and fully” satisfied the Bank of Greece’s request (although adjusted to one-week, so the ECB can see how the situation develops)
Draghi: "It's uncontroversial that debt relief is necessary.the issue is what's the best form of debt relief. I think we shld focus on this"— James Mackintosh (@jmackin2) July 16, 2015
2.05pm BSTDraghi: Greece needs debt relief
Debt relief for Greece is “necessary”, Draghi continues. No-one has ever disputed that.
But the question is how we do that in our institutional framework.
(ie, do we do it through extending repayment dates, rather than up-front haircuts)
Mario Draghi says it’s uncontroversial debt relief is necessary in Greece. Yes from an economist’s perspective. Not a (German) politician’s— Ed Conway (@EdConwaySky) July 16, 2015
What’s Draghi’s view of the Greek bailout deal?
Draghi points to the structural reforms in the package - they could help Greece become a thriving member of eurozone over time.
#Draghi mounted a pretty staunch defence of the ECB role in providing ELA to #Greece there.— Ferdinando Giugliano (@FerdiGiugliano) July 16, 2015
Have you let Greece down?
Mario Drahghi says he finds such criticism quite “unwarranted”.
He embarks on a long explanation of how the ECB has propped up the Greek banking sector for months, as savers withdrew their savings this year.
We now have a total exposure of €130bn to Greece, that makes us the biggest depositor.
We had to adjust the collateral haircuts when the quality of the assets held by Greek banks deteriorated.
But we didn’t cut the ELA off altogether, as some people pushed for. That would have been against our mandate. We have always acted on the assumption that Greece was, and would remain, a member of the eurozone.
Draghi says those wanting to cut ELA (*cough Weidmann*) did not respect ECB mandate and wanted to decide who is or is not in euro— Mehreen (@MehreenKhn) July 16, 2015
Updated at 2.02pm BST
1.55pm BSTGreek emergency liquidity raised by €900m
Draghi confirms, extremely casually, that the ECB has raised Greece’s emergency liquidity limits by €900m.
That’s a small increase -- it won’t allow capital controls to be lifted.
But it should stop the cash machines running out in the next few days.
And has talk of temporary Grexit opened the Pandora’s Box?
It’s not up to us to decide who should be in the eurozone, Draghi replies. We work on the assumption that Greece is a member, and will continue to be.
1.52pm BSTDraghi: We have decided to raise Greek ELA
Onto questions....and the first one is about Greece (quite right too).
Will the short-term bridging loan be enough to restore emergency liquidity to the Greek banking sector?
ELA is provided to solvent banks with sufficient collateral, Draghi explains. We capped it once Greece exited its bailout programme without a deal. There were some who wanted us to terminate it - which would have crashed the banking sector.
Things have changed now- we have a series of news, with the approval of the bridge package,.
This restores the conditions to a raise in the ELA.
Is he saying that the ECB has turned the liquidity pumps on again?
Looks like it!
Draghi: Decision to raise ELA took today symmetrical to decision to freeze ELA— ECB (@ecb) July 16, 2015
ECB raises ELA for Greek banks, Draghi casually mentions in press conference.— Jamie McGeever (@ReutersJamie) July 16, 2015
Nothing about Greece yet...
Draghi is taking some time to explain that Loan dynamics continued to improve, but are still subdued -- such as the flow of loans to companies.
Draghi cites emerging markets as a threat to the eurozone economic outlook:
Draghi says the ongoing slowdown in EM economies weighs on outlook @ecb @CNBCWorld #ECB— Louisa Bojesen (@louisabojesen) July 16, 2015
But he suggests other risks (oil, foreign exchange rates) are under control.
Draghi: Downside risks have been generally contained. #hawkishish— Lorcan Roche Kelly (@LorcanRK) July 16, 2015
We would use “all instruments available” if we saw that an “unwarranted tightening of monetary policy” was taking place, says Draghi firmly.
That’s a warning shot at the markets:
Think that Draghi just said: forget about tapering, our bazooka remains loaded and we will use it until the very end. #ecb— Carsten Brzeski (@carstenbrzeski) July 16, 2015
Draghi runs through his introductory statement following today’s meeting.
He confirms that the ECB left rates unchanged.
The ECB’s asset-purchase scheme is running smoothly, and will keep running until September 2016, or at least until inflation is back on target.
The evidence we’ve received since our last meeting in June has been broadly in line with our assessment of the economic situation.
It’s a ‘steady-as-she-goes’ performance so far.
Draghi: The ECB’s monetary policy stance remains accommodative.— ECB (@ecb) July 16, 2015
Draghi: Market-based inflation expectations have, on balance, stabilised or recovered further since our meeting in early June.— ECB (@ecb) July 16, 2015
1.33pm BSTECB press conference begins
After some toe-tapping hold music, Mairo Draghi has arrived.
You can watch the ECB press conference live here.
1.27pm BSTepa04848791 (FILE) A file picture dated 01 July 2015 of the headquarters of the European Central Bank (ECB) in Frankfurt, Germany. With the ECB having already said 16 July 2015 that it left its benchmark refinancing rate on hold at an historic low of 0.05 per cent, Draghi’s press briefing is likely to be dominated by questions about the steps the ECB plans to take to shore up Greece’s crisis-hit financial sector. EPA/FRANK RUMPENHORST *** Local Caption *** 52033317" width="1000" height="664" class="gu-image" /> The ECB heaquarters Photograph: Frank Rumpenhorst/EPA
It’s nearly time for the main event of the afternoon - Mario Draghi’s press conference.
We’re hoping for a lot of questions about Greece - this is the first European Central Bank presser since capital controls were introduced.
What will it take for Draghi to pump more emergency liquidity into the Greek banking system?
What will happen if Greece €3.5bn repayment to the ECB on July 20?
What’s his take on last weekend’s Euro summit (where he apparently had a blazing row with the German finance minister?)
Plus the meat-and-drink of monetary policy: the state of the economy, the ECB’s stimulus packages, etc etc.
Despite last night’s vote, the Economist Intelligence Unit reckon this latest bailout deal is domed:
3 reasons Greek deal wont work: i) debt sustainability unaddressed; ii) GR cant implement, iii) neither side is taking political ownership— Alex White (@AlexWhite1812) July 16, 2015
12.49pm BSTECB leaves rates unchanged
Here comes the European Central Bank’s decisions....
And to no-one’s huge surprise, they have left interest rates across the eurozone unchanged.
That means the headline rate remains at a record low of 0.05%.
The deposit rate stays at -0.2%, meaning banks will still face negative interest rates for leaving cash at the ECB.
The marginal lending rate (charged to banks who borrow from the ECB) remains at 0.3%.
#ECB leaves rates unchanged http://t.co/hqOZBDSNfW— ECB (@ecb) July 16, 2015
Here’s the Agence-France Presse report on the EU believing last night’s vote met the bailout conditions:
A Greek parliament vote satisfies the initial terms of a reforms-for-bailout deal between Greece and its EU creditors agreed at a 17-hour summit earlier this week, an EU spokeswoman said Thursday.
“The authorities have legally implemented the first set of four measures agreed at the eurosummit in a timely and overall satisfactory manner,” spokeswoman Annika Breidthardt told reporters.
Meanwhile, more concerns from Germany:
Economic Committee of Merkel's CDU party: third Greek ESM bailout "has been exposed as wishful thinking by the IMF" https://t.co/xRtXSRWZV4— Pieter Cleppe (@pietercleppe) July 16, 2015
12.12pm BSTGreek risks remain elevated, says Moody's
Despite the Greek vote avoiding an immediate default, there are still considerable risks ahead, according to ratings agency Moody’s. It said Greece’s fiscal strength was “low” and the potential to reduce its debt burden was uncertain:
The Greek parliamentary vote averts an immediate disorderly default and potential exit from the euro area, but risks remains elevated given Greece’s weak institutions and substantial political scepticism on the bailout conditions.
The vote – following votes in other parliaments on Friday – should pave the way for the Greek government to receive much-needed liquidity to make its upcoming large external payment obligations for at least the next month.
Considerable uncertainty remains regarding the ability of Greece and its official creditors to reach a final agreement on a third programme to receive sustained funding, especially given the short time frame within which the program has to be negotiated.
Even if an agreement is found, judging by recent events and the deep economic problems and social divisions within society, it is highly uncertain whether the Greek authorities have the capacity to achieve agreed objectives and to abide by its creditor’s conditions.
We assess Greece’s Fiscal Strength as `low’, because of the country’s high debt burden, which stood at around 177% of GDP at the end of 2014, one of the highest debt burdens in the universe of Moody’s-rated countries. Moreover, the potential to meaningfully improve the debt trend over the next 3-5 years is highly uncertain given that the large-scale reforms that could spur growth are currently hampered by ongoing political uncertainty.
Against the backdrop of considerable decline in economic activity in the last six months, and even with a support programme in place, we expect non-performing loan ratio to increase to 40-45% up from 35% of all outstanding loans in December 2014. Given that current provisioning levels are weak, higher provisioning charges are likely to raise further solvency issues for banks.
12.07pm BSTGreek elections in September?
Greece’s interior minister Nikos Voutsis has said elections could come in September or October.
Speaking on Kokkino radio station, he said that elections are highly likely. The station reports:
“If it’s not September it will be on October and it will be a product of an overall insight-not just of the Syriza government- on the broader developments” he said.
Asked what would be the main question for the next election, the minister of Interior said it would be a mandate to apply our program.
A decision on a reshuffle would be made before 22 July, he added.
#SYRIZA Nikos Voutsis: Elections September or October #Grelections #ThisIsACoup http://t.co/49RktxWCvm pic.twitter.com/EQj6bIzzm8— ??? ??????? 105,5 (@stokokkino1055) July 16, 2015
Updated at 12.17pm BST
The European Commission says it takes the Greek vote as a positive signal, and believes a compromise on a bridging loan for Greece is within reach.
It added that short term funds could be disbursed rapidly, reports Reuters.
Updated at 11.44am BST
The Eurogroup call has finished and more news is expected later today, according to its spokesman:
Call #Eurogroup has finished. More on the outcome early afternoon #Greece— Michel Reijns (@MichelReijns) July 16, 2015
Despite concerns from EU ministers about Greece’s ability to implement the proposed reforms - Finland’s Alexander Stubb for one - the EU reportedly believes that the vote last night satisfies the bailout terms:
#BREAKING Greek parliament vote satisfies bailout deal terms: EU official— Agence France-Presse (@AFP) July 16, 2015
European Commission-Institutions Assess Greece Has Legally Implemented 4 Key Measures Agreed At Summit. (DJ)— Holger Zschaepitz (@Schuldensuehner) July 16, 2015
Updated at 11.53am BST
Austrian finance minister Hans Jörg Schelling has said he has heard from sources at the European Central Bank that the emergency liquidity assistance for Greece will be extended, Reuters is reporting.
Schelling also said he expects an agreement on a bridging loan for Greece to be reached by late afternoon tomorrow.
And here’s the ECB (central bank) and ECB (cricket) confusion, as tweeted by the ECB’s head of media:
A typical morning on the @ecb mentions thread. (Not sure anyone every tweets monetary policy to @ECB_cricket) pic.twitter.com/cWXoEuXzLJ— Michael Steen (@michaelsteen) July 16, 2015
That leaves the German and Austrian parliaments to vote tomorrow.
Meanwhile the European Stability Mechanism council will have a conference call tomorrow to decide whether to begin negotiations about a third Greek bailout:
ESM governing council will have teleconf tomorrow at 4pm BXL time to make formal decision to start negotiations. #Greece— Jarno Hartikainen (@JarnoHa) July 16, 2015
11.16am BSTFinland approves Greek bailout talks
Finland has given its approval to start negotiations for a new bailout programme for Greece and for talks on bridging finance.
The Grand Committee, which acts on behalf of the country’s MPs, voted in favour of the request for talks (a day earlier than we had expected.)
Finance minister Alexander Stubb said Finland would not accept a haircut on Greek debt, but was open to other options.
He also said he was concerned about Greece implementing the reforms, given prime minister Alexis Tsipras said last night he did not believe in them.
#Finland parliament approuves #greekment . FinMin refusing possibility of haircut but open to discuss other options. https://t.co/M0eHFfmttZ— José Miguel Sardo (@jmsardo) July 16, 2015
Stubb: Today we have mandate from FI parliament for bridge financing and begin of negotiations of 3rd bailout. #Greece— Jarno Hartikainen (@JarnoHa) July 16, 2015
Stubb: Finland won't accept haircut. Some other form of debt restructuring might be discussed. #Greece— Jarno Hartikainen (@JarnoHa) July 16, 2015
Stubb: Though hard to see much space for further debt relief since already maturities very long and interest rates low. #Greece— Jarno Hartikainen (@JarnoHa) July 16, 2015
Stubb: I'm a bit worried after Greek PM last night said he doesn't believe in this programme. #Greece— Jarno Hartikainen (@JarnoHa) July 16, 2015
Stubb: Clear that in order to conclude ESM prog talks Greek gov't must fully commit to its implementation. We have to be able to trust them.— Jarno Hartikainen (@JarnoHa) July 16, 2015
Updated at 11.16am BST
New Forsa/Stern poll of German voters: - 55%: Merkel right to try keep #Greece in; - 31%: #Grexit should've been forced; - 14%: undecided.— Open Europe (@OpenEurope) July 16, 2015
Secondly, film of violence that broke out at last night’s protests: