Even though protestors were lighting up the Syntagma Square using firebombs, Greece’s government introduced the bailout deal in its parliament on Wednesday. The result of this was overwhelmingly in favor but most probably since opposition parties were supporting the Syriza government. But Syriza was split itself. Some MP’s & ministers had voted against or abstained from voting altogether. Nadia Valavani, the dep. Finance Minister, resigned and the former FM voted against it. PM Alexis Tsipras took a beating from his own. But he hasn’t bowed out yet. Elections may be held in autumn but he is still popular and it’s quite unclear on who is going to replace him.
The ECB decided to give an extra 900 million euro of funding to the banks in Greece. This will just last a week & is subject to the ECB getting paid this Monday when one large bond redemption is due.
But this payment isn’t in the hands of Greece’s government anymore. The plan among creditors is to use short-term funding for meeting this bonds redemption from the EFSM (European Financial Stability Mechanism). And because the IMF is going to be paid before ECB as it is a senior creditor, Greek arrears to IMF will be paid from this source as well. The total amount required on Monday will be 7 billion euro. Even though non-Euro governments were against it, this funding was agreed to. The fear of losses by governments like that of the UK were assuaged with promises of collateral. It’s quite strange that ELA being released for Greece’s banks should be subject to the approval of the FM of UK. But these sure are strange times.
The relaxation of the ELA cap by the ECB isn’t that generous. 900 million euro is basically 80 euros for every Greek. But the government has said that banks are going to open on the 20th of July on the back of this. This isn’t as good as you may thing, banks will open for transactions but the capital controls are still going to be in place. This will provide relief for cash-strapped Greek people. But it’s hard to consider it as anything apart from a political gesture.
Steven Myers
