FXStreet (Guatemala) – Events are moving very quickly in Greece, and every day the combination of capital controls and bank holiday are becoming more disruptive and destructive.
Key Quotes:
“Commercial activity is grinding to a halt. Private businesses are already reportedly issuing scrip. In addition to the further souring of loan book, Greek banks will also be hit hard by a sovereign default. The ECB cannot raise the ELA ceiling but may still tighten the rules of access. In order to preserve its limited options, the Syriza government may have to do two things. First, it needs to challenge the ECB’s ELA authority. It does not arise from the execution of monetary policy.”
“It seems to emanate from its position as a backstop. However, the exposure is not on the ECB’s balance sheet or the Eurosystem as a whole. Only Greece bears the risks. Second, Syriza may choose to replace the Governor of the Bank of Greece. It will violate the principle of the independence of the central bank, and anger other countries in Europe.”
“However, from a strategic point of view, Tsipras needs to control the bank, especially if Greece were to leave the monetary union. It would also give the Syriza government access to the 5 bln euros of reserves (according to Bank of Greece figures) and the 3.6 bln euros of gold.”
(Market News Provided by FXstreet)