We need your help now

Support from readers like you keeps The Journal open.

You are visiting us because we have something you value. Independent, unbiased news that tells the truth. Advertising revenue goes some way to support our mission, but this year it has not been enough.

If you've seen value in our reporting, please contribute what you can, so we can continue to produce accurate and meaningful journalism. For everyone who needs it.

Crunch time

Greece is facing three massive tests for its debt plans today

It’s going to be a big day for the country’s new leaders.

belgium-eu-greece European Commission President Jean-Claude Juncker, right, welcomes Greece's Prime Minister Alexis Tsipras today Geert Vanden Wijngaert / AP/Press Association Images Geert Vanden Wijngaert / AP/Press Association Images / AP/Press Association Images

THERE ARE THREE absolutely crucial meetings for Greece’s financial future going on today.

The outcome of pretty much all of them will have to be positive, or at least neutral, for markets to keep taking a positive view of Greece’s new plans for restructuring its huge debts.

The first meeting is at the European Central Bank today. A Reuters exclusive yesterday revealed that two Greek banks have tapped the emergency liquidity assistance (ELA) mechanism for €2 billion.

That comes from the ECB  and the governing council have to assess and approve or deny the assistance every two weeks. They’re doing that this morning.

Here’s Lloyds’ research team on the subject, emphasis ours:

The ECB holds the key to Greece’s survival until the completion of the negotiations through the liquidity provided to Greek banks. Today’s non-rate setting meeting is expected to extend the ELA for another 2 weeks but the post-February situation looks still unclear. As already discussed next week’s EU summit is key and there is a high probability of an extraordinary Eurogroup early next week (the Eurogroup is a summit of all of the eurozone’s finance ministers).”

Then there’s finance minister Yanis Varoufakis’ meeting with ECB chief Mario Draghi.

Draghi has previously said that the ECB’s liquidity assistance is subject to Greece sticking to its bailout agreement, which Varoufakis wants to scrap.

Britain Greece Varoufakis after meeting British Finance Minister George Osborne on Monday Matt Dunham / AP/Press Association Images Matt Dunham / AP/Press Association Images / AP/Press Association Images

The debt gap

There’s a big gap between the official end of the bailout – if it isn’t extended – at the end of February, and a full deal on debt, which likely wouldn’t come for months – if it comes at all – so it’s crucial for the new Greek government that the ECB still acts as a backstop for the country’s banks, Varoufakis will likely need Draghi’s tentative agreement for that.

The headline meeting is between Greek prime minister Alexis Tsipras and EU Commission president Jean Claude Juncker.

Tsipras is continuing his tour of Europe in Brussels,  and Juncker is the most important person he’s met yet in terms of his plans for Greece’s debt.

It might be a little bit awkward: Just a few months ago Juncker said if Tsipras was elected it would be a “major risk” for Greece, that he had “not adequately understood what the problems are in Greece”.

- Mike Bird

READ: ‘No-brainer’, ‘game changer’ and ‘a dig out of a hole’ – why these people want a debt conference >

READ: The ECB is threatening Greece the same way it did Ireland before the bailout >

Published with permission from
Business Insider
Your Voice
Readers Comments
    Submit a report
    Please help us understand how this comment violates our community guidelines.
    Thank you for the feedback
    Your feedback has been sent to our team for review.