For some weeks now, it has been clear that the Greeks would run out of money this summer. For now, the priority for Greece is to keep its head above water until it receives its next planned bailout tranche of €31 billion in September.
Eurozone politicians are increasingly pushing the ECB, to help save Athens from its severe financial emergency. The fact that central bankers are willing to go through contortions reveals just how feeble the situation is.
"The government in Athens needs to repay a maturing bond worth €3 billion ($3.7 billion) to the ECB by Aug. 20. The solution to that problem seems paradoxical: The ECB itself is pumping money into Greece, so that the country can in turn repay the ECB. (...) It's a controversial plan, because the central bank is prohibited from financing governments directly. (...)
Now, information has leaked regarding how the ECB plans to keep Greece on its feet until the next tranche of EU-IMF aid is paid out. The ECB has chosen a detour via the Greek central bank. It will allow it to issue additional emergency loans to the country's banks. These in turn are supposed to use the money to buy up Greek bonds with short maturities. This will scrape together €4 billion (...) The Greek central bank will accept the dodgy bonds as collateral, and will provide the country's equally troubled commercial banks with freshly printed euros -- which ultimately come from the ECB.
What is particularly absurd is the fact that, for the past two weeks, the ECB has no longer been accepting Greek government bonds as collateral for its refinancing operations. But the Greek central bank - which in reality is little more than the Athens branch of the ECB - is still allowed to accept them."
|source: The European Central Bank's Discreet Help for Greece | Spiegel|