The mad dash and perhaps last dash for euros in Greece is on. Some will undoubtedly be frozen out as soon as the ECB halts emergency liquidity assistance (ELA) to Greek Banks.

Emergence Meeting Monday, Unscheduled ECB Conference Call Today

There’s an Emergency Meeting of Eurozone Leader on Monday to discuss Greece, but the ECB may very well act in advance. Once ELA is removed, Greece will soon be forced to issue capital controls.

Greek banks have continued to suffer withdrawals amid concerns that Athens and its creditors will fail to strike a deal to avoid a debt default.

The eurozone’s top central bankers are set to decide in the next few hours whether to approve an increase in emergency loans to Greece’s banking system after talks on Thursday between finance ministers failed to strike an agreement to prevent the country from defaulting on its debts and potentially crashing out of the currency bloc.

Depositors pulled out more than €1bn on Thursday from the country’s four systemic banks, bringing the total for the week to €3bn – three times the average weekly amount over the past two months.

Greece has already seen more than €30bn of deposit flight this year in an orderly process under which depositors notify their bank of withdrawals and take the cash out 24 hours later.

The latest withdrawals came as eurozone leaders were summoned to an emergency summit on Monday in a last-ditch effort to prevent Greece from defaulting on its debts and potentially crashing out of the EU’s common currency.

The European Central Bank’s governing council will hold an unscheduled conference call on Friday where they will decide whether to allow a rise of around €3bn in Emergency Liquidity Assistance available from the Bank of Greece, the country’s central bank.

A two-thirds majority of voting members of the council would be needed to block the rise. The council, made up of the ECB’s top six officials and the governors of member states’ central banks, could also approve a smaller rise.

The request for an increase came from the Greek central bank on Thursday evening — just a day after the ECB backed a €1.1bn rise in ELA that took the figure of emergency loans available to €84.1bn. Greek banks are thought to have around €95bn-worth of collateral that they can use in exchange for the loans under the current terms of the loans.

According to people briefed on eurozone planning, Greece’s central bank could request that Mr Tsipras legislate for capital controls if no agreement is reached at the Monday night summit, called for 7pm.

Question of Collateral

The ECB requires collateral in exchange for loans, but pray tell, how good is that collateral?

Capital controls actually violate EU rules, but that will not stop eurozone leaders from telling Greece to impose them.

My suggestion to Greece, and one that I already think is being acted on, is to wait until the ECB halts the ELA. At that point, Greece can and will blame the ECB for the controls.

Mike “Mish” Shedlock