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Wednesday's European Central Bank Meeting Crucial for Greece

Press conference of the European Central BankThe European Central Bank meeting on Wednesday will be crucial for Greece as bank governors, such as Bundesbank’s Jens Weidmann, will certainly ask for a warning message to be sent to Greece regarding liquidity.
European bankers who hold a hard stance against Greece will ask on June 17 for reduction of liquidity to Greek banks, especially if by then there are no signs that Greece and creditors will come to an agreement at the June 18 Eurogroup.
It’s been a few days now that European bankers want to see the central bank cutting emergency liquidity assistance (ELA) to Greece and a haircut on collateral because of continuous negative ratings by international investment houses.
Greece’s current bailout program expires on June 30. If by July 1st Greece is not in a new bailout program, then the ECB cannot continue to fund Greek banks.
This makes Wednesday’s meeting of European state bank governors very critical for Greece. So far there is no evidence of an agreement between Greece and creditors until Wednesday. Analysts say that it is obvious that ECB President Mario Draghi will not be able to defer measures that would lead to further deterioration of the Greek banking system, leaving it without liquidity.
Draghi is scheduled to inform the European Parliament’s Financial and Monetary Affairs Committee on the latest developments in the Eurozone. He will refer to the latest developments in the negotiations between the Greek government and creditors, which broke down over the weekend. The Italian Central banker will be pressed to comment on the progress of negotiations, the Greek banking system and the liquidity which it receives.
According to Eurosystem sources, Draghi is expected to argue that lenders are still waiting for the Greek government to submit “adequate proposals” claiming that the proposals so far fall short of the European Union, the International Monetary Fund and the ECB demands.
Draghi: The Ball Is In Greece’s Court
European Central Bank President Mario Draghi told a European Parliament committee Monday that the institution is doing all it can to help reach a resolution of Greece’s debt talks, but said the “ball lies squarely in the camp of the Greek government to take the next step.”
Talks between Greek and eurozone officials collapsed Sunday, stoking fears of a potential default by Athens that could lead the way to Greece’s exit from the eurozone. Draghi said the ECB would continue to extend liquidity to the country’s banking sector “as long as Greek banks are solvent and have sufficient collateral.”
Draghi also emphasized that a final decision on whether to conclude an agreement with Greece “lies entirely” with eurozone finance ministers and their bosses in the eurozone national governments. “Hence this is a political decision that will have to be taken by elected policy makers, not by central bankers,” he said.

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