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Bankers’ Cold Coup Escalates in Greece

May 7, 2015 (EIRNS)—Greek Member of the European Parliament Stelios Kouloglou, representing Syriza, charged last week that the international creditors have launched a cold coup, not with tanks as against Allende’s Chile, but with banks. This coup started within days of the new Greek government’s coming to power in January, when the European Central Bank cut off all regular liquidity operations to Greek banks, forcing them to take more expensive Emergency Liquidity Assistance that requires constant ECB approval. Now it is reported that, because Greece refuses to capitulate to deep cuts in pensions and salaries, the ECB is threatening to cut off the ELA.

Citing unnamed ECB sources, Kouloglu said the ECB will raise haircuts on the Greek bonds used by Greek banks to as high as 90%, which would be consistent with Greece being considered in default. Such a move would force Greece to implement capital controls, which would lead to Greek banks being completely cut off from the rest of Europe, despite the ECB having approved another increase, however slight, of EU2 billion to the Greek banks, which only barely keeps them afloat, as deposits in Greek banks continue to decline.

They claim the decision will be taken after the Eurogroup meeting on May 11.

According to Kathimerini, the coup players are not confined to the ECB, but also include international securities firms which are reportedly increasingly curtailing trading with Greek banks, for fear that the government will impose capital controls. These controls would be forced on Greece by the ECB, if it cut off Greek banks.

"The latest sign that the market is attempting to fortify itself against a Greek default, is playing out in the FX [foreign exchange] market," said Mark Williams, a former bank examiner for a Federal Reserve Bank and now a lecturer at Boston University’s Questrom School of Business. "The market has increasingly become aggressive in preparing for a Greek default and in protecting itself from the potential financial impact."