Given the recent substantial increase in Greek political risk and the high probability of early elections I ‘d like to comment on a recurring theory that ECB can threaten to close down Greek banks access to liquidity (in the same manner it did in Cyprus) in case that a newly elected Syriza government does not adhere to the currently agreed upon measures, reforms and budget cuts.
In my view, 2015 is quite different than 2012 and the possible threats that the ECB could (then) make against Greece are no longer possible.
The main measure that the ECB can take against Greece in case that the current program is put on hold is to remove the waiver on accepting Greek government guaranteed securities and other assets as collateral in its regular refinancing operations. The important fact to keep in mind though is that Greek banks do not hold significant amounts of…
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