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Here's one outside scenario that the creditors are probably not considering likely or even possible.

  1. The deposit outflow from the Greek banks picks up pace on Monday
  2. The ECB extends extraordinary liquidity (ELA)
  3. At the extraordinary eurogroup on Monday, Varoufakis is threatened with an end to ELA unless greece capitulates on austerity and imposes capital controls like Cyprus did two years ago.

So far, everything is proceeding according to plan. Here's where Varoufakis takes a different turn.

4. Varoufakis tells the ECB if it believes the Greek banks are insolvent and the ELA should be stopped, then the SSM bank supervisory branch of the ECB should wind the banks down there and then. Banks which the SSM had been telling the world until last week were solvent and well-capitalised. We now have a European directive on bank recovery and resolution, after all. And if the national government in question cannot recapitalise the banks the ESM (formerly EFSF) is on the hook, too.


A society committed to the notion that government is always bad will have bad government. And it doesn't have to be that way. — Paul Krugman

by Migeru (migeru at eurotrib dot com) on Sat Jun 20th, 2015 at 09:02:24 AM EST
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