After three months of acrimonious talks, false hope, and threats of default, Greece’s endgame is finally approaching.
Having warned that they will run out of money to continue running the basic functions of a government, the country’s cash crunch seems to have finally reached a tipping point.
In anominous harbinger of what now lies ahead, hundreds of elderly Greeks struggled to get access to their pensions on Wednesday, as the local authority in Athens scrambled to find the cash to make its monthly payments.
From November 2014 to February 2015, €28bn has rushed out of Greek banks, sending deposits to a 10-year low.
The shortfall is being plugged by ever-increasing amounts of emergency cash from the European Central Bank, which is fast being burnt through.
This Emergency Liquidity Assistance (ELA), which has hit €77bn since February, has been described the”Sword of Damocles” hanging over the country.
With negotiations showing little discernible progress, the ECB has touted plans to put a firm ceiling on ELA, as well as forcing banks to take a bigger haircut on the collateral they need to access the funds.
It is a stance that is beginning to scarily resemble the threats which resulted in Ireland eventually bowing to eurozone bail-out terms in 2010.
Meanwhile, the Greek central bank’s Eurosystem liabilities have breached €110bn, rapidly reaching heights not seen since Greece had to undergo the biggest private sector bond restructuring in history in 2012.
Should the country default, it remains to be seen whether the rest of the eurozone would have to pick up the tab for the mess through the Eurosystem’s Target2 liabilities.
Greece’s post-default realityremains up in the air. Theoretically, Athens could stiff its lenders and temporarily stay in the currency union – a situation which would be heavily dependent on the benevolence of the ECB.
In the words of Prime Minister Alexis Tsipras: “Whoever gets scared in this game loses”.
Greece may not have a choice but to capitulate and finally admit defeat.