Greece negotiations at crucial juncture

Last night´s decision by the European Central Bank to restrict the the amount of extra Emergency Liquidity Assistance to Greek banks to just €3.3 billion means that the Greek Government must agree a deal with its EU counterparts on a bailout extension or face the prospect of a bank run.

The ECB has already issued €65 billion in ELA assistance, and the Greek central bank had requested an additional € 10 billion to support the country´s banking system.The decision to limit the funding will undoubtedly tighten the squeeze on the country´s politicians, who head into negotiations today in the knowledge that they need to agree a deal by tomorrow at the latest.

Proposals leaked yesterday outlined the case which the Greek government will make for a “loan extension” today, but the initial response from EU politicians is believed to have been sceptical, with some noting that the Greek proposals may be a rehashing of those which were rejected at Monday´s Eurogroup meeting of finance ministers.

The Greek Government are seeking a six month period with which they can devise a different course for the country´s faltering economy, but prospective changes to reforms made after the first bailout have been met with fierce resistence from creditor nations. The latest move from the ECB merely heightens the need for the Greeks to strike a deal.

Failure to do so would most likely see capital controls deployed in Greece, a turn of events that could spark chaos across European markets and something which may be the precursor to a so called “Grexit”. Finance Minister Yanis Varoufakis has appeared optimistic that a deal will be done, a sentiment that may not be shared by his EU counterparts at this juncture.

Despite the uncertainty, market have appeared relatively relaxed about the Greek situation, possibly indicating a general feeling that a deal will be struck.However the Ibex 35 was down 56.80 at 10,748.50 in early trading while the euro was trading at $1.1441.