ESM Signs Off €7.5bn Greek Bailout

The European Stability Mechanism has given the green light for Greece's €7.5bn bailout.

However, it is not clear as to whether the IMF is onboard with this; as there has yet to be any debt relief offered to Greece.

Greece Will Need Another Bailout

Unsurprisingly Greece, it seems, isn't fixed!

Klaus Regling, the Managing Director of the European Stability Mechanism, has said that he believes that the Greek government will soon be out of liquidity and Greece will need another midterm program with the participation of International Monetary Fund (ie another bailout).

He is quoted by Keep talking Greece:

“Greece will not need money tomorrow, but sooner or later there will be a money problem. 

Greece has debt service payments of nearly 4 billion euro in the first quarter [of 2016]. It is very likely that the country has a small primary deficit in the beginning of the year. Therefore, the government will need money to cover budget spending. “

That will not go down well in Germany.

Regarding Greek Debt Relief, it is bad news for the Greeks. Regling said that the Eurogroup was committed to Debt Relief after the Program Review is completed.

“Economically, the renegotiation of debt is not urgent because Greece has received a grace period of 10 years to repay the debt and the majority of the interest. Therefore, during the next 10 years, the service of the debt will not be increased.  

Consequently, a new debt relief would have an impact on payments, mainly after 2022.”

That will not go down well in Greece!

German Court Refers Complaint Against ECB to European Court

The German Federal Constitutional Court has decided to refer a complaint against the ECB's "unlimited" bond-buying programme to the European Court.

The German Federal Constitutional Court stated:

"In the view of the Senate, there are important reasons to assume that it exceeds the European Central Bank’s monetary policy mandate and thus infringes the powers of the Member States, and that it violates the prohibition of monetary financing of the budget."

It will rule on the legality of the eurozone's permanent bailout scheme, the European Stability Mechanism (ESM), on March 18.

Thus the Euro continues to endure a period of uncertainty, which needless to say negatively impacts on its "value" when measured against other currencies, and plays into the hands of the monetarist hawks in the Northern region of the eurozone who wish to increase rates at the expense of the millions who are unemployed in the Southern region of the eurozone.

The Empty Vessel That Is The ESM

In case you didn't realise it, today is the official launch of the European Stability Mechanism (ESM), allegedly this is the permanent bailout fund which offers a pot of cash that can be used to bailout troubled nations.

Eurozone finance ministers, who form the ESM's board of governors, will hold the inaugural meeting in Luxembourg today, two years after the idea of setting up such a fund was endorsed.

Who says that EU politicians don't move "quickly" when there is a crisis?

Reuters reports that the fund's lending capacity will be:

"based on 80 billion euros of paid-in capital and 620 billion of callable capital, against which the ESM will borrow money on the market to lend it on to governments cut off from sustainable market funding".

Oh, and it won't reach its full capacity gradually by 2014.

What does that mean?

It means that even "fully funded" at Euro620BN it hasn't enough money to staunch the tsunami ripping through the Eurozone's finances.

Oh, but as already noted, it hasn't got Euro620BN anyway; ie it is an empty vessel!