Greek endgame nears for Tsipras as bank collateral hits buffers

By Nikos Chrysoloras & Vassilis Karamanis

Greek banks are running short on the collateral they need to stay alive, a crisis that could help force Prime Minister Alexis Tsipras?s hand after weeks of brinkmanship with creditors.

As deposits flee the financial system, lenders use collateral parked at the Greek central bank to tap more and more emergency liquidity every week. In a worst-case scenario, that lifeline will be maxed out within three weeks, pushing banks toward insolvency, some economists say.

?The point where collateral is exhausted is likely to be near,? JPMorgan Chase Bank analysts Malcolm Barr and David Mackie wrote in a note to clients May 15. ?Pressures on central government cash flow, pressures on the banking system, and the political timetable are all converging on late May-early June.?

European policy makers are losing patience with Tsipras who said as recently as May 14 that he won?t compromise on any of his key demands. While talks are centering on whether to give Greece more money, the European Central Bank could raise the stakes if it increases the discount on the collateral Greek banks pledge in exchange for cash under its Emergency Liquidity Assistance program.

Such a move might inadvertently prompt a further outflow of bank deposits and pressure Tsipras to choose between doing a deal and putting his country on the road to capital controls. A Greek government spokesman declined to comment, as did officials at the Greek central bank and the ECB.

?We are in an endgame,? ECB Executive Board member Yves Mersch said in an interview with Luxembourg radio 100.7 broadcast Saturday. ?This situation is not tenable.?

Liquidity Lifeline

The arithmetic goes as follows: Greek lenders have so far...