Greece, not again?

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We would expect ECB’s GC to shut down ELA at the latest by 20 July. Assuming that all of the pledged collateral at the ECB is recorded at (close to) par on Greek banks’ balance sheets and that current average haircut on collateral is 50 percent, then retention of the collateral by the euro system would translate into a more than 30 billion-euro loss for the banks. This alone would wipe out shareholders’ equity. The Greek central bank will eventually need to print its own currency in order to inject new liquidity and capital.

How Bad Is ‘No’ for Greek Banks? Analysts Split on ECB Lifeline - Bloomberg Business

The ECB may not want to see the Greek banking system go down in flames overnight -- before some sort of smoothing exit arrangements can be made that could enable Greece to have a decent survival chance outside the euro. Maybe a 30-day line of credit to enable the banks to reopen, and to see for sure whether Greece is going to leave the euro or not. I don’t see how the troika can continue to work with Greece, but I do see a willingness to help them leave as gracefully as possible.

How Bad Is ‘No’ for Greek Banks? Analysts Split on ECB Lifeline - Bloomberg Business

it suggests that a 1 point rise in the primary surplus, which requires austerity that causes a 3-point fall in real GDP, will reduce inflation by about 0.7 percentage points (3*0.23). And if you start with debt of 170 percent of GDP, this raises the debt ratio by more than a percentage point each year. That is, the attempt to reduce debt by slashing spending actually raises the ratio of debt to GDP, not just in the short run, but indefinitely.

Paul Krugman - Austerity Arithmetic - The New York Times

German Chancellor Angela Merkel will take pains to appear she is extending an olive branch to Greece, but she has little room to negotiate after Greeks voted "no" on economic austerity, former Dallas Federal Reserve President Richard Fisher said Monday. "Ultimately, people report to their own people, and [Merkel] has to be supported by the German parliament and the German people," Fisher told CNBC's "Squawk Box." "There is a limit of tolerance, and she knows what that limit is."

Why Germany won't back down on Greece: Ex-Fed's Fisher