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| Decisions that will shape Greece's future are being made in Frankfurt | Decisions that will shape Greece's future are being made in Frankfurt |
| (35 minutes later) | |
| When Alistair Darling was faced with the hair-raising news in autumn 2008 that Royal Bank of Scotland was on the brink of being forced to close Britain’s cash machines, there was never a serious doubt that, whatever Mervyn King’s moral qualms, the Bank of England’s job was to underpin the UK’s financial system as “lender of last resort”. | When Alistair Darling was faced with the hair-raising news in autumn 2008 that Royal Bank of Scotland was on the brink of being forced to close Britain’s cash machines, there was never a serious doubt that, whatever Mervyn King’s moral qualms, the Bank of England’s job was to underpin the UK’s financial system as “lender of last resort”. |
| Yanis Varoufakis and his colleagues in Athens have also faced the prospect of a total financial collapse this week – but key decisions about whether, and on what terms, to prop up its struggling banks are being taken thousands of miles away in Frankfurt. | |
| And that is the desperate background against which the Greek prime minister, Alexis Tsipras, appears to have decided to cave in to his country’s creditors. | And that is the desperate background against which the Greek prime minister, Alexis Tsipras, appears to have decided to cave in to his country’s creditors. |
| Bank branches are already closed, a powerful symbol to Greek citizens of a government that has lost control of events. But Tsipras and Varoufakis know that without support from the European Central Bank, capital controls and withdrawal limits would just be the start. The Syriza government faced presiding over total financial collapse. | Bank branches are already closed, a powerful symbol to Greek citizens of a government that has lost control of events. But Tsipras and Varoufakis know that without support from the European Central Bank, capital controls and withdrawal limits would just be the start. The Syriza government faced presiding over total financial collapse. |
| As the Greek bank run continued in recent weeks, the ECB had repeatedly extended the ceiling for its crisis loan scheme, known as emergency liquidity assistance (ELA), which permits the Greek central bank to prop up Greek lenders. | As the Greek bank run continued in recent weeks, the ECB had repeatedly extended the ceiling for its crisis loan scheme, known as emergency liquidity assistance (ELA), which permits the Greek central bank to prop up Greek lenders. |
| When the ECB opted to leave the ELA ceiling unchanged on Sunday, it didn’t amount to pulling the plug on the banks, but it sent the message that Frankfurt – and by extension Brussels – would be willing to watch the Greek banking sector fail. | When the ECB opted to leave the ELA ceiling unchanged on Sunday, it didn’t amount to pulling the plug on the banks, but it sent the message that Frankfurt – and by extension Brussels – would be willing to watch the Greek banking sector fail. |
| So perhaps we should not be surprised that despite the fiery rhetoric of recent days, Tsipras sent a two-page letter to the country’s creditors on Tuesday night, which – subject to a few amendments, including the continuation of tax breaks for Greek islands – accepts the conditions of the bailout deal his government rejected so vehemently just a few days ago. | So perhaps we should not be surprised that despite the fiery rhetoric of recent days, Tsipras sent a two-page letter to the country’s creditors on Tuesday night, which – subject to a few amendments, including the continuation of tax breaks for Greek islands – accepts the conditions of the bailout deal his government rejected so vehemently just a few days ago. |
| Yet it may be too late. Rather than glorying in what looks like the abject capitulation of the radical Syriza government, Wolfgang Schäuble, the German finance minister, told reporters in Berlin he had not even read the letter, and didn’t consider Tsipras and his colleagues to be trustworthy negotiating partners. | Yet it may be too late. Rather than glorying in what looks like the abject capitulation of the radical Syriza government, Wolfgang Schäuble, the German finance minister, told reporters in Berlin he had not even read the letter, and didn’t consider Tsipras and his colleagues to be trustworthy negotiating partners. |
| Eurogroup finance ministers will meet later on Wednesday to discuss a separate request from Tsipras for a third bailout from the eurozone’s crisis fund, the ESM, to replace the deal that expired at midnight on Tuesday, causing Greece to default to the International Monetary Fund. | Eurogroup finance ministers will meet later on Wednesday to discuss a separate request from Tsipras for a third bailout from the eurozone’s crisis fund, the ESM, to replace the deal that expired at midnight on Tuesday, causing Greece to default to the International Monetary Fund. |
| But Germany appears to have decided it can’t get down to serious talks until there has been regime change in Athens. | But Germany appears to have decided it can’t get down to serious talks until there has been regime change in Athens. |