A Weekend of Intense And Tense Negotiations for Greece

Wednesday 15 July is 5 days before Greece is due to pay the ECB €3.5bn on Monday 20 July. Bridge financing will be discussed at today's Eurogroup to prevent a Greek default on the ECB. Adding up the numbers, we find the Greece needs just under €7bn by Monday. Different possibilities are on the table, notably the EFSM facility. 

This mechanism allows the Commission to borrow up to €60bn on behalf of the EU. The EFSM has been activated for Ireland and Portugal, for a total amount up to €48.5bn. Two points are worth noting here: 

(1) This facility needs to be approved by the EU Member States, not the euro area countries (albeit by a qualified majority) 
(2) A Memorandum of Understanding (MoU) will also be required to access this facility.

Even if the bridge financing solution fails, this is a manageable situation. Already, the ECB is under criticism for authorising ELA to Greek banks, which a number of observers believe no longer meet the collateral and solvency requirements. This will in itself not change on 20 July as the Greek sovereign has already defaulted on the IMF. 

Societe Generale opines
(1) Greek capital controls will remain in place for the foreseeable future,
(2) the ECB will maintain the ELA cap of €89bn until political agreement is reached on a third adjustment programme
(3) the ECB would even in a worst case scenario do its utmost to prevent a very disorderly collapse of  the Greek banking system. 

Source : FX-Primus

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