Do the election results mark a turning point for Greece? Think again...

Over on the Spectator's Coffee House blog, we argue,

Things in Greece could have been worse after the election, but that fact can’t be hailed as a ‘turning point’. Assuming that Greek political leaders form a coalition and push ahead with EU-mandated reforms, which is a very likely outcome given that Greece may only have enough cash in its coffers to soldier on for another month, any such government will inevitably include parties that completely disagree on how to resolve the crisis. The only glue would be the fear of economic catastrophe.

This uneasy government would be ill-suited to withstand pressure from Syriza and the rest, who will spare no effort in blaming it for the inevitable economic pain. The threat of new elections, which would probably lead to Greece's exit from the Eurozone, will constantly hang over the country’s head like the famous sword of Damocles.

A great deal of hope is being placed on the new government’s ability to renegotiate the terms of the EU-IMF bailout programme. At the G20 summit in Mexico, Angela Merkel went a long way to play down these expectations. This suggests that the upcoming revision will largely be a superficial exercise. Greece may obtain a slight reduction in the interest rates, an extension of the debt repayment deadlines, a few billion for investment, and perhaps even be given some slack on its deficit reduction targets. However, the thrust of the bailout agreement will stay the same — and many of the conditions will remain unachievable and poorly targeted at the substance of Greece’s problems, such as the dramatic loss of competitiveness since it joined the euro, and a number of systemic flaws in the country’s administration.    

So should Greece leave the Eurozone as fast as it can? The euro crisis has proved that Greece should never have joined the single currency in the first place, and the benefits of Greece trying to re-build its economy outside the Eurozone are well-documented. However, if Greece left the euro now, the risks involved would very likely outweigh these benefits in the short term. Our estimate is that, if Greece exited today, it would need external financial assistance worth up to €259 billion — or else face the serious threat of hyperinflation and a banking sector collapse. Given the blind alley down which Europe has led Greece, this is the unfortunate reality, failing to take these issues into consideration could lead to a terrible outcome for all, including the UK. 

Having said that, the key question about the future of Greece’s euro membership will not go away; and it will have to be answered, sooner or later. The impression is that, once Greece manages to balance its budget and put its ailing banking sector back in decent shape, dropping the euro will look a more sensible, even desirable, alternative — especially if the Greek budget is to be drafted in Brussels on a permanent basis.

Euro opinion polls point to more fudge

Some interesting opinion polls from the heart of the eurozone from the last couple of days:

In Greece, a series of polls shows momentum ahead of the country’s re-run election next month shifting slightly from the radical left anti-bailout and austerity SYRIZA party to the pro-bailout and austerity centre-right New Democracy party, though SYRIZA is still set for gains compared with its election result earlier this month. New Democracy, which won the elections with 18.9%, now leads with between 25.6% and 27.7%, a lead of between 0.5% and 5.7% over SYRIZA. That means that together with the establishment socialist PASOK party, which won 13.2% at the elections, a pro-bailout coalition could be formed with a majority of seats in the Greek parliament, something that evaded the parties last time.

The polls also showed support for staying the euro at 65% versus 25% against. While staying in has enjoyed a consistent majority, voters are potentially starting to re-align their party choice accordingly - realizing perhaps that ripping out the bailout package comes with massive risks - albeit this could change again before the elections and remember, SYRIZA remains the joker in the pack.

Meanwhile in Germany, public opinion seems to be shifting in the anti-euro direction, with an opinion poll published on Friday by German state TV ZDF finding that 79% of respondents rejected eurobonds as a solution to the crisis, which is a stark reminder for the rest of Europe how far away we actually are from eurobonds. Interestingly, though, support for euro membership itself was also waning, with 50% (up from 43% in February) saying they believed it carried more disadvantages than advantages for Germany, with 45% taking the opposite view (down from 51% in February).

These opinion polls - together with events of recent weeks - point towards one conclusion: we're looking at yet more fudge. As we've pointed out before, as sceptical as one might be about the future of the euro, there's still considerable scope for negotiations on all sides of the Greek crisis, and therefore, chances that the country can find a settlement and agreement with its creditors after the elections that allows it to stay in the euro remain strong. It would be different if the public were to turn against the euro itself, which it isn't at this time.

The stakes are simply far too high for another round of Russian roulette.

Is the ECB trying to push Greece out of the euro? We’re not so sure…

A story seems to have taken hold today that suggests the ECB may be indirectly trying to push Greece out of the euro by reducing its liquidity support to its banks which, the theory goes, would threaten a banking collapse and cause Greece to leave the euro in order to use its own central bank to support its banks. This seems par for the course with many of the headlines doing the round at the moment, but after some further inspection we're not certain that any decrease can really be seen as the ECB trying to force Greece out. 

The story started from an overnight report from Dutch daily Het Financieele Dagblad which claimed that, according to unnamed central bank sources, the ECB is winding down its lending to Greek banks due to concerns over their capital levels. According to the article the liquidity provision from the ECB to Greek banks has dropped by almost half since they last publicly recorded level of €73bn in January.

Now, the report could be accurate but there are some caveats here which need to be noted.

First, ECB lending to Greece was always going to fall post restructuring.

Most of the €73bn borrowing by Greek banks from the ECB uses Greek bonds as collateral, when these were written down by over half, the banks were always going to have much fewer assets to post as collateral. This problem has also been exacerbated by the fall in the value of the new Greek bonds, which would have ensured that they were subject to huge haircuts in value at the ECB’s liquidity operations.

So, the Greek banks would probably have always had to cut their borrowing from the ECB simple due to collateral constraints.

The slack will naturally be taken up by the ‘Emergency Liquidity Assistance’ ( ELA, provided by the Greek Central bank under less stringent capital requirements, see here for a full discussion) resulting in a decrease in the level of lending by the ECB directly to Greek banks. Some lending would have been maintained by the €35bn in guarantees which the EFSF provided to help insulate the ECB against additional risk. However, these fall far short of covering the entire €73bn borrowing by Greek banks from the ECB (against which they would have needed to post around €100bn in collateral due to the large haircuts which the ECB applies).

One of the motivations for the ECB's supposed reduction in lending is the slow progress in the bank recapitalisation. This could well be true, however, the fact is that without this new capital the banks will continue to be short of collateral to use at the ECB, meaning lending must take place under the ELA in the interim.

Lastly, the size of the balance sheets which Greek banks need to service would also have been reduced by the restructuring meaning they may need less liquidity than before.

In summary, a fairly large decrease in ECB lending to Greek banks would have been expected in the aftermath of the restructuring, even if it were just moved onto the ELA. It could in fact have been motivated by constraints on the banks themselves rather than the ECB.

Now, that’s not to say that the ECB is not annoyed by the lack of progress in the Greek bank recapitalisation but we all know that the correlation of these events does not mean causation. Things will be clearer when the full figures are released, but until then we’d be very wary of suggestions that the ECB is trying to force Greece out the euro, it’s not like the eurozone is short of dramatic headlines anyway.

No Good News From Greece

Today's negotiations in Greece on the creation of a government of technocrats have broken down. Talks will resume tomorrow morning, but only in order to appoint a caretaker cabinet which will remain in office until new elections take place - in all likelihood as early as mid-June.

Although widely expected, the outcome of today's meeting is going to create further political and economic uncertainty over the future of Greece in the eurozone. So what could happen now?

First off, it's by no means certain that a stable government will come out of the next elections. The latest polls indicate that left-wing SYRIZA could be the biggest party, but it would still have to form a coalition government. However, following the latest tough round of talks, the outspoken leader of SYRIZA Alexis Tsipras (in the picture with Greek President Karolos Papoulias) doesn't seem to have many friends - the Communist Party has ruled out a left-wing coalition since the very beginning of the electoral campaign, and Democratic Left leader Fotis Kouvelis said yesterday that he would no longer cooperate with Tsipras, even after new elections. On the other hand, Tsipras has repeatedly said that he doesn't want to become a 'complicit' of New Democracy and PASOK - the only two Greek parties that insist on the need for Greece to stick to the EU-IMF bailout programmes.

Needless to say, this would complicate Greece's position vis-à-vis its eurozone partners. As Eurogroup Chairman Jean-Claude Juncker told reporters in Brussels yesterday, there could be some room for Greece to negotiate a relaxation of its deficit targets if a serious new government can be formed. As we pointed out here, Greece may well be heading towards a series of inconclusive elections. This would make it very difficult indeed for Germany and the others to justify the disbursement of future tranches of bailout money.

Greece's euro exit is becoming increasingly likely - not just because it's being talked about by a growing number of top European politicians - although we still think that Greece's anti-bailout parties may ultimately soften their stance, potentially paving the way for a compromise. What's most interesting is the fact that figures are being put on the impact of a Greek euro exit (and consequent default). A couple of hours ahead of Francois Hollande's inauguration ceremony, outgoing French Economy Minister Francois Baroin told Europe 1 that Greece's euro exit and default "would have a net cost of €50bn" for France, "plus the debt held by banks and insurance firms in their portfolios." Le Figaro did its own estimates, and put the cost at up to €58.5bn - that is, €895 per Frenchman.

Quite a busy eurozone day. As usual, you can follow our live updates on Twitter @OpenEurope, and continue to check out our blog for updated analysis. 

The buck passing continues in Greece

The political situation in Greece following Sunday's elections is getting even messier. Following the failure of conservative New Democracy to even begin a serious discussion about forming a government (negotiations lasted all of six hours), the Radical Left (SYRIZA) yesterday also threw in the towel. The "dream" of a leftist Coalition government had failed, said SYRIZA's leader Alexis Tsipras, but added that his party had nonetheless forced Europe to reconsider the Greek bailout package (perhaps a bit premature). 

The buck has now been passed to socialist PASOK, the former governing party which slumped to third in the elections. PASOK leader Evangelos Venizelos said yesterday that he will ask Greek President Karolos Papoulias - who by now must be a seriously nervous man - to give him the go-ahead to start discussions with other parties in a last-ditch effort to try to form a government. If that fails, we're definitely looking at fresh elections, probably in June. The prospects for PASOK succeeding are slim - to say the least.

So what's going to happen? Frankly, heaven knows. As we have noted before, even fresh elections may not generate a stable government, though there's a chance that those people who voted on smaller parties that didn't get over the 3% threshold to enter the Greek parliament, may shift their votes to bigger parties. SYRIZA clearly remains the X-factor, and could potentially pick up more votes. The party has outlined a five point plan - including completely ripping up the bailout agreement - that is simply fundamentally incompatible with the position of the Germans and the IMF. The politics are immensely complicated, but if SYRIZA's support is required for forming a government, then we're basically looking at three potential outcomes:

1) SYRIZA and Germany/IMF stick to their guns, the bailout cash is frozen, Greece defaults and almost certainly leaves the euro
2) SYRIZA caves and Greece is given the next tranche of bailout cash and the charade continues for a bit longer
3) Germany/IMF cave, the bailout terms are revised and Greece is given the cash

Perhaps a path between the second and third options would be possible too - and given the stakes, not unlikely. In any case, it ain't lookin' good.

Who's afraid of the big bad bailout fund?

Update - 12:10: Eurozone finance ministers have already reached an agreement and put out a statement. It's pretty much exactly as we expected, with all assigned funds being rolled into the headline lending volume to give the €800bn.

The fact remains though that, even combined, the funds will not be able to introduce more than €500bn in fresh lending. This was the aim all along. In fact, all eurozone finance ministers have done is correct a previous mistake which would have limited the combined lending capacity to €300bn (as originally the treaty essentially specified that only €500bn in loans could be outstanding at any one time). There should be no illusions that this changes almost nothing (we expect not even the markets which have been reacting to every piece of news will be moved much by this). One thing is for certain though this is a clear win for Germany.

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Eurozone finance ministers are meeting today, in what looks to be the most chilled get-together of this group in recent time. They’re set to sign off on an agreement that will see the combination of the eurozone’s temporary and permanent bailout funds, the EFSF and ESM. On paper, the funds have the potential to produce a combined firewall of €940bn. Still far too little if Italy and Spain went, but an impressive sum nonetheless. That is, on paper. In reality they won’t even come close to this.

In an interview with Bild this morning, German Finance Minister Wolfgang Schauble said he didn’t want to “unnerve markets with numbers”, but in a speech in Copenhagen he did just that, saying,

"We have 500 billion euros in fresh money available, together with the programs already agreed for Ireland, Portugal and the new program for Greece. It is about 800 billion (euros). I think it's enough."

Apparently, Schauble reached this number by adding €500bn from the ESM, €200bn from the EFSF, €56bn in bilateral loans to Greece and €60 billion from the third bailout fund, the European Financial Stability Mechanism (EFSM) – which is underwritten by all 27 member states via the EU budget. But much of this cash has already been spent, i.e. the EFSM only has €11bn left, and some of the other money can’t actually be lent out. In addition, the remaining €240bn in unused EFSF capacity will be held back for ‘exceptional circumstances’ until mid-2013.

As we’ve been reminded of time and again, the only thing that matters is effective lending capacity. The real amount of cash that is still available to back stop struggling states, should it come to that, is only around €500bn. Here’s the lending capacity math (courtesy of some excellent analysis by the WSJ):

• Mid-2012 – The ESM will be limited to €210bn (as it will only have €32bn in paid-in capital). Along with the €240bn in ‘exceptional’ funds, this gives a total potential lending of €450bn. (The money which is already out the door should be ignored)

• Mid-2013 – Following a second instalment of capital the ESM will be able to lend €420bn. The ‘exceptional’ funds will be wound down around this point.

• Mid-2014 – All ESM capital paid-in, reaches total lending capacity of €500bn.

(There is one caveat to these figures, in that the eurozone could decide to speed up the paying in of ESM capital if the funds were needed. However, this would likely face significant opposition from the likes of Germany and Finland, and is therefore most certainly a last resort).

So despite Schauble’s comment, euro finance ministers continue to throw various different numbers around, which bear few resemblances to reality. We also note that the French Finance Minister, François Baroin, yesterday floated an unfortunate analogy. He said,

"The bailout fund is a bit like the nuclear weapon in the military domain…It is not intended to be used but to act as a deterrent."

The problem here is that if it’s too big and terrible to ever be used, it’s likely that it won’t ever be used. Even jittery markets will be able to figure out that a large fund which would damage French and German credit ratings if ever extended will never be fully tapped. So clearly some circular logic at play. And let's not forget that it’s still far too small to save Italy and Spain should if worse come to worse.

But at least eurozone ministers can look forward to a quieter Friday than usual...

Burying parliamentary scrutiny?

The picture on the left is not some random shot to illustrate excessive bureaucracy, it's literally the document setting out the details of the second Greek bailout package, which German MPs just voted on.

Not exactly bed time reading.

As expected, the Bundestag voted to approve the package, by 496 votes in favour compared with 90 against and 5 abstentions. We'll provide a breakdown of the votes alongside some further analysis in due course.

While approving the deal, many MPs were unhappy (Die Linke's Kathrin Vogler specifically raised the issue) about having had only a few days to read through, digest and then analyse a document which came to no less than 726 pages, including hugely complicated issues such as explaining different options for bond swaps, how the swap would work and the impact on Greece's debt sustainability (and therefore the risk to German taxpayers).

The agreement was only reached in the early hours of Tuesday morning, and the Bundestag's budgetary committee only looked into the details on Friday, meaning ordinary MPs only got hold of the documentation over the weekend.

This begs the question, how in the world are MPs supposed to fulfil their role scrutinising the decisions reached by governments. The bailout took eight months to organise, now MPs were expected to approve it with a weekend's notice (at least with respect to the details). Given the number of unanswered questions and heroic assumptions on which the agreement shakily rests, this is a pretty scary situation.

In fact, if this is the future of parliamentary/constitutional democracy in the eurozone, you'd forgive national parliaments for believing that is a price not worth paying for keeping the eurozone intact.

STOP! Bild pumps up pressure on German MPs ahead of vote on second Greek bailout

With the debate ahead of the Bundestag vote on approving the second bailout package for Greece due to get underway in 30 min or so (as ever we will be covering the event live on our twitter page @openeurope), Germany's biggest selling tabloid, Bild Zeitung, has upped the ante calling on MPs to vote against the package.

Under the brilliantly simple headline "STOP" (see picture above), Bild writes:

"Once again, it's payday in the Bundestag. €130 billion are meant to save Greece from ruin. Bild appeals to all MPs, do not proceed with this folly!"

The entire page 2 of the paper then features a range of interviews with economists, such as the German Guru Hans-Werner Sinn, explaining why Greece is a "bottomless pit" and why it "can't stand on its own two feet even with this bailout". The Chief Economist of Deutsche Bank, Thomas Mayer, says that a euro exit should not be "taboo" anymore.

It's pretty strong stuff.

Remember, as we've pointed out before, Bild is a huge paper - by far the best selling paper in Germany (far bigger than the Sun for example) and according to some measures, the paper with the widest circulation outside Japan.

In other words, it has a lot of political clout and serves as an important barometer of public opinion, which you mess with it at your peril. A poll in Bild Am Sonntag also showed that 62% of Germans are against the second Greek bailout (up from 53% in September).

But how many MPs, not including those who were already going to vote against, will be swayed? Given that the opposition SDP and Green party will back the government there is virtually no chance of the bailout being rejected, so the issue is how many coalition MPs will rebel, and whether it will be more than the 15 who voted against the expansion of the EFSF back in September.

If Merkel is unable to rely solely on her MPs to pass through the bailout, it will have serious repercussions for the continued viability of the government...

Money vs Democracy: What The European Press Said Of The Second Greek Bailout

As the negotiations on the second Greek bailout went on until 3.30am on Tuesday, Europe's papers weren't able to provide a response to the agreement until yesterday. Here's a round-up:

As usual, we would like to start with Germany. The front page of Die Welt ran with an unequivocal headline,

Europe: Welcome to the Transfer Union

In the Frankfurter Allgemeine Zeitung, Economics Editor Holger Steltzner argued,

Prices must fall if Greece wants to compete with its neighbours in agricultural products or tourism. Such an adjustment usually works via the exchange rate with the devaluation of the own currency. But members of the monetary union have relinquished this instrument. In Greece wages and prices would have to fall by half in order to become as successful as Ireland. That is too much – there is a lack of will and force. Therefore, a third credit package is coming – or the farewell to the euro.

While part of the German press was more interested in the economics of the second Greek bailout, others chose to focus on what the second Greek bailout could mean for the future of Greek democracy.

In Die Welt, political commentator Günther Lachmann warned,

Europe is being radically changed. With regulations in a Socialist-style language the EU is trying to govern nation-states...The kind of consequences this has can now be seen in Greece. There, the government is actually thinking of changing the constitution, at the request of the EU, to give absolute priority to debt repayment.

Wolfgang Böhm wrote in Austrian daily Die Presse,

[Greece] is de facto being completely put under custody...This has nothing to do any longer with the normal democratic order of a sovereign state.

To continue with 'Northern' Europe, this is what Carla Joosten wrote in Dutch magazine Elsevier,

The euro has condemned European citizens to deal with each other more than they may really want to. Can Europe go on this way?

A leader in Belgian magazine Knack carried the headline,

Greece must choose between money and democracy.

The article is particularly critical of German Finance Minister Wolfgang Schäuble's idea of postponing the Greek elections, due in April, and questions how it is possible that such proposals,

Are being floated without any serious protest coming from the European Commission, the European Council or even the European Parliament.

Let's move South.

In Italy's main business daily Il Sole 24 Ore, editorialist Carlo Bastasin noted that, with the second Greek bailout,

Europe enters into the heart of the state’s supreme authority, showing that monetary and fiscal policies are now detached from the sphere of the nation’s exclusive prerogatives.

In an op-ed in Spanish business daily Expansión, Spanish Economics Professor Juan Castañeda warned,

This European way out of the crisis in which national institutions democratically elected by citizens are gradually losing the effective ability to rule their countries…to the advantage of European institutions chosen by states will do nothing but distance even more the citizens from the so-called European project.

So what's the alternative? Well, get prepared to read something pretty unusual among Spanish academics,

Greece’s temporary suspension from the euro and the circulation of the new drachma in parallel would allow for the effective devaluation of Greek prices and costs, once and for all and without so much social discontent.

For those who love ancient Greek history, Nick Malkoutzis took inspiration from the 'marathon negotiations', arguing in Greek daily Kathimerini,

Marathon can refer to one of two things: one of the most decisive battles in history, in which the ancient Greeks repelled the threat of the Persians and a disastrous future, or the long-distance race which marks the lung-busting effort of messenger Pheidippides to inform the Athenians of victory over the invading army...Where these two allegories might cross paths in the case of modern Greece in the wake of the Eurogroup’s bailout decision is that the country might escape the clutches of disaster but its people, like the ancient messenger, might collapse from exhaustion.

Not sure we can call the following comment piece a 'reaction' to the second Greek bailout, given that it was written ahead of Monday's Eurogroup meeting. However, French columnist Nicolas Barré made a very good point in French business daily Les Echos,

Two years ago, European leaders concealed the gravity of the situation of the sickest economy of the eurozone, and pretended to believe that, with some tens of billions of aid, [Greece] would be put back on its feet and miraculously regain the markets’ confidence. Not only was this a complete failure, but such a denial of reality also undermined the credibility of the eurozone as a whole and contributed to make the crisis worse. So that nowadays it’s frankly paradoxical that the more cautious, those who warn against the risks, those who don’t rule out a Greek default in the coming months, are relegated with disdain into the ‘anti-European’ camp.

And here's what François Roche has written in La Tribune,

Over the coming years, Greece will be watched over by an impressive number of EU and IMF observers. It must commit, in its constitution, to prioritising the reimbursement of its foreign creditors. Can this stand up to the exasperation of [Greece’s] public opinion and part of the political class? For the first time in the history of the European construction, a member state is deprived of part of its budgetary policy prerogatives.

What about voices from outside the eurozone?

In Swedish daily Dagens Nyheter, columnist Annika Ström Melin argued,

The crisis is not only about the survival of the euro. A rescue package for democracy will be required as well. Even more secret meetings and ingenuous but incomprehensible agreements between the representatives of the political elite are not enough to save the European project.

In Polish daily Rzeczpospolita, Andrzej Talaga wrote,

Trading sovereignty in exchange for financial assistance could be acceptable if it were a temporary measure, until Athens is ready to stand on its own feet again. However, this is not going to happen – the agreement reached in Brussels contains…utopian macroeconomic assumptions regarding Greece’s debt, deficit and growth prospects which could only be achieved if Greece were to completely overturn its economic, administrative and political system and replaced its pathology with a healthy state and economy…Let it be a warning to others.

We are sure that, after this 'marathon' of comments, you are still curious to know what we said in reaction to the second Greek bailout. We published a comprehensive response on our blog, which you can read here. In addition, over on the Telegraph's blog, we argued,

New debt issued by the Greek government in 2014/2015 will essentially be junior to existing debt. This raises the question why private creditors would want to purchase Greek debt at all in three years' time, given that they would be first in line for any losses if Greece’s economy goes down the tubes. Taken together with the tough austerity targets which could choke of any chance of recovery, as the [debt sustainability analysis] admitted, this may force Greece to seek another €50bn bailout after 2014 [as investors will have little incentive to hold Greek bonds].

This is enough reaction for one day, but if you want to stay on top of the latest developments in the eurozone crisis, follow us on Twitter @OpenEurope.

Bild sets it sights on another scalp

Bild's reporting of the eurozone crisis has hardly been subtle, but following the increasingly hostile attitude towards Germany by the Greek public and politicians, this morning it has openly called for Greece to "finally be be thrown out of the euro!", adding that the only things the country is able to export are “scorn, abuse and insulting rants”.

As Welt journalist Florian Eder pointed out on twitter, with German President Christian Wulff's resignation this morning over the long-standing property scandal, Bild has claimed a significant victory (the paper played a key role in uncovering the scandal and called on Wulff to step down).

Will it also get its way on Greece?

The Greek Crisis: Five Key Developments

The decision on the second Greek bailout has been put on ice until (at least) next Monday, but things are moving fast in and around Greece these days - so here are yesterday's five key developments in the Greek crisis:

• A new poll published by Greek magazine Epikaira confirmed that the Greek electorate is moving towards the extremes of the political spectrum. New Democracy - the centre-right party led by Antonis Samaras - is credited with 27.5% of votes, while former Greek Prime Minister George Papandreou's PASOK lags well behind with 11%. In total, the two 'mainstream' parties would therefore get 38.5% of votes. The Greek Communist Party, Democratic Left and the Radical Left Coalition (SYRIZA) are credited with a combined 43.5% of votes, but the first has ruled out entering a coalition with the other two hard-left parties. These results are clearly very significant, not least because they will give Germany, Finland and the Netherlands fresh impetus to argue that Greece's smaller parties should also provide written commitments to austerity. Unfortunately, as we point out in our latest briefing, at the moment it's quite hard to see any of these parties agreeing to such a request;

• PASOK's Michalis Chrysochoidis, Greek Minister for growth and competitiveness (definitely an unenviable post), told reporters in Frankfurt that his party is "in favour of an extension of the life of [Greek Prime Minister Lucas] Papademos’s government...Elections should take place by the end of the constitutional term in 2013." Incidentally, Germany, Finland and the Netherlands reportedly brought up the possibility of postponing the Greek elections during Wednesday's conference call of eurozone finance ministers;

• Greek President Carolos Papoulias' anti-Schäuble invective didn't go unnoticed in Germany. CDU MP Christian von Stetten yesterday said that, without the German Finance Minister, Greece would already have been bankrupt a long time ago. The Greek President's intervention, he went on, was "unthinkable" and "absurd". Most significantly, Mr von Stetten said that Papoulias' words would "certainly impact" on the Bundestag vote on whether to approve the second Greek bailout, due on 27 February;

• According to Die Welt, the ECB has started the announced swap of its €50 billion Greek government bond holdings for new Greek bonds. The ECB is swapping the bonds at their nominal value, meaning that it is making profits out of them. These profits will then be distributed via national central banks to eurozone governments, which will have to decide whether they want to return the money to Greece as part of the second Greek bailout. The swap will be reportedly completed by 20 February. We will expand on this specific point later;

• Separately, Schäuble is also said to have rejected the idea of providing Greece with a bridge loan to avoid the country defaulting on 20 March - when Greece needs to redeem €14.5 billion worth of its debt - and uphold the rest of the second Greek bailout until after the elections as a means to maintain pressure on Athens.

Lots of stuff going on, and not all is necessarily good news. As usual, if you want to stay on top of the eurozone crisis, we recommend that you check out the €uro-Zone section of our new website and keep following us on Twitter @OpenEurope.