Thursday 29 September 2016

ECB hands Greece €900m cash injection to reopen the banks

Peter Spence in Athens

Published 17/07/2015 | 02:30

Prime Minister Alexis Tsipras rubs his eyes as the Greek parliament debates the new legislation into the early hours of the morning
Prime Minister Alexis Tsipras rubs his eyes as the Greek parliament debates the new legislation into the early hours of the morning

Greece's banks have been granted a reprieve by the eurozone's policymakers and may be able to open their doors for the first time in three weeks next Monday.

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The European Central Bank decided yesterday to raise the liquidity it provides to the country's banks by €900m - cash that will tide them over for a short time. However, current capital controls that limit daily ATM withdrawals to €60 will remain in place.

Emergency liquidity assistance (ELA) to Greece's banks had been previously capped at €89bn, interpreted by critics as an overtly political move by the ECB. Frederik Ducrozet, of Credit Agricole, said that the ELA increase was a "surprise in terms of timing and a supportive signal to Greece".

The ECB lifeline was granted as eurozone finance ministers agreed to give Greece a €7bn bridging loan, which should help the state through the next couple of debt payments.

ECB president Mario Draghi expressed confidence that a €3.5bn transfer to the central bank on Monday and a payment to the IMF would be made by the Greek government. Completing those payments could take Greece closer to meeting the criteria for inclusion in the ECB's quantitative easing scheme, Mr Draghi said.

Only German and Austrian politicians have yet to give the go-ahead for formal talks to begin on the terms of Greece's third bailout.

They are expected to approve the process today.

As they prepared to vote, German Finance Minister Wolfgang Schaeuble said a temporary exit from the euro could still be Greece's best option.

German Chancellor Angela Merkel defended the debate about a possible temporary Grexit.

"I think it's definitely right to think through and discuss every option in such a situation," Ms Merkel said, according to a participant at the extraordinary meeting of her conservative parliamentary faction.

Ms Merkel has rejected criticism that her junior coalition partner, the Social Democrats (SPD) have directed at Mr Schaeuble for suggesting that Greece could take a "time-out" from the eurozone if it failed to meet conditions.

Ms Merkel asked the conservative lawmakers to agree to negotiations for a third Greek aid package in the German Bundestag lower house of parliament vote planned for today.

"This will save Europe from going through an ordeal," she said, according to the source.

Victoria Clarke, of Investec, said that Mr Draghi "is not willing to see the ECB take responsibility for the breakdown of the single currency and will fight hard to maintain it."

Forces

The central bank does not want to be the one that pulls the plug on Greece and forces it out of the euro, she said.

The decision to increase ELA was revealed by Mr Draghi, who stressed that as a "rules-based" institution, the central bank will act as though Greece would continue to be a member of the euro.

Mr Draghi said that it was "uncontroversial that debt relief is necessary" for Greece, and that he did not think anybody "has ever disputed that".

His remarks were interpreted as a slight aimed at German negotiators, who have helped firm against further reductions to Greece's debt pile.

Irish Independent

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