ECB inches open purse strings for Greece
Published 10/04/2015 | 02:30
Greece has secured an increase in emergency funding available to its banks as Finance Minister Yanis Varoufakis said he's confident of reaching an aid agreement with European partners this month.
Greece yesterday met a €450m repayment to the International Monetary Fund (IMF).
In the wake of that European Central Bank's (ECB's) Governing Council raised the cap on so-called emergency liquidity assistance provided by the Bank of Greece by €1.2bn to €73.2b in a telephone conference yesterday, according to two people familiar with the discussion.
That was more than the €700m increase granted last week. An ECB spokesman declined to comment.
The amount approved matched what Greece had sought from the ECB and comes amid growing concern about the state of Greece's finances.
Mr Varoufakis said his country isn't looking outside Europe to resolve its crisis after Prime Minister Alexis Tsipras met Russian President Vladimir Putin on Wednesday. "We should be very clear: our bailout fallout needs to be dealt with in the European family," Mr Varoufakis said in an interview with Bloomberg TV.
Greece is Europe's most-indebted state and is negotiating with euro-area countries and the IMF on the terms of its €240bn rescue. The standoff, which has left Greece dependent upon ELA, risks leading to a default within weeks and the country's potential exit from the euro area.
ECB President Mario Draghi, below told fellow policy makers on the call that Greece's request for more emergency funds has to be granted in full as outflows threaten to create acute liquidity issues, one person said.
The ECB is assessing ELA weekly to prevent banks from financing the state. Before the Governing Council discussion, officials said Greece probably wouldn't be given the complete amount of between €800m and €900m it asked for.
Earlier, Varoufakis criticised central-bank policy makers for keeping the country on a tight leash amid negotiations to release aid from its international bailout package.
"The Eurozone is teaching us about the paradox of central bank independence," Mr Varoufakis said at an event in Paris. "The attempt to ringfence Frankfurt from politics has produced a highly politicised central bank. I do not blame the Governing Council.
"In their attempt to do some efficient firefighting, they have become politicised."
The ECB call came less than a day after a meeting of the currency region's representatives. They piled more pressure on Athens to start negotiating in earnest if it's serious about obtaining liquidity, according to two EU officials.
Greek officials said this week they are targeting an April 24 meeting of euro-area finance ministers as a deadline for approving new money. A looming cash crunch in the summer, when the ECB needs to be repaid, means a new bailout deal will be needed before then.
"The negotiations are proceeding quite well," Mr Varoufakis said in the interview. "It is in our mutual interest to strike a deal by the 24th and I'm sure we will."
Italian Finance Minister Pier Carlo Padoan also expressed confidence that an agreement will be reached by the next Eurogroup meeting.
"The situation is going in the right direction," he said.
Greek stocks and bonds gained after a Finance Ministry official said yesterday that the government had met its obligation to pay the €450m due to the IMF.
The benchmark Athens equity index added 1.1pc. Three-year yields fell 70 basis points, or 0.7pc, to 20.7pc.
The negotiations on more aid are focused on honing an initial agreement reached in February over reforms including tax collection and maintaining sales of state-owned companies.
European Commission spokesman Margaritis Schinas said that progress was being made and discussions will continue during the Orthodox Easter weekend in Greece.
Even so, with many finance chiefs attending IMF meetings in Washington next week, time is running out for Greece to meet its self-imposed target.
"We're making progress and we foresee more of that in the coming days and weeks," Ms Schinas said.
"The objective is to have the full list of reform measures specified and then agreed with the institutions by the end of April."