Monday 5 December 2016

ECB should not cut support for Greek banks - French Prime Minister

Published 28/06/2015 | 11:41

French Prime Minister Manuel Valls
French Prime Minister Manuel Valls

The European Central Bank should not cut off support to Greek banks even if the country misses a June 30 deadline for debt repayments it cannot afford to make, French Prime Minister Manuel Valls said on Sunday

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"The European Central Bank is independent, but I don't doubt it will assume its responsibilities," Valls said in an interview broadcast on Europe 1 radio. "I don't think it can cut off support, to put it another way."

Valls also sounded a warning to Greek voters that a "no" vote in the upcoming referendum on a proposed debt deal could amount to a decision to leave the euro zone.

Read more: Greece's parliament vote in favour of holding July referendum

"The Greek people must be able to decide lucidly," Valls said. "If there's a negative vote, there is a real risk ...of exiting the euro zone."

 Austria's finance minister said a Greek exit from the euro - or Grexit - would only be possible if Athens first asked to leave the European Union and other countries agreed to its request.

Athens has called a July 5 referendum so that Greek voters can decide on whether to accept new, tougher bailout terms that the government itself opposes.

"The consequences for the euro countries are not nearly as bad as for Greece. It's clear that one country can under no circumstances blackmail the European Commission and the euro countries," Hans Joerg Schelling was quoted as saying in Sunday's print edition of Austrian newspaper Die Presse.

Greeks continued lining up at ATM machines this morning, the day after Prime Minister Alexis Tsipras called for a referendum on creditors' financial proposals in return for rescue loans.

Read more: Europe is heading into uncharted waters - Noonan

Mr Tsipras' move for a national vote on July 5 angered Greece's European partners and threw the country's bailout negotiations with international lenders into turmoil. Parliament approved the referendum call in a majority vote.

But Greece's international bailout with its European creditors and the International Monetary Fund (IMF) expires on Tuesday, and Greece's European partners said they would not accept an extension of the bailout until next Sunday's referendum.

With Greece also facing a 1.6 billion euro (£1.1 billion) debt repayment to the IMF on Tuesday - one it will struggle to meet without bailout funds - the developments have thrown the country's financial future and its continued membership in the 19-nation shared euro currency into question.

Alternate Greek finance minister Nadia Valavani said the government was "expecting the funding of Greek banks to continue normally via the ELA after Tuesday."

Ms Valavani urged Greeks themselves to show restraint, telling private Mega television the country's banks could see "business as usual" next week if they receive the emergency support "so long as there is calm" and Greeks do not attempt to withdraw all their savings.

Read more: No harmony in the lullabies as the cradle of our civilisation is rocked

If the ECB decides not to increase the emergency liquidity, which currently stands at just under 90 billion euro (£63 billion), Greece's four major banks will soon run out of cash and be forced to place restrictions on transactions.

Those limits on withdrawals could keep Greek banks functioning - but they would mean a deepening of the financial crisis and could take Greece a step closer to leaving the euro.

The ECB has been permitting Greek banks to draw emergency credit from Greece's central bank, a financial lifeline that has been keeping the country's four major lenders going.

The ECB has been slowly increasing the amount of emergency credit which has been compensating for the increase in withdrawals from Greek banks.

But the ECB has said it can only continue such assistance if the banks are basically solvent.

A failure by the Greek government to get more aid could lead to a determination that the Greek banks are no longer financially solid, since they have financial ties to the government.

Read more: Greek tragedy: nation lives out drama, one act at a time

ECB president Mario Draghi has said it is up to Greece's elected officials to decide their country's fate and analysts say the ECB wants to give the politicians every chance to negotiate a deal.

But any determination that a deal is no longer likely could push the central bank to decide not to increase emergency credit further.

Reuters

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