Monday 26 September 2016

ECB piles pressure on Greek banks

Published 06/07/2015 | 05:51

Outgoing Greek finance minister Yanis Varoufakis has resigned. (AP)
Outgoing Greek finance minister Yanis Varoufakis has resigned. (AP)
Greece's future in the eurozone is uncertain (AP)
Greek finance minister Yanis Varoufakis has announced his resignation (AP)
A supporter of the No vote waves a Greek flag in front of parliament after the results of the referendum are revealed (AP)

The European Central Bank has announced it is to keep the level of emergency credit to Greek banks unchanged - leaving the banks under increasing pressure as they try to cope with cash withdrawals.

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In a statement, the ECB said that the credit "can only be provided against sufficient collateral". That collateral has been weakened due to the worsening financial situation of Greece.

The decision leaves the Greek banks in a stranglehold, as they struggle to replenish cash machines in the coming days.

The move added to Greek woes with time pressing for the country to reach a bailout deal with creditors after Greeks resoundingly rejected the notion of more austerity in exchange for aid.

With Greek banks running out of cash and facing the danger of collapse within days without new aid, the government in Athens is racing against the clock.

In an effort to facilitate negotiations on a new aid programme, finance minister Yanis Varoufakis, who had clashed with European officials in the bailout talks, announced his resignation.

But Greece and its creditors, who will meet again tomorrow to discuss how to keep the country in the euro, remain far apart on key issues, particularly the notion of debt relief.

The negotiations are complicated for the European creditors by prime minister Alexis Tsipras's triumph in Sunday's referendum.

More than 61% of Greeks backed his call to vote No to budget cuts the creditors had proposed in return for rescue loans the country needs - even though those proposals were no longer on the table.

The vote was painted by opposition parties and many European officials as one on whether Greece should remain in Europe's joint currency. In the aftermath, many officials softened their tone and said talks would resume, though Greece's chances of staying in the euro were looking increasingly shaky.

The country's banks remained shut for a sixth working day as the government tries to limit a drain of deposits despite limits on cash withdrawals at ATMs.

The ECB move means Greece might have to tighten its limits on cash withdrawals and transfers from the current 60 euros (£42) per day.

IAnd it will be impossible for Mr Tsipras to keep his pledge to quickly restore Greece's banking system.

The Greek government has vowed to quickly restart negotiations with creditors in other eurozone countries and with the institutions that oversaw the country's bailout: the ECB, European Commission and International Monetary Fund.

Mr Varoufakis appeared to be the first casualty of the vote's fallout.

He said he was told shortly after the referendum result that some other eurozone finance ministers and the country's other creditors would appreciate his not attending the ministers' meetings.

The idea was one "that the prime minister judged to be potentially helpful to him in reaching an agreement. For this reason I am leaving the ministry of finance today", he said.

As for his European negotiating colleagues, he said of them: "I shall wear the creditors' loathing with pride."

Euclid Tsakalotos was named as his replacement.

The 55-year-old economist was Mr Tsipras's lead bailout negotiator in talks that halted last month before the prime minister called a bailout referendum.

With his high-stakes gamble to call a referendum with just a week's notice, Mr Tsipras aimed to show creditors that Greeks, whose economy has been shattered and who face spiralling unemployment and poverty, have had enough and that the austerity prescribed is not working.

But everything hinges on European reaction. A eurozone summit was hastily called for tomorrow afternoon to discuss the situation.

European officials appear to be split on a key demand by Greece to have the burden of its bailout loans be made more manageable.

France's finance minister, Michel Sapin, indicated that discussing Greece's debt is not taboo, saying the country could not recover with its current obligations "in the months and years to come".

Germany, however, remains reluctant to discuss debt forgiveness.

Finance ministry spokesman Martin Jaeger said Germany's "position is well-known ... a debt cut is not an issue for us".

More broadly, chancellor Angela Merkel's spokesman said talks on a new bailout programme for Greece would depend on what proposals Athens makes.

Christine Lagarde, managing director of the IMF, said the fund stands "ready to assist Greece if requested to do so".

Press Association

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