ECB raises emergency liquidity assistance for Greek banks

Including its unused funds Athens now has around 3.0 billion euros of funding available, although the debt-mired country still faces risk of default

Photo by: Reuters
Photo by: Reuters

Updated Jul 28, 2015

The European Central Bank (ECB) has increased the limit of maximum emergency funds Greek banks can withdraw from the country’s central banks by 200 million euros (S$297 million), a Greek banking source said. However, Greece is still on the brink of bankruptcy as international lenders refuse to back down on demanding reforms. 

The ECB has now raised the ceiling on Emergency Liquid Assistance (ELA) to 80.2 billion euros, but compared to previous ECB measures, it is only a small increase.

"The reason for the small increase was that deposit outflows have stabilised at very low levels," said the banking source. 

According to the source, the ECB examined several possibilities including a ‘haircut’ and discount applied to collateral offered by Greek banks, nevertheless, the final verdict was to not raise the haircut.

With little time left to deter bankruptcy, a result which could destabilise both the eurozone and global economy, the debt burdened country is still trying to persuade its international lenders to reach a cash-for-reform deal. 

Recently, Greece requested for its international creditors to ease predictions of a default,  however the so called “Eurogroup” in the words of Germany’s finance minister Wolfgang Schäuble stated that they “couldn’t rule out a Greek default.”

In 2012, Schäuble offered a statement to relieve doubt on Greece’s default but now The Wall street Journal cites that he “would have to think very hard before repeating this in the current situation.”

If Greece fails to unlock the final installment of the €245 billion ($272 billion) bailout before the program expires [within 6 weeks] emergency funds will elapse, pushing the country into a default.

During certain points in the negotiation talks there was the possibility for the current bailout fund to be broken down into installments depending on fruitful steps by Greece. However, this option is now off the table after the Greek government refused to implement mandatory pension and labour reforms that were part of the programme.

“The negotiations between Greece and the three institutions [the European Commission, the ECB and the IMF] have always been tough, but they have always succeeded,” Mr. Schäuble said. “I have no intention of interfering in this process.”

Although the German minister is firm about the bailout rules for Greece, he has opened up to the UK by inviting correspondent George Osborne to Berlin in order to discuss both parties requests for changes in European Union. 

“We have talked about him coming to Berlin so that we can think together about how we can combine the British position with the urgent need for a strengthened governance of the eurozone,” said Schäuble. Adding that they have “a huge interest in the UK remaining a strong and engaged member of the European Union.”

Greek Finance Minister Yanis Varoufakis was quick to respond to Schäuble’s comments.

Varoufakis agreed with the German minister's comments about a political union in Europe because “without it, our monetary union is problematic,” he said. However, he opposed Schäuble’s analysis regarding Greece. 

“[ Schäuble] does not appreciate how helpful it would be for mainstream Northern Europe to find a modus vivendi with a movement [like SYRIZA in Greece] which may be very critical of European institutions but which is profoundly pro-European and eager to help bring Europe closer together,” he said.

TRTWorld and agencies