ECB Keeps Cash Aid to Greek Banks Flat Despite Liquidity Shortage

World » SOUTHEAST EUROPE | July 6, 2015, Monday // 21:45
Bulgaria: ECB Keeps Cash Aid to Greek Banks Flat Despite Liquidity Shortage The headquarters of the European Central Bank (ECB) in Frankfurt, Germany. Photo EPA/BGNES

The European Central Bank on Monday said it will keep its financial assistance to Greek banks unchanged, further tightening the screws on the Greek lenders.  

“The Governing Council of the European Central Bank decided today to maintain the provision of emergency liquidity assistance (ELA) to Greek banks at the level decided on 26 June 2015 after discussing a proposal from the Bank of Greece,” the ECB said in a statement on its website.

The ECB decision means that Greek banks, which are quickly running out of cash in the absence of new international bailout agreement, may find it hard to keep ATMs operating even at the current rate of maximum daily withdrawals of EUR 60 per person as Greeks keep pulling their money out of banks.  

Unless the current EUR 88.6 B ceiling on ELA is increased, Greek banks may have to restrict cash withdrawals further, Bloomberg said in its coverage of the news.

“Yet with no bailout deal on the table that could rescue Greece’s finances, ECB policy makers can’t ignore their duty to protect the Eurosystem,” the newswire said.

The government in Athens broke off negotiations on a rescue plan proposed by creditors just days before Greece was due to repay EUR 1.5 B to the IMF on Tuesday.

With state coffers empty, Greece defaulted on its IMF debt, and was forced to impose capital controls and close banks as of 29 June to halt an outflow of cash as anxious Greeks rushed to withdraw money.

Greece faces a EUR 3.5 B ECB bond repayment on 20 July. Defaulting on the repayment would prevent the ECB from accepting collateral from Greek banks which could lead to cutting the liquidity lifeline.

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Tags: greece, European Central Bank, ECB, ELA, emergency liquidity assistance
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