His colleague on the ECB΄s governing council, Bundesbank President Jens Weidmann, took a tougher stance on emergency funding for Greek banks.
Advertisement
“The eurosystem must not provide bridge financing to Greece even in anticipation of later disbursements”, he said.
After hiking emergency credit for Greek lenders to about 86 billion euros last week, the European Central Bank agreed to a further 2 billion euros of such Emergency Liquidity Assistance (ELA) on Monday, people with knowledge of the matter told Reuters.
Bank of Greece Governor Yannis Stournaras called a special meeting with top bankers on Friday to discuss the mounting crisis in the banking sector after a flood of withdrawals that passed a billion euros a day towards the end of the week.
“The governing council raised the ELA cap and will convene again via teleconference at any time necessary”, the source said, speaking on condition of anonymity and declining to say how much the ceiling had been raised by.
ECB policy-setters held the limit on their emergency funding for the banks steady for the second day running, a source familiar with their talks said, having previously increased it steadily over many weeks.
Greek bank deposits by businesses and households fell to €129.9 billion in May from €133.7 billion the month before, according to data released by Bank of Greece on its website on Thursday.
But he warned there was a genuine risk of Greek banks being forced to close their doors tomorrow and cease dispensing cash for days, if the Greek government led by Alexis Tsipras fails today to convince eurozone finance ministers and government heads that it is taking credible steps to balance its books.
So, until Greece and its creditors find a way out of their current deadlock, the ECB’s hands are tied and it is effectively compelled to keep on approving ELA so as not to let Greek banks – and in turn the entire country – go under.
Why is the European Central Bank still giving Greece money?
National Bank of Greece (NBG). And here, the ball was firmly in the politicians’ court, Draghi said.
Advertisement
The loans sit on the Greek Central Bank’s balance sheet, which is part of a European system of central banks, including the nine members of the Eurozone and the ECB.
