Home > EU > ECB divided over Greek bank funds

ECB divided over Greek bank funds

Written by Business World, on 18th Feb 2015. Posted in EU

article headlineECB policymakers debated today whether to allow more emergency funding for Greek banks with opinions divided as Athens came under pressure to accept an extended aid-for-reform program. Greece's new leftist-led government said it will request an extension of a loan agreement on Thursday but it has yet to agree on the terms of any such deal with its euro zone creditors. The ECB's policymaking Governing Council was meeting to decide how far the cash-strapped country may support its troubled banks, which are suffering rising deposit outflows due to the political uncertainty. While the ECB is unlikely to lower the ceiling on emergency lending assistance (ELA) by the Greek central bank, a refusal to increase it would be bad news for the banks, which are close to using up the full 65 billion euros granted so far. The meeting of central bank chiefs from across the euro zone was expected to run into the evening. The ECB does not want to be sucked into an intensely political debate but the governors' decision is a crucial part of the jigsaw. "The question is how things will continue with Greece," said one European official. "From the European side, there is the hope that one might find a way forward this week." The ECB's decision two weeks ago to stop banks presenting Greek government bonds as collateral in return for funds raised pressure on Athens to reach a deal with the euro zone. Talks among finance ministers broke down on Monday but there are rising expectations that a loan request will lead to an emergency Eurogroup meeting on Friday or at the weekend to clinch an agreement. Opposition in EU paymaster Germany will make it difficult for the ECB to cut Athens any financial slack although other countries are in favor of doing so. Bundesbank chief Jens Weidmann, who has warned against the misuse of the emergency funding to indirectly finance the Greek state, opposed any increase in the cap, the sources said. But while some governors share his reservations, others want more leniency. One euro zone central bank official forecast a "slight increase" in ELA for Greece, stressing that the ECB "has to try to preserve financial stability" and "its role is not to teach Greece some kind of lesson." (Reuters) For more visit www.businessworld.ie

More articles from EU

image Description

EU moves to extend grip on financial sector after Brexit

Read more
image Description

Brexit is a chance to forge a tighter EU says Juncker

Read more
image Description

Ministers to debate euro zone future

Read more
image Description

Euro zone bond markets held back by ECB nerves

Read more