ECB raises emergency funding to Greek banks by EUR 900m
Mario Draghi - Photo EP
(FRANKFURT) - The European Central Bank decided Thursday to boost emergency funding for Greek banks after lawmakers in Athens passed a bailout-for-reforms deal, ECB chief Mario Draghi said.
"We decided today to raise ELA," or Emergency Liquidity Assistance, which has been fixed at around 89 billion euros ($99 billion) since late June, Draghi told a news conference, adding that that financial lifeline's ceiling would be increased by 900 million euros.
The increase corresponded to the amount requested by the Bank of Greece, Draghi said.
"We substantially accommodated the request put forward by the Bank of Greece, recalibrated over one week, so the increase will be 900 million euros over one week," Draghi said.
The ELA facility has been the life support system for the Greek economy for weeks.
But strictly speaking, it is only available for banks that are solvent. And following the massive capital flight -- and the subsequent capital controls to try to stem it -- the solvency of Greek banks was looking increasingly shaky.
Athens has already failed to make a key debt repayment to the International Monetary Fund, and it must now stump up 4.2 billion euros to the ECB itself by July 20.
Should it miss that deadline, the ECB may find it impossible to justify keeping the ELA taps open, which could lead to Greece crashing out of the single currency.
But Draghi was adamant that Athens would repay its debts to both the ECB and the IMF.
"On 20 July, we will be repaid," Draghi said.
Athens is currently in talks with its European partners to find bridge financing to meet its immediate financial commitments until a third bailout can be reached with its creditors.
The ECB always worked from the assumption that Greece would remain part of the single currency, Draghi said.
And the deal hammered out in marathon talks in Brussels at the weekend had put in place the conditions for an increase in the ECB's emergency funding to Greek banks, he said.
The ELA facility has been frozen since June 26.
Draghi dismissed as "unjustified and totally unfounded" criticism that the ECB had put too much pressure on Greek banks and triggered panic.
The ELA ceiling "has risen from zero to 90 billion euros" since the start of the crisis and the exposure of the European System of Central Banks to Greece stood at 130 billion euros in total, he argued.
Draghi insisted that the capital controls introduced by Athens had protected savers, even if he conceded that the measures put a drag on economic recovery.
Draghi said that Greece -- whose debts amount to 180 percent of economic output -- would need some sort to debt relief.
The key issue was what form such relief could take and that would be the focus of discussions between Greece and its creditors in coming weeks, he added.
The ECB chief also conceded that doubts remain about the willingness and capacity of the Greek government to push through the economic reforms demanded by its creditors.
"No matter whom you talk to, there are questions about implementation will and capacity," Draghi told a news conference, adding that it was up to Athens to assuage such doubts.