The European Central Bank maintained its emergency support for Greek lenders, signaling it’s willing to give the country time for a referendum on the terms of a bailout program.
The Governing Council, meeting in Frankfurt on Wednesday, left the cap on Emergency Liquidity Assistance unchanged, an ECB spokesman said. Policy makers also refrained from imposing steeper discounts on the collateral pledged by banks, a Greek official said, asking not to be identified as the meeting was private.
During five months of wrangling between Greece and its creditors, the ECB has kept the country’s lenders alive by authorizing emergency cash to the tune of almost 89 billion euros ($98 billion). With banks now shut and capital controls in place until after a July 5 vote on an incomplete creditor proposal, ECB policy makers may be judging that they can’t preempt a political process.
Even so, the ECB can approve ELA, which is provided by the Greek central bank, only as long as it judges lenders to be solvent and have adequate collateral. With Greek banks relying on sovereign-debt holdings and state guarantees, it may have to pull the plug should the creditor proposal be rejected as Greek Prime Minister Alexis Tsipras has urged, and the government then run out of money.
For more, read this QuickTake: Greece's Fiscal Odyssey