Euro Area Said to Consider Guarantee Plan for ECB Greece Aid

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Euro-area officials have informally discussed an arrangement whereby the European Central Bank maintains liquidity to Greek lenders in return for a guarantee for the loans, people familiar with the matter said.

As Greek banks remain closed and customers restricted to withdrawing a maximum of 60 euros ($66) a day, officials have recognized the need to ease the pressure on citizens while the government negotiates a bailout with European Union creditors. Yet with the risk of Greece exiting the euro rising by the day, the ECB may seek protection from any losses, the people said, asking not to be named as the matter isn’t public.

A guarantee arrangement would reprise a 2012 debt swap in which central-bank loans to Greece were guaranteed by the euro area while a bond restructuring meant the country was temporarily judged to be in default. No concrete proposals are yet under discussion, the people said. An ECB spokeswoman declined to comment.

“In the event that further short-term assistance is thought to be desirable or necessary, it is up to fiscal policy makers to provide ad hoc financial support,” ECB Governing Council member Jens Weidmann said on Thursday in Frankfurt, without specifically referring to a guarantee program.

Sunday Summit

Greece has until a summit of euro leaders on Sunday to agree a bailout or face potential expulsion from the single currency.

“I know that there is a humanitarian crisis that we have to address,” Pierre Moscovici, European Economic Affairs Commissioner, said in an interview in Paris. “People suffer from the fact that banks are closed since the last 10 days,” he said, without commenting on ECB actions.

Maintaining or increasing the Emergency Liquidity Assistance credit line, which is offered by the Greek central bank with the approval of the ECB, could help the country’s lenders keep operating even if negotiations drag on. The euro-area’s rescue fund, the European Stability Mechanism, could provide the vehicle for the guarantee, the people said.

The ECB kept the ELA cap at 88.6 billion euros on Wednesday, the level it has been frozen at since Greek Prime Minister Alexis Tsipras announced a referendum last month on the terms of the country’s bailout.

At the current level of ELA, banks have sufficient liquidity to last through Monday without lowering the withdrawal limit, a Greek official with direct knowledge of the matter said.

For more, read this QuickTake: Greece's Fiscal Odyssey

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