Draghi Said to Surprise ECB Governors With Bid to Ease Greek Aid

Mario Draghi
ECB President Mario Draghi during a news conference in Frankfurt on Thursday, July 16, 2015. Photographer: Martin Leissl/Bloomberg

Mario Draghi surprised his European Central Bank colleagues on Thursday by pushing for an increase in emergency aid to Greek lenders, people familiar with the matter said.

The ECB’s Executive Board had signaled to Governing Council members the previous day that the cap on Emergency Liquidity Assistance of 88.6 billion euros ($96.5 billion) should stay in place, despite a request by the Greek central bank for an extra 1.5 billion euros, the people said, asking not be named as the discussions were private.

The ECB president’s intervention followed events on Thursday morning, when the Greek parliament approved austerity measures linked to an international bailout package in the early hours and euro-area finance ministers later agreed on 7 billion euros of bridge funding. The cash infusions should allow Greece to meet debt repayments, including to the ECB on Monday, reopen its banks and start to repair its economy.

An ECB spokesman declined to comment.

ELA was increased by 900 million euros, Draghi said at a press conference on Thursday, adding that the Greek central bank’s request was “recalibrated” over one week.

“Now things have changed,” he said. “We had a series of news, with the approval of the bridge financing package, with the various votes in various parliaments -– to begin with, in the Greek Parliament -– which have restored the conditions for a raise in ELA.”

Confounding Colleagues

Euro-area leaders seemed confident of a change in ECB policy by midday Thursday, as the Governing Council meeting was still taking place.

“I would expect that Mario Draghi will consider now turning on the tap to some extent of emergency liquidity,” Irish Prime Minister Enda Kenny told broadcaster RTE on Thursday morning. That would “keep the banks in Greece having money for their customers,” he said.

The Greek government and Greek central bank are examining how lenders can reopen as soon as possible, a Greek central-bank official said Friday on condition of anonymity. Lenders have been shut and the country has been under capital controls for almost three weeks.

Draghi has form in persuading the Governing Council, which includes the governors of the euro-area’s 19 national central banks, to take decisions contrary to the institution’s planned course of action.

At his first meeting as president in November 2011, when the ECB’s economic staff advised no change in the interest rate, he surprised them and some of the Governing Council turning the debate in favor of a quarter-point cut.

In July 2012, as surging sovereign debt yields strained the euro area’s stability, he said at a conference in London that he would do “whatever it takes” to save the single currency. The comments, which hadn’t been endorsed by the Governing Council, sparked six weeks of hurried negotiations before the announcement of an emergency bond-purchase program.

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