Greece to Make Key ECB Debt Payment Before Deadline

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How Is Greece Making $7.4B Payments to ECB, IMF?

Greece repaid about 6.8 billion euros ($7.4 billion) to creditors, as depositors queued at reopened banks in the first signs of normality after last week’s bailout deal.

The European Central Bank and the International Monetary Fund both confirmed receipt of money owed, and a Greek Finance Ministry official said earlier that the country ordered payments to both those institutions and its central bank. The disbursements close one chapter on Greece’s debt crisis after five months of bailout talks that culminated in a frenzy of last-minute negotiations a week ago to meet the Monday deadline.

Repaying the ECB was one bill Greece couldn’t afford to miss because a default would probably have forced the central bank to pull support from Greek lenders, all but ensuring the exit from the currency union. In the standoff between the country and its creditors, it imposed capital controls on depositors and became the first developed-world nation to find itself in arrears with the IMF.

“As the realization dawned that Greece was facing a very disorderly, painful exit from the monetary union, the government stepped back from the brink,” said Ken Wattret, an economist at BNP Paribas SA in London. “The issue of repayment to the ECB was pivotal, because failure to make the payment would have had a knock-on impact on the ECB’s willingness to continue providing Emergency Liquidity Assistance to the Greek banks.”

Debt Relief

While banks reopened Monday, Greek financial markets will remain closed at least through Wednesday, two officials said.

News of the impending payment helped push the euro higher earlier. The currency was up more than 0.1 percent at $1.0842 as of 6:59 p.m. Frankfurt time. The Stoxx Europe 600 index closed up 0.3 percent at 406.80.

Draghi: ECB Accommodated Bank of Greece ELA Request

As Greece gets relief, steps toward a possible bailout of as much as 86 billion euros are only starting. Parliament is scheduled to vote Wednesday on a second set of prerequisites for further financial aid, and German Chancellor Angela Merkel said the repayment terms for earlier aid loans can’t be eased yet. With the International Monetary Fund and ECB President Mario Draghi urging relief, Merkel ruled out a cut in the nominal value of Greek debt.

Greek stock and bond markets will only reopen after the lawmakers approve the second batch of conditions for the proposed bailout by the European Stability Mechanism, the euro area’s firewall fund, two Greek officials said Monday.

The government is drafting a decree to allow selective waivers on capital controls, and the best-case scenario is for markets to reopen Thursday, one official said.

Cash Restrictions

Greece will begin easing the 60 euro-a-day restriction on cash withdrawals this week, National Bank of Greece Chairwoman Louka Katseli said on state television Monday. Depositors will be able to access five days worth of cash -- 300 euros -- from this Friday and they’ll be able to get seven days’ withdrawals on Aug. 1. Check deposits, access to safety deposit boxes and teller-window transactions have already been restored, though most transfers abroad are still prohibited.

That was good enough for Diana Sotiropoulou, 60, a retired restaurant owner waiting in line to pay her power bill at a bank in Varkiza, outside Athens.

“I’ll now be able to start paying bills again as I don’t have phone or Internet banking,” she said. “Before, there was no way I was going to wait in line for four days at an ATM to withdraw 240 euros to pay the bill.”

Greece’s payments Monday comprised 4.2 billion euros in maturing debt and interest to the ECB, 2.05 billion euros to the IMF, and 470 million euros to the Bank of Greece, a second finance ministry official said.

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