ECB Grants Greece Less Emergency Liquidity Than RequestedJeff Black and Karl Stagno Navarra
The European Central Bank raised the maximum amount of emergency liquidity available to Greek lenders by 400 million euros ($435 million), less than the Greek central bank requested, people familiar with the decision said.
The increase was approved by the ECB’s Governing Council on Wednesday, the people said, asking not to be identified as the council meeting was private. Greece requested about 900 million euros, one of the people said.
Greek banks were cut off from regular ECB funding operations in February, forcing them onto Emergency Liquidity Assistance from the Greek central bank. The Frankfurt-based ECB has the power to curb ELA and is reviewing it weekly amid concern that banks will use it to finance the Greek government and so violate European Union law.
The increase should take ELA to about 70 billion euros. Policy makers raised the limit by 600 million euros on March 12, after a boost by 500 million euros to 68.8 billion euros on March 5. Greek banks haven’t used all their ELA and have a total of about 3 billion euros in liquidity available, one of the people said.
The newly elected government could run out of money as soon as this month as it tries to agree the terms under which euro-area governments will disburse aid payments. The region’s finance ministers are urging Greece to draw up a plan to fix the economy in exchange for emergency loans, while Greek Prime Minister Alexis Tsipras is challenging the nation’s creditors to blink first.
The country faces more than 2 billion euros in debt payments on Friday, and government salaries and pensions must be paid at the end of March.
As bailout disbursements have ceased, the Greek state covers its cash deficit by rolling over treasury bills, forcing the country’s banks to make a choice between participating in liquidity-draining auctions or letting their sovereign default.