ECB looks at restricting emergency lending to Greek banks
More pressure has been heaped upon Athens, as reports suggested the European Central Bank is looking at placing greater restrictions on the use of its emergency lending facilities by Greece’s domestic banks.
Greek banks have tapped around €74bn (£53bn) in emergency liquidity assistance from the ECB to replace the deposits that nervous domestic savers have pulled out of the financial system in recent months. Without that lifeline, the country’s banks would rapidly collapse.
Greek financial stocks duly sold off heavily after the report emerged that the ECB is considering increasing the interest rate – or “haircut” – on their ELA borrowing, with the banking index shedding 5.5 per cent.
There have been signs that Greece is preparing for the possibility of life outside the single currency. Earlier this month its Prime Minister, Alexis Tsipras, made a trip to Moscow to meet Vladimir Putin. He followed that up with talks with Alexey Miller, the head of the Russian oil giant Gazprom, over investment in Greece.
While money has been flowing out of Greek sovereign debt, it has been flowing into perceived safe havens. The ECB’s quantitative easing scheme has also pumped large volumes of liquidity into the single currency’s financial system, pushing down borrowing rates in many areas to unprecedented lows.
Full article: Greece bailout: Europe turns up pressure as cash runs out (The Independent)