Europe boosts emergency funding as Greek banks bleed

20 Jun 2015

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A woman in Athens walks past a graffiti by French street artist Goin called “Death of euro”. — AFP
A woman in Athens walks past a graffiti by French street artist Goin called “Death of euro”. — AFP

ATHENS: The European Central Bank expanded emergency funding for Greek banks as depositors pulled out 1.2 billion euros in a single day on Friday, bankers said, but Prime Minister Alexis Tsipras insisted the nation’s future in the euro was secure.

With the country edging closer to default at the end of this month, the leftist leader assured Greeks that prophets of “crisis and terror” would be confounded, and his government would strike a deal with European Union and IMF creditors.

However, EU officials said euro zone finance ministers would discuss on Monday how to handle a Greek default unless Athens made new proposals on reform and austerity to persuade the creditors to unlock aid blocked since August.

European Council President Donald Tusk said no one should assume that an emergency summit of euro zone leaders he would chair on Monday evening would find a “magic solution”.

“The game of chicken needs to end, and so does the blame game. Because this is not a game and there is no time for any games,” Mr Tusk said.

Bankers said that after Friday’s accelerated outflows, about 4.2bn euros had flooded out of Greek accounts this week despite central bank efforts to restore calm. “Today was a more difficult day compared to yesterday,” one of the bankers said. “Monday will likely be tough as well.”


Over 4 billion euros have flooded out of accounts this week


Earlier, a banking source said ECB policymakers had raised the limit on Emer­gency Liquidity Assistance — the lifeline keeping Greek banks afloat as deposits dive — for the second time in a week. There were contradictory reports about the scale of the increase, which the ECB never announces.

Officials said the ECB would review the limit again on Monday night after euro zone government leaders try to break the deadlock with Athens at an emergency summit in Brussels.

Greece is on course to default on a 1.6bn euro debt repayment it must make to the International Monetary Fund on June 30 unless the creditors resume funding.

Mr Tsipras nevertheless exuded confidence and calm, going ahead with a planned meeting with Russian President Vladimir Putin on the sidelines of an economic conference in St Petersburg.

“All those who are betting on crisis and terror scenarios will be proven wrong,” he said in a statement issued by his office while he was in Russia.

“There will be a solution based on respecting EU rules and democracy which would allow Greece to return to growth in the euro.”

Russia played down any possibility of Russian financial aid for Greece. Asked if Mr Putin and Mr Tsipras had discussed the issue, Kremlin spokesman Dmitry Peskov said: “No, no, no.”

Germany, the biggest contributor to the European bailout loans, held out hope on the chance of a deal at Monday’s summit. “It’s not too late for this and of course we hope that such an agreement is possible,” government spokesman Steffen Seibert said in Berlin. But Finance Minister Wolfgang Schaeuble, who has taken a hard line with Athens, was less optimistic. “I’m not sure I’ll be able to announce anything sensational or new on Monday,” he told reporters.

The Greek central bank — which has warned that the country’s future in the euro and even in the EU is at risk unless the government strikes a deal with its creditors — tried to assure depositors that the banking system remained stable. Money has been seeping out of the banks since Greece first had to take a bailout from euro zone governments and the IMF in 2010.

But after a relative lull, withdrawals have risen in recent months, and accelerated sharply this week.

The ECB has been gradually raising the amount of emergency funding which is available at the Bank of Greece but the tempo has picked up as the crisis deepened. Earlier this week the limit was raised by 1.1bn euros to 84.1bn, but the banking source declined to give a figure for Friday’s increase.

Published in Dawn, June 20th, 2015

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