ECB maintains emergency funding for Greece

Alexis Tsipras
Alexis Tsipras
Alexis Tsipras

The European Central Bank has refused to increase emergency credit to Greek banks, maintaining its current level of funding instead.

The decision comes a day after the government threw Greece’s bailout negotiations into turmoil by calling a referendum on creditors’ financial proposals.

The move could keep the bailout talks going but leaves Greece’s banks under increasing pressure as deposits drain away.

Anxious Greeks have been lining up at cash machines, worried about the possibility of financial controls being imposed to stop banks from haemorrhaging funds.

Greece’s international bailout runs out on Tuesday and it needs the last tranche of those funds to pay some €1.6bn it owes to the International Monetary Fund on the same day.

The developments have thrown Greece’s financial future and its continued membership in the 19-nation shared euro currency into question.

The ECB said it could reconsider its decision on credit levels.

“We continue to work closely with the Bank of Greece and we strongly endorse the commitment of member states in pledging to take action to address the fragilities of euro-area economies,” ECB chief Mario Draghi said.

Yannis Stournaras, governor of the Bank of Greece, said the bank would “take all measures necessary to ensure financial stability for Greek citizens in these difficult circumstances”.

The Greek finance ministry said the country’s financial stability council, the Systemic Risk Board, would meet to discuss the situation.

The board is a seven-member body that includes the finance minister, the central bank governor and the heads of the Greek banks association, the capital markets commission and the financial stability fund.

Finance Minister Yanis Varoufakis meanwhile, tweeted that the government “opposes the very concept” of capital controls within a monetary union. He also suggested that his country might not pay the money it owes to the IMF on Tuesday.

He told the BBC that the ECB should pay the money to the IMF out of the profits it made on Greek bonds in 2014.

“We are owed money by one part of the troika and we owe money to another part of the troika. Why don’t they sort themselves out and transfer money from one pocket … to the other?” Mr Varoufakis said.

Greek Prime Minister Alexia Tsipras’ move for a national vote on the creditors’ financial proposals startled and angered Greece’s European partners, who said they would not accept an extension of the current bailout. The Greek parliament approved the referendum call in a majority vote.

France’s prime minister, meanwhile, urged all in Europe to do everything they could to keep Greece in the eurozone.

“We don’t know – none of us – the consequences of an exit from the eurozone, either on the political or economic front. We must do everything so that Greece stays in the eurozone,” French Prime Minister Manuel Valls told France’s i-Tele TV.

“But doing everything, that means respecting Greece and democracy, but it’s also about respecting European rules. So Greece needs to come back to the negotiating table.”

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