ECB hands Greece extra €900m in emergency funds

Vulcano at Nissyros

Greek banks will benefit from an extra €900m (£630m) in emergency funding to keep them afloat, the European Central Bank has announced, possibly allowing bank branches to open on Monday.

Mario Draghi, the ECB president, said a majority of the central bank’s governing council had voted in favour of the move that brings the institution’s support for Greek banks to €130bn in total.

Giving a robust defence of the ECB’s recent actions, Draghi denied accusations it precipitated the closure of Greek banks with its decision to freeze emergency lending assistance following the announcement of a Greek referendum.

“We take this criticism very seriously, but I think it is unwarranted and unfounded to say that ECB actions started a bank run in Greece,” Draghi said.

He argued that the ECB in June supplied more than €10bn of liquidity assistance to Greece while only €8bn was withdrawn. This left Greek banks in better shape as Athens headed into the referendum, he said.

Draghi’s intervention came as eurozone finance ministers assembled the €7bn worth of bridging finance needed to keep Greece afloat until its third bailout of €86bn can be agreed.

The Eurogroup president Jeroen Dijsselbloem said the money was in place and that inspectors from the International Monetary Fund could be in place as early as Monday.

Meanwhile, MPs in Athens approved the contentious reforms and austerity package demanded by its creditors amid angry scenes in parliament and violent clashes on the streets on Wednesday.

Finland gave its approval for negotiations to start on a new bailout and for talks on bridging finance. The finance minister, Alexander Stubb, said Finland would not accept a “haircut” on Greek debt, but was open to other options. He also said he was concerned about Greece implementing the reforms, given that the prime minister, Alexis Tsipras, said on Wednesday night he did not believe in them.

In Germany, which is due to vote on the bailout talks on Friday, an ally of the chancellor, Angela Merkel, called on the Bundestag to back the plan.

Horst Seehofer, the centre-right prime minister of Bavaria, said the Bundestag should vote for starting formal talks with the Tsipras government on a bailout.

In an interview with Süddeutsche Zeitung, Seehofer welcomed the Greek parliament’s decision to pass VAT and pension reforms to secure the deal, as a first step to winning back confidence.

“[The Greek vote] is the beginning of trust-building, which is urgently needed after the last few weeks and months.”

However, doubts about Greece’s place in the eurozone persist, with further signs that neither Athens, nor its creditors believe the €86bn bailout can work.

Germany’s finance minister, Wolfgang Schäuble, told German radio on Thursday that a temporary Greek exit from the eurozone could still be the best option.

He called the Greek vote an important step, but pointed out that many economists doubt Greece’s problems can be solved without reducing the overall value of the debt. He said such a debt haircut would be incompatible with a country’s membership of the euro.

Schäuble’s ministry has suggested it could consider giving Greece more time to pay back debts, as long as easing the debt burden in such a way wasn’t a backdoor route to reducing the total amount.

Asked about extending maturities for Greece, a German finance ministry spokesman told local media that “technically this possibility exists”, although he added that Germany thinks debt sustainability could be achieved by structural reforms and economic growth.

 

Greek protesters clash with police

Tsipras won the vote in the Greek parliament, with 229 out of 300 MPs voting for the agreement struck with eurozone partners early on Monday after a weekend of bruising negotiations.

Thirty-two of his own Syriza MPs voted against the plan, including the former finance minister Yanis Varoufakis, who has likened the bailout deal to the 1919 Treaty of Versailles that imposed crushing debts on Germany.

The IMF is urging eurozone countries to give Greece far more generous debt relief than what is on offer. It thinks Athens should receive a 30-year grace period before it has to start paying off its debts.

Slovakia’s finance minister raised doubts about Greece’s ability to implement the reforms. Peter Kažmír, who angered some Greeks when he said the country was paying the price for a “Syriza spring”, suggested the absence of support from Syriza meant it was less likely the laws would work in practice.

“The real trouble and challenges may come later. No majority, no ownership could dent implementation of measures and reforms,” he wrote on Twitter.

Powered by Guardian.co.ukThis article was written by Jennifer Rankin in Brussels, Nick Fletcher and Phillip Inman, for theguardian.com on Thursday 16th July 2015 15.37 Europe/Londonguardian.co.uk © Guardian News and Media Limited 2010

 

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