Sunday

21st Oct 2018

Greek banks expected to reopen on Monday

  • Greek banks have been closed since 28 June (Photo: Eric Maurice)

Greek banks are set to reopen on Monday (20 July) after the European Central Bank (ECB) increased the level of its liquidity assistance by €900 million.

Meanwhile, Eurozone finance ministers gave their green light to open negotiations for a Greek bailout.

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Speaking at a press conference in Frankfurt, ECB chief Mario Draghi announced that the bank will increase the level of the Emergency Liquidity Assistance (ELA) by €900 million over one week.


The ELA was frozen on 28 June after Greek prime minister Alexis Tsipras announced a referendum on austerity measures requested by Greece's creditors.

The new decision will give some breathing space to Greek banks, which have been closed and under capital controls since the referendum announcement.

After Draghi's press conference, Greek media said banks would reopen next Monday but the €60-daily withdrawal limit will remain in place.

Draghi himself said that when exactly capital controls will be lifted is "hard to predict" but is "clearly in the interest of the Greek economy".

He cautioned there's still a risk of a bank run when banks reopen, adding "the responsibility [to lift controls] is with the Greek government".

Debt relief

"The ECB continues to act on the assumption that Greece is and will remain a member of the euro area," Draghi also said, speaking just a few days after the possibility of a Grexit was explicitly mentioned in a Eurogroup document.

"It is not up to the ECB to decide who is member or not of the euro area", he added.

"The ECB acted within its mandate and will continue to so."

The ECB chief also said Greece's debt should be reprofiled.

"It's uncontroversial that debt relief is necessary. The only issue is: What is the best form in our institutional framework," he said.

Bailout

In other developments on Thursday, the Eurogroup decided "to grant in principle" the three-year bailout requested by Greece last week and agreed at a euro summit Monday.

Ministers held a conference call after the Greek parliament voted on Wednesday night a first series of reforms and fiscal measures.


They said the measures were implemented "in a timely and overall satisfactory manner".

The opening of negotiations will depend on eurozone countries' approval of Monday's agreement. A vote in the German Bundestag on Friday will be keenly watched.

After the French parliament on Wednesday, the Finnish parliament's grand committee on Thursday also gave a mandate to the Finnish government to negotiate the bailout.

The Eurogroup said it expected a formal decision by the European Stability Mechanism (ESM) "by the end of this week" that would "entrust" the EU, the ECB and the International Monetary Fund (IMF) "with the task of swiftly negotiating a Memorandum of Understanding (MoU)" with Greece.

"The overall purpose is to ensure that Greece will become a thriving economy in the euro area," Mario Draghi said.

Regling

In an interview with Germany's ARD channel, ESM chief Klaus Regling said the fund would provide "perhaps €50 billion".

"One reason is that the IMF is part of the rescue package," Regling said.

"Privatisation receipts will also be part of the package. And I also expect that in this three-year period Greece will regain market access, if the reforms are implemented".

In the meantime, EU finance ministers were still discussing the modalities of an emergency €7 billion loan through the European Financial Stabilisation Mechanism (EFSM).

"There is an agreement in principle on EFSM-based bridge financing for Greece, procedure to be finalised by tomorrow at noon", said commission vice-president Valdis Dombrovskis.

Greece needs €7 billion before Monday (20 July), mainly to repay a €4.2 billion debt to the ECB and €2 billion arrears to IMF.

"We will be repaid, as well as the IMF," Draghi said.

Greek MPs pass bailout austerity laws

Greek MPs adopted laws needed for third bailout, amid bitter debate, and amid fresh German remarks that a Greece euro-exit might be best.

UK to accept Greek short-term loan

The UK will not oppose a €7bn emergency loan for Greece, following an EU commission deal which interweaves Grexit and Brexit.

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