Monday

23rd Sep 2019

ECB has no plans to pull plug on Greek banks

  • A deal with Greece is needed 'very soon' warned ECB chief Draghi (r) (Photo: europarl.europa.eu)

The European Central Bank (ECB) has no plans to pull the plug on emergency funding for Greece's stricken banking, bank boss Mario Draghi has said.

"The major Greek banks are solvent and the collateral they provide is adequate” Draghi told MEPs on Monday (15 June) during his quarterly hearing with the European Parliament's economics committee.

Read and decide

Join EUobserver today

Support quality EU news

Get instant access to all articles — and 18 year's of archives. 30 days free trial.

... or join as a group

However, he maintained that the ECB would not resume buying Greek government bonds until an economic programme had been thrashed out with its creditors.

The ECB withdrew a waiver that allowed it to accept Greek debts as collateral, restricting the Syriza government’s access to cash-flow, after Greek prime minister Alexis Tsipras halted implementation of his country’s bailout.

“We don’t buy bonds of countries that are under a review by the IMF [International Monetary Fund] and we don’t buy bonds that are below a certain rating unless these have a waiver", said Draghi.

“However, this waiver could be reversed by reaching an agreement ... and I really don’t think we are that far away. As soon as the negotiations are complete, all these requirements would be overcome", he added.

Bailout talks between Greece and the European Commission collapsed on Sunday over what the commission said was "a significant gap" between the Greek government and its creditors that left a €2 billion hole in Greece’s budget targets.

The impasse leaves Greece on the brink of a default at the end of the month, when its bailout programme ends and it faces a €1.6 billion repayment to the IMF.

Eurozone finance ministers will gather in Brussels on Thursday for a eurogroup meeting, although it appears highly unlikely that an agreement will be reached before next week’s EU summit.

In the meantime, all eyes will be on whether the ECB makes changes to the Emergency Liquidity Assistance (ELA) available to eurozone banks when it holds the monthly meeting of its governing council on Wednesday (17 June).

Last week, the governing council decided agreed to a €2.3 billion increase to the ELA ceiling for Greece, taking it to €83 billion.

Despite Draghi downplaying the role of the ECB in resolving the crisis, the Frankfurt-based bank would be one of the main losers from a Greek default and possible exit from the eurozone.

The ECB has pumped in €118 billion into the Greek banking system, equivalent to around 66 percent of the Greek annual economy, and more than double the amount exposed at the end of 2014.

Questioned by Elisa Ferreira, the Socialist group spokesperson on the committee, about the prospect of contagion hitting the rest of the eurozone if Greece defaulted, Draghi conceded that “we would be entering into unchartered waters."

"We have all the tools to manage the situation at our best,” he added.

Elsewhere, Draghi commented that the eurozone recovery was “proceeding at moderate pace”, and forecast that economic growth across the currency bloc would rise to 1.5 percent in this year followed by 1.9 percent in 2016.

He also reiterated the bank’s intention to continue with its €60 billion per month quantitative easing programme, scheduled to run until September 2016 at the earliest, and played down suggestions that the €1.1 trillion programme was adding risks to the bank’s balance sheet of liabilities.

The “risks are rather contained”, he noted.

Greece situation 'dramatic'

ECB chief Draghi has said "urgent action is needed" for a bailout deal, but Greek PM Tsipras says he's waiting for creditors' "realism".

News in Brief

  1. Doubt cast on new Maltese inquiry into slain reporter
  2. March by Slovak Catholics seeks abortion ban
  3. 600,000 stranded on holiday as Thomas Cook collapses
  4. Egypt: hundreds of protesters arrested over weekend
  5. Global car industry fears no-deal Brexit shock
  6. France: de-escalation between US and Iran priority
  7. Spain demands UK 'reciprocity' on resident rights
  8. Ireland: right Brexit deal is 'not yet close'

Agenda

Europe goes to New York This WEEK

Iran and climate change likely to dominate as French president Emmanuel Macron speaks for Europe at the UN general assembly in New York this week.

Column

These are the crunch issues for the 2019-2024 EU commission

These developments will largely determine who will be running the world in the coming decades and perhaps generations. If the Europeans can't find an answer over the five years, they will be toast. And we haven't even mentioned climate change.

Stakeholders' Highlights

  1. UNESDASoft drinks industry co-signs Circular Plastics Alliance Declaration
  2. FEANIEngineers Europe Advisory Group: Building the engineers of the future
  3. Nordic Council of MinistersNew programme studies infectious diseases and antibiotic resistance
  4. UNESDAUNESDA reduces added sugars 11.9% between 2015-2017
  5. International Partnership for Human RightsEU-Uzbekistan Human Rights Dialogue: EU to raise key fundamental rights issues
  6. Nordic Council of MinistersNo evidence that social media are harmful to young people
  7. Nordic Council of MinistersCanada to host the joint Nordic cultural initiative 2021
  8. Vote for the EU Sutainable Energy AwardsCast your vote for your favourite EUSEW Award finalist. You choose the winner of 2019 Citizen’s Award.
  9. Nordic Council of MinistersEducation gets refugees into work
  10. Counter BalanceSign the petition to help reform the EU’s Bank
  11. UNICEFChild rights organisations encourage candidates for EU elections to become Child Rights Champions
  12. UNESDAUNESDA Outlines 2019-2024 Aspirations: Sustainability, Responsibility, Competitiveness

Join EUobserver

Support quality EU news

Join us