ECB Hands Greece an Extra 900 Million Euro in Emergency Funds
By admin July 16, 2015

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The European Central Bank announced that Greek banks will benefit from an extra 900 million euro, approximately 980 million dollars, in emergency funding to keep them afloat and possibly allowing bank branches to stay open on Monday. The ECB voted on a measure that would bring the institution’s support for Greek banks to 130 billion euro, or 141 billion dollars, in total. However, some believe that this decision to accept ELA, or emergency liquidity assistance, could hurt Greek banks, which will have to pay higher interest rates on their central bank funding. Some say, the ECB has moved a step closer to “calling time” on the Greek government’s campaign to secure a more favorable deal from its European creditors.

Mario Draghi, the ECB president, denied accusations that it precipitated the closure of Greek banks with its decision to freeze emergency lending assistance. The Eurogroup president, Jeroen Dijsselbloem, stated the money was in place and inspectors from the International Monetary Fund could be in place by Monday. At the same time, MPs in Athens approved the austerity package demanded by Greece’s creditors, while violent street demonstrations and anger in the parliament.

Finland gave its approval for negotiations on a new bailout plan and Germany will vote on bailout talks on Friday, while Chancellor Angela Merkel asked the Bundestag to back the plan.

Despite talks of this new bailout, there still remain doubts about Greece’s place in the eurozone with increasing signs that neither Athens nor its creditors believe the 86 billion euro, 93.7 billion dollars, bailout can work. The German finance minister, Wolfgang Schaube, believes a temporary Greek exit from the eurozone would be best. He also suggested giving Greece more time to pay back debts, as long as it did not turn out to be a tactic to reduce the total amount. However, a German finance minister spokesman stated that Germany believes that debt sustainability could be achieved by structural reforms and economic growth instead. Whereas the IMF is urging eurozone countries to give Greece more generous debt relief and a 30-year grace period before having to repay its debts.

Although this is a quick fix for Greece at the moment, some believe this increase in funds could exacerbate the run on deposits. Additionally, the move is seen as the European Central Bank playing a game of politics and continuing to put pressure on Greece to “behave well.” There is little belief by Athens and its creditors that even this further bailout can make things work.


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