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ECB extends emergency liquidity for Greek banks

Reuters , Monday 22 Jun 2015
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The illuminated euro sign is seen in front of the headquarters of the European Central Bank (Photo: Reuters)
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The European Central Bank raised the ceiling on emergency liquidity for Greek banks on Monday for the third time in six days and a senior ECB policymaker said any further extension would depend on how talks with creditors progress.

A banking source told Reuters the euro zone central bank's governing council had held a teleconference to discuss extending the emergency liquidity assistance (ELA) after savers pulled about 4.2 billion euros from Greek lenders last week.

"The governing council raised the ELA cap and will convene again via teleconference at any time necessary," the source said, speaking on condition of anonymity and declining to say how much the ceiling had been raised by.

Austria's central bank chief Ewald Nowotny later said the Governing Council, which is made up of central bank chiefs from around the euro zone and the ECB's executive, would talk again to discuss the outcome of Monday's euro zone leaders' summit.

Nowotny warned that Greece risks losing access to further emergency funding for its banks if the government does not reach a prompt deal with creditors.

"This credit is advanced until the end of today and whether we can continue to extend it depends on our rules as well as the result (from negotiations) today," Nowotny, a member of the European Central Bank's Governing Council told journalists.

"(ELA) runs precisely for one day because there is a summit meeting (of leaders) to deal with the Greek question and the ECB, sensibly enough, did not want to anticipate the result," he said on the sidelines of a conference in Vienna.

Were the ECB to freeze central bank funding for Greek banks, as Nowotny's remarks imply it could, capital controls on withdrawing cash would be unavoidable.

The ECB raised the ceiling on ELA that banks can draw from the Greek central bank by 1.1 billion euros to 84.1 billion euros on June 17 and raised it by a further 1.8 billion euros on Friday, according to a government official.

Sources in Frankfurt and in Brussels said pre-orders for deposit withdrawals for Monday had reached 1 billion euros.

Nowotny, who also underlined the importance of finding a long-term 'perspective' that put Greece's future and that of its banks on a solid footing, emphasised the urgent need to reach political agreement.

"Credit has been extended for one day. Then we will see what the result of the summit is," he said.

His remarks came after a new Greek proposal on a cash-for-reforms deal raised hopes of an agreement as euro zone leaders prepared for an emergency summit.

The ECB had been approving emergency funding on a weekly basis but is now meeting almost daily as bank withdrawals and negotiations reach a climax.

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