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Bundesbank opposes more emergency funding for Greece: report

Friday, March 27, 2015 - 16:48
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Bundesbank chief Jens Weidmann says he is opposed to giving Greece more emergency loans, charging the new government in Athens with frittering away a lot of trust.

[FRANKFURT] Bundesbank chief Jens Weidmann says he is opposed to giving Greece more emergency loans, charging the new government in Athens with frittering away a lot of trust.

"Until the autumn, an improvement in the economy had been discernible. But the new government has gambled away a lot of trust," Weidmann said in an interview with the weekly Focus that was released on Friday.

"I am opposed to an increase in the emergency loans," said Weidmann, who as head of the German central bank sits on the European Central Bank's decision-making governing council.

Greece is currently trying to reach a long-awaited accord with its creditors providing funds vital to avert a state default.

Greek banks are the main source of financing for the government, but the ECB has restricted their ability to purchase short-term debt known as treasury bills, the main instrument used by Athens for emergency financing.

The ECB has also suspended a waiver allowing Greek sovereign bonds from being used as collateral for loans in its regular refinancing operations.

That means Greek banks now rely on the Emergency Liquidity Assistance (ELA) facility for funding, which is more expensive than the regular refinancing operations.

Earlier this week, the ECB increased the maximum ELA that Greek banks can get from the Bank of Greece by 400 million euros (S$594 million) to 71.1 billion euros.

Under ECB rules, any such decision must receive a two-thirds majority on the governing council.

Weidmann rejected Athens's claims that it could no longer meet its financial obligations.

"I don't buy the argument that they are financially overburdened," he said.

He conceded that Greece's overall debt was very high, but the burden was being made more manageable by lower interest rates and deals to extend repayment deadlines.

Weidmann said the public appearances of Greek government officials, including finance minister Yannis Varoufakis, did not inspire confidence.

"Generally speaking, I get the impression that the statements given by various govenrment members can be very different, depending on the day and the audience," he said.

"Ultimately, that doesn't inspire much confidence." Asked whether Greece was in imminent danger of bankruptcy, Weidmann replied: "Clearly, the governments of the other countries have the impression that a solution can be found. But we don't have a lot of time."

AFP