ECB raises pressure on Greece as Tsipras meets EU peers

[BRUSSELS] The European Central Bank raised pressure on Greece on Thursday to extend an international bailout deal or risk a bank collapse, as new leftist Prime Minister Alexis Tsipras told EU leaders austerity is killing his economy and they must find an alternative.

After euro zone finance ministers failed to agree on a joint statement on the way forward on Greece's debt crisis, the ECB's Governing Council held a short-notice teleconference to discuss how long it could continue to keep Greek banks afloat.

The ECB declined comment, but two sources familiar with the matter said it concerned the provision of Emergency Liquidity Assistance (ELA) by the Greek central bank, which the ECB authorised as a temporary expedient when it stopped accepting Greek government bonds in return for funding last week.

Arriving for his first European Union summit, Mr Tsipras told reporters: "I'm very confident that together we can find a mutually viable solution in order to heal the wounds of austerity, to tackle the humanitarian crisis across the EU and bring Europe back to the road of growth and social cohesion." Chancellor Angela Merkel, vilified by the Greek left as Europe's "austerity queen", said Germany was prepared for a compromise and finance ministers had a few more days to consider Greece's proposals. "Europe always aims to find a compromise, and that is the success of Europe," she said on arrival in Brussels. "Germany is ready for that. However, it must also be said that Europe's credibility naturally depends on us respecting rules and being reliable with each other." Ms Merkel was due to meet Mr Tsipras privately on the sidelines of the one-day informal EU summit.

Other leaders said it was up to Greece to respect budget discipline and economic reform commitments made by previous governments if it wanted continued aid.

ECB executive board member Peter Praet said the ECB would apply its existing ELA rules to Greece. "It is key that the banks benefiting from emergency liquidity assistance remain solvent," he told the Financial Times.

His comments appeared to signal that the central bank could cut the cash lifeline if Greece failed to reach a deal with its creditors before the 240 billion euro bailout expires at the end of this month, exposing Greek banks to a risk of capital flight and collapse.

Analysts say that in turn could trigger a Greek exit from the euro zone, potentially causing wider financial turmoil.

Highlighting the precariousness of Greece's position, tax revenues fell about 1 billion euros short of the budget target in January as Greeks held off payments before the Jan 25 election, anticipating that the new leftist government would scrap an unpopular property levy.

Euro zone finance ministers in the Eurogroup will try again on Monday to bridge their differences, but at Greek insistence, there will be no preparatory talks between officials from Athens and the European Commission, the IMF and the ECB. Mr Tsipras has vowed no longer to cooperate with the "troika" of lenders.

A Greek official said the hard left Syriza party leader, elected on a tide of public anger against austerity last month, was determined to put the Greek crisis at the centre of the Brussels summit. However other EU officials said it would be largely devoted to the conflict between Ukraine and Russia.

REUTERS