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ECB said to increase Greek ELA ceiling by 600m euros
[FRANKFURT] The European Central Bank increased the maximum amount of Emergency Liquidity Assistance that Greek banks can receive from their national central bank by 600 million euros (S$885 million), according to two people familiar with the decision.
The amount matches the request by the Greek central bank, said the people who asked not to be named because the talks are private. The ECB's Governing Council held a phone conference on Thursday to set the limit, which the policy makers increased by 500 million euros to 68.8 billion euros on March 5. The council is scheduled to review the level again on March 18.
The ECB is reviewing the ELA level weekly, reflecting concern that banks will use it to finance the Greek government. That would violate European Union law. The newly elected government in Athens is struggling to gain access to aid payments as a cash crunch looms before the end of the month.
"The financing of the Greek state via banks, which then access monetary-policy operations or ELA funding from the Greek central bank, throws up obvious concerns over monetary-state financing," Bundesbank President Jens Weidmann said at a press conference in Frankfurt on Thursday before the ELA decision.
"The Eurosystem needs to make sure that the Greek banks do not weaken their liquidity situation further by purchasing government debt for which there is no market."
Greek banks were cut off from regular ECB funding operations in February, forcing them into ELA, when the ECB removed an exemption on the quality of debt it accepts as collateral.