BackECB’s Draghi keeps Greek lenders afloat as bailout talks drag on
The governing council of ECB raised the cap on emergency liquidity assistance by 800 million euros to 74 billion euros
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Athens: Greek government officials and the nation’s creditors resume talks in Athens about the stalled review of the cash-strapped country’s bailout on Wednesday, a day after European Central Bank (ECB) extended the lifeline to keep the nation’s lenders afloat.
The governing council of the ECB raised the cap on Emergency Liquidity Assistance by €800 million ($852 million) to €74 billion at a meeting in Frankfurt on Tuesday, said people familiar with the decision who asked not to be identified because the matter is private. That leaves a buffer of about €4 billion, said one of the officials.
Junk-rated Greek banks are being denied access to the ECB’s regular refinancing operations because of the anti-austerity government’s resistance to the terms attached to its emergency loans. Uncertainty over Greece’s future in the euro area has also triggered steep deposit outflows, leaving lenders reliant on emergency cash injections that are subject to weekly reviews by the ECB.
The Greek government “hasn’t made too many friends," as negotiations to reach an accord between Athens and its European partners continue, Spain’s Finance Minister Luis de Guindos said in an interview with Cadena Ser radio.
Having lost market access, the Greek state is running out of cash, as disbursements from its €240 billion bailout ceased last summer. The government can use cash reserves of state enterprises, pension funds and local governments to stay afloat until May, an international official involved with the negotiations between the country and its creditors said on Tuesday.
Riga meeting
The two sides are moving further apart from each other, the international official said, adding that the government’s refusal to proceed with any privatizations, and its pledges to reverse labour-market reform, pension system overhaul and budget savings can’t be accepted by the country’s creditors. The official asked not to be named as talks between the two sides are not public.
Euro-area finance ministers, who will meet in Riga, Latvia, on 24 April, will assess whether Greece has made enough progress to warrant a bailout disbursement. European Union officials have asked that a specific set of reforms be submitted by early next week.
“Time seems too short until 24 April to work out the technical details of the reform list, particularly regarding the insurance system and labour market reforms" UBS analysts Ricardo Garcia-Schildknecht and Thomas Wacker wrote in a note to clients. “We still view the probability of a debt default at 50-60%."
Treasury bills
Greece’s public debt management agency will sell 13-week treasury bills later on Wednesday, and will use the proceeds to roll over short-term notes maturing Friday. Greek banks, whose biggest shareholder is the state, and the Bank of Greece, which manages cash reserves of pension funds and other public entities, cover the hole created by lack of investor interest for the country’s notes.
Yields on Greek 10-year notes rose to as much as 12.25% on Wednesday, the highest level in two years. Greek banks’ shares fell as much as 4.9% in Athens, reaching their lowest level in at least 20 years. Bloomberg
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