The European Central Bank approved an increase of more than 1 billion euros ($1.1 billion) in the emergency funds available to Greek lenders, two people familiar with the decision said.
The Governing Council raised the cap on Emergency Liquidity Assistance provided by the Bank of Greece to just over 71 billion euros in a telephone conference on Wednesday, the people said, asking not to be named because the call was private. The increase is the biggest this month and means the cap has risen by more than 10 billion euros since lenders lost access to normal ECB funding lines in February.
The Frankfurt-based ECB is reacting to the deterioration of Greece’s finances on two fronts as euro-area governments press Prime Minister Alexis Tsipras to deliver on economic reforms. While policy makers are ensuring lenders have sufficient liquidity to operate, the ECB’s supervisory arm yesterday made it illegal for domestic banks to increase their holdings of short-term government debt.
An ECB spokesman declined to comment.
The ELA increase is larger than the two previous weekly increases, of 400 million euros on March 18 and 600 million euros on March 12. It may be a sign of worsening deposit flight amid uncertainty over whether Greece can meet creditor demands and stay in the currency bloc.
Euro-area officials have said Greece needs to show it can deliver detailed reform proposals by Monday if the country is to receive further aid payments.
The currency bloc left the door open for Greece to access 1.2 billion euros that has been allocated to aid the banking system, if the cash-strapped nation can show how it will move ahead with the changes that its creditors are seeking. At the same time, the euro zone’s other 18 members were adamant that Greece needs to deliver specific plans to see any more bailout cash, officials said following a conference call of finance-ministry deputies.
By allowing the Greek central bank to fund the nation’s lenders while striving to prevent them from breaking European Union law by financing the government, the ECB is putting pressure on politicians to reach a deal.