Frankfurt: The European Central Bank yesterday cut off Greek banks’ access to a key source of much-needed cash, piling fresh pressure on the country’s new government to reach a deal with international creditors.
In a decision that rattled financial markets, the ECB said it would no longer allow Greek banks to use government debt, which has a junk rating, as collateral for loans.
The announcement came just hours after new Greek Finance Minister Yanis Varoufakis held his first talks with ECB chief Mario Draghi as part of the country’s push to renegotiate Athens’ €240bn ($270bn) EU-IMF bailout.
Stock markets fell on the news, while the euro tumbled by more than one percent against the dollar.
Greece said it would not be “blackmailed” and insisted its banks were secure after the ECB move. “The Greek republic does not intend to blackmail anyone but will not be blackmailed either,” a government source said, adding that the Greek banking system “was fully secure”.
Athens views this decision as “an act of political pressure to enable the rapid conclusion of an agreement” with Greece’s international creditors, the government source said.
“The liquidity and funding of Greek banks is fully safeguarded by the ELA mechanism,” the source added, referring to the ECB’s emergency liquidity assistance programme that has been a financial lifeline for Greek banks.
Greek Prime Minister Alexis Tsipras spoke with ECB chief Mario Draghi late Wednesday, after the bank announcement, government spokesman Gabriel Sakellaridis said. While declining to give details, he told private Mega TV: “We are prepared to talk to all our creditors.”
“(We want) all sides to understand that Greece is being subjected to an irrational policy,” he said, adding that Athens wanted to find a solution “without a gun to our head”.
Tsipras’ anti-austerity government came to power after last week’s election on a promise to renegotiate Greece’s EU-IMF bailout and erase over half the country’s debt.
He and Finance Minister Yanis Varoufakis have been holding a flurry of meetings with EU leaders and ECB officials this week in the hope of drawing allies to Greece’s cause. Sakellaridis said the ECB’s move could speed efforts to reach agreement on Greece’s demands.
“This pressure can lead all sides to reach a solution, a mutually beneficial solution,” he told Mega.
The Greek stock market plunged more than nine percent in early trading before recovering some of its losses.
Elected on a pledge to end austerity policies imposed on Greece as part of its bailout, Tsipras faces the delicate task of convincing his European partners to reverse course while ensuring Athens still gets the aid required to avoid a default.
In Brussels, Tsipras struck an upbeat note after talks with European Commission chief Jean-Claude Juncker and EU president Donald Tusk, saying he was optimistic of a “viable and mutually acceptable solution”.
A Greek government source said Tsipras and Juncker discussed plans to “jointly” create a four-year reform plan for Greece, as well as a bridging deal to give Athens time to draw up plans for reforms including on corruption and tax evasion.
But Tusk acknowledged that resolving the showdown over Greece’s debt was likely to be “difficult” and needed “cooperation and dialogue as well as determined efforts by Greece.”
Ahead of the ECB talks in Frankfurt, Varoufakis told the German weekly Die Zeit that the ECB “should support our banks so that we can stay afloat”, acknowledging that Greece was “a bankrupt country”.
The former economics professor later described his talks with Draghi as “very fruitful”.
But after a meeting of its policy-setting governing council late Wednesday, the ECB said it was taking the step to end the special waiver for Greece because “it is currently not possible to assume a successful conclusion of the programme review”.
The waiver, which will end on February 11, had allowed banks to pledge their Greek bonds as collateral, even though the securities did not meet standards for a minimum credit rating.
Greece faces key payments on its debt at the end of February and again at the end of May. AFP
