The Korea Herald


Greece awaits European Central Bank decision on liquidity

By 안성미

Published : June 28, 2015 - 21:31

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ATHENS, Greece  Greece was anxiously awaiting a decision Sunday by the European Central Bank on whether it will increase the emergency liquidity assistance that Greek banks can draw upon.
Worried Greeks continued lining up at ATM machines Sunday morning, the day after the Prime Minister Alexis Tsipras called for a referendum on creditors' financial proposals in return for rescue loans. While some machines were running out of cash, others were being replenished.
Tsipras' move for a national vote on July 5 startled and angered Greece's European partners and threw the country's bailout negotiations with international lenders into turmoil. Parliament approved the referendum call in a majority vote.
But Greece's international bailout with its European creditors and the International Monetary Fund expires Tuesday, and Greece's European partners said they would not accept an extension of the bailout until Sunday's referendum.
With Greece also facing a 1.6 billion-euro ($1.8 billion) debt repayment to the IMF on Tuesday -- one it will struggle to meet without bailout funds -- the developments have thrown Greece's financial future and its continued membership in the 19-nation shared euro currency into question.
Alternate Greek Finance Minister Nadia Valavani said the government was "expecting the funding of Greek banks to continue normally via the ELA after Tuesday."
Valavani urged Greeks themselves to show restraint, telling private Mega television the country's banks could see "business as usual" next week if they receive the emergency support "so long as there is calm" and Greeks don't attempt to withdraw all their savings.
If the ECB decides not to increase the emergency liquidity, which currently stands at just under 90 billion euros ($100 billion), Greece's four major banks will soon run out of cash and be forced to place restrictions on transactions.
Those limits on withdrawals could keep Greek banks functioning -- but they would mean a deepening of the financial crisis and could take Greece a step closer to leaving the euro.
The ECB has been permitting Greek banks to draw emergency credit from Greece's central bank, a financial lifeline that has been keeping the country's four major lenders going. The ECB has been slowly increasing the amount of emergency credit which has been compensating for the increase in withdrawals from Greek banks. 
But the ECB has said it can only continue such assistance if the banks are basically solvent. A failure by the Greek government to get more aid could lead to a determination that the Greek banks are no longer financially solid, since they have financial ties to the government.
ECB President Mario Draghi has said it's up to Greece's elected officials to decide their country's fate, and analysts say the ECB wants to give the politicians every chance to negotiate a deal.
But any determination that a deal is no longer likely could push the central bank to decide not to increase emergency credit further.  (AP)