Greece can use bank rescue funds after bailout exit

Greece can use the remaining 11.5 billion euros ($14.4 billion) in its bank rescue fund as a precautionary credit line when it exits its EU/IMF bailout, the country’s central bank chief told Greek newspaper Ta Nea on Wednesday.

Greece is in talks with EU institutions and the International Monetary Fund ahead of the expiry of its bailout package with the European Union on Dec. 31. Athens wants to exit its bailout when euro zone funding stops, though the IMF is scheduled to stay through to early 2016.

A precautionary credit line would serve as a cushion in the event that Athens encounters difficulties in funding itself from markets.

Greece wants any new support to come without the strict conditions attached to earlier loans which led to years of unpopular austerity, however bond markets are nervous about the uncertainty surrounding the future of the bailout program.

“Excluding a small amount that must remain (at the fund) as a security cushion for unforeseen credit system risks, the largest part of this sum could be used as a precautionary credit line and be returned to the European Stability Mechanism (ESM),” Bank of Greece Chief Yannis Stournaras told the paper.

Stournaras’s view echoes that of the country’s finance minister and euro zone officials.

Greece’s HFSF bank rescue fund, set up to recapitalise Greek banks, has spent about 38 billion euros out of its 50 billion euro arsenal to prop up the battered sector and recapitalise lenders.

“The fact that the European Central Bank’s stress test showed that Greece’s systemic banks do not have capital shortfalls allows the opportunity to use the HFSF’s 11.5 billion euros with greater comfort and flexibility,” Stournaras was quoted as saying.

He said that returning the remaining HFSF sum to the ESM fund would reduce Greece’s debt if the funds are eventually left untapped.

“As long as it reduces public debt it gives the Greek government the ability to negotiate a realistic relaxation of the primary budget surplus target for 2016, which would benefit the economy,” Stournaras said.

The central bank chief told the paper he believes changing the use of the remaining HFSF bank rescue funds would overcome any reservations by eurozone officials. [Reuters]

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