Where Greece hopes to find cash – and why the ECB says no

Cash-strapped Greece had been hoping that the European Central Bank — which is about to pump billions into the eurozone economy — would help ease its torment, but so far the ECB has been markedly reluctant to come to its aid.

These are the key issues over which they are at loggerheads:

The bank — whose governors meet on Thursday — is one of the big three institutions, along with the IMF and the European Commission, who must make sure Greece sticks to the terms of its 240-billion-euro ($265-billion) bailout, and the extension that the country’s new leaders have just agreed.

But new promises of more spending by Greeces left-wing government to tackle the “humanitarian crisis” in the country got a chilly reception from the ECB’s president Mario Draghi.

“It is far from certain that the bank is ready” to give Greece the helping help that it expects with its creditors, said economist Carsten Brzeski of ING bank.

Athens would like to borrow more money in short-term bonds called treasury bills, its only real means of raising cash on its own.

But neither the ECB nor the other two members of the “troika” that hold Greece’s purse strings are ready to raise the ceiling of 15 billion euros it is allowed to raise in this way.

The governors of the ECB halted in February an exception that temporarily allowed Greek banks to refinance themselves from the ECB in Frankfurt using Greek debt as a guarantee.

As long as the ECB thinks Greece is not doing enough to push through the reforms it would like, this source of financing is unlikely to be restablished.

Since this source of cash was cut, Greek banks have had to borrow from the Bank of Greece at more costly rates through a mechanism called Emergency Liquidity Assistance.

While the debt is formally on the books of the Bank of Greece, the ECB still controls the amount of funds that can be used in this manner, and this too will be on the table on Thursday.

To make matters worse for Athens, the ECB has asked Greek banks to stop buying Greek treasury bills on which the government has so relied, cutting off another lifeline.

Greek Finance Minister Yanis Varoufakis claims that the ECB owes Greece 1.9 billion euros and wants to use the money to make the next repayment to the IMF at the end of March.

The sum is the money the bank has made on Greek debt it bought up at the height of the crisis, along with the sovereign debt of other struggling eurozone countries.

Although it was agreed in 2012 that money made on Greek debt would go back to Greece, Draghi said last week that first Athens “must conform to the programme”. The money was not the bank’s to give, he claimed, because the profits have already been redistributed to eurozone central banks.

But Varoufakis insisted this was “the Greek peoples money” and demanded to know why “why we are being evaluated” before it is given back.

It is out of the question to restructure the 27 billion euros of Greek debt the ECB holds, one of its directors, Benoit Coeure, said in January.

But Varoufakis claimed that if the debt had been held by private banks, a part of it at least would have been written off during a restructuring in 2012.

Now, however, Athens must pay these obligations as they come due, with 6.7 billion euros falling due to the ECB this summer.

While the ECB is about to pump billions into the flagging eurozone economy through “quantitative easing” — buying up at least 1.1 trillion euros of public and private debt — ironically Greece cannot for now benefit from its largesse.

The bank’s rules dictate that it cannot hold more than a third of the sovereign debt of any country. So until Greece pays off the debts that fall due in the summer, it will be excluded from the massive bid to kickstart growth.


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