ECB tells Athens to reach a deal

The European Central Bank again issued a terse message to the Greek government on Wednesday by not extending the limit on the cash made available to Greek lenders through the emergency liquidity assistance (ELA) of the Bank of Greece beyond the level of 80.2 billion euros.

The decision generated concern in Athens as it had been widely expected that Frankfurt would extend the limit by a few hundred million euros as it had done in previous weeks. Government sources were quick to reassure that there had been no Greek demand for an extension to the limit as the existing amount suffices to serve the needs of the local credit system.

However, the ECB decision is seen as a call to Athens to wrap up its negotiations with the country’s creditors, without Wednesday’s decision triggering any immediate developments.The ECB tests the safety reserves that local banks have maintained, estimated at around 3 billion euros, which could evaporate very quickly if there are no positive developments in the talks over the coming days.

Banking sources, however, said that the picture of deposits has stabilized compared with April, though the outflow continues daily, while in the past few days there has been a significant rise in the outgoing tide owing to various statements suggesting possible capital control measures and the imposition of a tax on cash machine withdrawals, as well as the prospect of the upcoming long weekend.

Bank officials note that in the last couple of weeks the outpour of deposits has been significantly greater than the increase of the ELA limit by 200 million euros decided last week by the ECB, meaning that the previous cash reserves of 3.5 billion euros have now diminished to about 3 billion.

At least the ECB once more stopped short of increasing the haircut on the value of Greek banks’ collateral, which could have left them without access to the liquidity of the Eurosystem altogether.

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