ELA cash to suffice till Monday

The European Central Bank injected additional cash into the Greek credit system on Friday after an extraordinary teleconference of its governing council that decided to extend the emergency liquidity assistance (ELA) limit by about 1.8 billion euros to help Greek banks cope with the increasing outflow of deposits.

Kathimerini understands that, following an intense debate regarding the Bank of Greece’s request for a further extension to the ELA limit, the ECB board finally decided to keep the funding tap open, offering local lenders the cash flow that would be necessary for them to keep operating up to Monday’s eurozone summit meeting.

The ECB board actually made it clear that “we are all expecting a positive outcome in Monday’s meeting,” thereby warning of dire consequences should that not be the case.

Greek bankers estimated that the deposit outflow amounted to 1.7 billion euros on Friday, bringing total withdrawals from bank accounts to 5 billion euros this week.

Earlier on Friday BoG Governor Yannis Stournaras met with the head of the government’s negotiating team, Euclid Tsakalotos. After the meeting Stournaras affirmed the stability of the local banking system, stressing that it is fully secured by the common action of the BoG and the ECB.

Friday’s ECB board meeting was off schedule and sources say it took place in a heavy atmosphere due to the impasse in the talks between the SYRIZA-led government and the country’s creditors. It was also the first time this year that the ECB was forced to convene twice in the same week to support the liquidity of Greek banks. Last Wednesday it extended the ELA limit by 1.1 billion euros.

Banks expressed relief following Frankfurt’s reaction, acknowledging that Friday could have ended very differently without a new cash injection.

Senior bank officials told Kathimerini that the situation is on a knife’s edge and warned that unless there is sufficient progress over the weekend to pave the way for decisions at Monday’s summit meeting, the credit system may face exceptionally dangerous conditions.