ECONOMY

ECB said to cut Greek emergency funding as outflows decelerate

ecb-said-to-cut-greek-emergency-funding-as-outflows-decelerate

The European Central Bank reduced the amount of emergency funding available to Greek lenders, a person familiar with the matter said, as capital controls and an agreement between the country’s government and its creditors eased deposit outflows.

The cap on Emergency Liquidity Assistance was cut by 600 million euros to 89.1 billion euros ($100 billion), and the ceiling will stay in place until the next Governing Council meeting scheduled for Sept. 16, the person said, asking not to be named as ELA decisions aren’t public. An ECB spokesman declined to comment. A Bank of Greece spokesman wasn’t immediately available for comment.

The decline in ELA, which follows a cut of 700 million euros last month, reflects an easing of Greece’s financial crisis after months of dispute that almost drove the country out of the euro. Former Prime Minister Alexis Tsipras was forced to impose capital controls after breaking up negotiations with creditors and calling a referendum on the terms demanded, before finally agreeing to a deal.

Deposit outflows in August decelerated to about 300 million euros, the person said. They fell by about 1.4 billion euros in July, according to the latest available data from the Bank of Greece. Greeks withdrew more than 43 billion euros from their bank accounts over the previous months, or 26.5 percent of total savings.

Under the capital controls, transfers of money abroad are restricted while a limit of 420 euros per week has been set on withdrawals from ATMs.

ECB President Mario Draghi will hold a press conference at 2:30 p.m. in Frankfurt where he’ll explain the Governing Council’s latest monetary-policy decisions and may elaborate on the state of Greece’s financial system.

The ECB is carrying out a comprehensive assessment of Greek lenders’ balance sheets, the results of which are foreseen by the end of October. A recapitalization backed by 25 billion euros of emergency loans from the euro area will follow by the end of the year under the aid program.

Tsipras stepped down last month to call elections for Sept. 20. Latest polls show the difference between his Syriza party and New Democracy is too close to call.

[Bloomberg]