Greek banks could return to normal European Central Bank funding before international lenders conclude a first review of the country's new bailout program early next year, the euro zone's central bank said on Thursday.
The ECB shut Greek lenders out of its liquidity operations in February after a radical leftist government won power vowing to tear up a previous bailout agreement and reverse austerity.
The banks were kept afloat by more costly, ECB-authorized emergency liquidity assistance (ELA) from the Greek central bank, enabling them to survive massive deposit outflows and the imposition of capital controls in late June.
ELA peaked at 91 billion euros in July after banks were shut for three weeks. The ceiling has been reduced gradually since a third bailout was agreed in August. The ECB lowered it by 7.8 billion euros to 77.9 billion euros on Thursday "reflecting the improvement of liquidity in the Greek banks".
The country is just completing an operation to recapitalize the four systemic banks before new EU bank resolution rules come into force in January which would force big depositors to share losses before lenders could receive rescue aid.
Asked when the ECB would restore a waiver to let Greek banks participate in its liquidity tenders, ECB Vice-President Vitor Constancio told a news conference in Frankfurt: "The main condition is that the (ECB) Governing Council will be satisfied that the country … is complying with the program.
"That could even happen before the conclusion of the review, if we would be close enough to that end of the review and we would be convinced that the review would become successful."
Finance Minister Euclid Tsakalotos and a senior EU official said they expected the first review to be completed in February once Greece enacts pension, tax and labor reforms.
The government also wants the ECB to include Greek sovereign bonds in its quantitative easing asset-purchasing program. But Constancio made clear that was a more distant prospect than restoring the waiver for Greek banks.
"Regarding the participation in QE, it's more complex, and it does not depend only on the successful completion of the review," he said.
He did not spell out the other factors, but the ECB only buys bonds of euro zone governments that are ranked at investment grade by at least one credit rating agency. No agency currently rates Greece at that level.
The International Monetary Fund said on Thursday it would consider in January whether to participate in the bailout program when inspectors from Greece's lenders review its compliance with the conditions.
"That's the first point when we could begin to think about participation," IMF spokesman Gerry Rice told a briefing in Washington.
Any IMF role would be "in the context of a new program", he said, making clear the global lender would not extend the 16 billion euros of unused funds left from an incomplete program that expires in March.
He repeated the IMF's position that participation depends both on Greek compliance with the program and on euro zone lenders granting sufficient debt relief to Athens.