ATHENS: The European Central Bank is looking at placing greater restrictions on the use of its emergency lending facilities by Greece’s domestic banks which increased pressure on Greece.
Greece financial stocks duly sold off heavily after the report emerged that the ECB is considering increasing the interest rate – or “haircut” – on their ELA borrowing, with the banking index shedding 5.5 per cent.
Greece banks have tapped around €74bn (£53bn) in emergency liquidity assistance from the ECB to replace the deposits that nervous domestic savers have pulled out of the financial system in recent months. Without that lifeline, the country’s banks would rapidly collapse.
Greece’s three-year borrowing costs also jumped to just shy of 30 per cent, reflecting rising concerns about the solvency of the country’s banking system and the lack of progress towards a deal between Athens and its eurozone creditors. Greece needs a €7.2bn bailout from its partners in order to service its maturing debts and to carry on paying public sector workers. It also needs to make an €800m payment to the International Monetary Fund early next month.
