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ECB keeps Greek banks afloat - for now

June 19, 2015

However shortlived, Greece's embattled banks can breathe a sigh of relief after the European Central Bank has decided to increase the level of emergency funding. This comes amid a growing wave of capital flight.

Lifeline around euro coin
Image: picture-alliance/dpa

The European Central Bank (ECB) on Friday moved to keep Greece's sinking financial system afloat, raising the cap on its Emergency Liquidity Assistance (ELA) by 3.3 billion ($3.7 billion), according to an unnamed Greek banking official.

The source said the ECB Governing Council responded to a request from the Bank of Greece.

The decision comes amid reports of massive capital flight, as many Greeks seek to secure their assets over fears that their country could default by the end of the month and drop out of the eurozone.

Fear of bank runs

On Thursday alone, deposit outflows topped more than 1 billion euros, raising the total amount savers have pulled to at least 4.2 billion euros since talks between Athens and its international creditors collapsed last weekend. That's over 2 percent of estimated household and corporate deposits at the end of April.

"Money is going out of the Greek banks faster than at any time before," said an EU official, who spoke only on condition of anonymity because of the sensitive nature of the situation.

On Monday, ECB President Mario Draghi told EU lawmakers that he had helped Greek lenders to the tune of 118 billion euros to stop the bleeding - more than double the amount at the end of 2014.

Defying doomsayers, the Greek central bank insisted that the country's banking system remained stable.

"The governor of the Bank of Greece has confirmed the stability of the banking system, which is fully safeguarded by the joint actions of the Bank of Greece and the European Central Bank," a government source said.

The official added that banking governors were expecting a "positive result" at next week's emergency summit in Brussels. EU President Donald Tusk called the meeting of the 19 eurozone leaders after finance ministers on Thursday had failed to break the five-month deadlock between the anti-austerity government in Athens and its creditors from the European Union and the International Monetary Fund.

pad/uhe (AP, AFP, Reuters)

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