The European Central Bank has reacted to uncertainty over Greece’s future in the euro zone by excluding four of the country’s banks from its regular liquidity-providing operations.
The move raises the pressure on Greece to stick to its international bailout by highlighting the risk that euro zone central bankers could pull the plug on its financial system. It reflected ECB fears that a planned recapitalization of Greece’s banks could be delayed.
The four Greek banks – which the ECB did not name – will have to rely instead on “emergency liquidity assistance” – a special temporary facility provided by the Greek central bank but subject to ECB approval. The ECB “continues to support Greek banks,” a spokesman said.
European leaders are attempting to turn Greece’s repeat national election next month into a referendum on the country’s membership of the euro, a high-stakes political gamble that officials believe can win back voters disillusioned by the tough bailout conditions but eager to stay in the single currency.
“We want Greece to remain part of our family, of the European Union, and of the euro,” José Manuel Barroso, president of the European Commission, said at an unscheduled news conference. “This being said, the ultimate resolve to stay in the euro area must come from Greece itself.”
Speaking in Frankfurt, Mario Draghi, ECB president, said the ECB’s “strong preference” was for Greece to remain in the euro zone, which suggested the ECB would maintain its support for its banks as long as possible The decision on the Greek banks was taken by the ECB’s governing council on Tuesday but had been in preparation since the country’s inconclusive May 6 election.
Under Greece’s bailout plan, some €25-billion ($31.8-billion U.S.) of funds has already been transferred from the European Financial Stability Facility to Greece to strengthen its banks. But its deployment has been held up by a dispute between Athens and its banks over future control of banks.
An ECB spokesman said that once the recapitalization process was “finalized,” the banks would regain access to standard liquidity operations. This could happen within days, according to ECB and Greek officials.
Mr. Draghi said that, as an exit was not foreseen in EU treaties, it was not up to the ECB to decide whether Greece stayed in the euro zone. But the ECB would stick to its mandate of fighting inflation and preserve “the integrity of our balance sheet.”Report Typo/Error
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