ECB ensures the continuing operation of Greek banks

The European Central Bank raised the ceiling on Greece’s liquidity assistance from 83 billion to 84.1 billion euros, wire services reported Wednesday,  as usual  citing unnamed sources.

The ECB governing council increased the limit on emergency liquidity assistance to €84.1bn from €83bn in a meeting in Frankfurt yesterday.

“Liquidity will continue to be extended as long as Greek banks are solvent and have sufficient collateral,” ECB president Mario Draghi told the European Parliament on Monday.

The decision means that the Greek banks can continue to operate as normal despite the continuing outflows of capital caused by yet more rumours about a possible Greek exit.

Last week, the ECB increased its ceiling for ELA to Greek banks by 2.3 billion euros to 83 billion euros, in light of Greek savers continuing to pull out their savings.

The last two  ELA increases are larger than what the B of G has been allowed recently and is an indication that Mario Draghi’s continued commitment to support the Greek banks, while  at the same time increasing the central bank’s exposure in the event of a Greek default.

However, the ECB is at liberty to restrict banks’ access to the ELA if operations “interfere with the objectives and tasks of the Eurosystem.” This decision would be taken by the ECB’s Governing Council and would require a majority of two-thirds of the votes cast.

The ECB can force the collapse of the of the banking system by turning off the emergency cash. This  is seen as the preferred way  lenders  will use to force Greece out of the eurozone.

The discreet ECB announcement on Wednesday was overshadowed by reports of Schaeuble’s preparations for Grexit