ATHENS (Reuters) – The European Central Bank left abruptly Wednesday accepting Greek bonds as collateral for financing, in a move that puts on the Central Bank of Athens burden of financing to lenders and isolating Greece, unless you reach a new agreement with economic reforms.
The measure, which implies that the Central Bank of Greece shall provide the country’s banks with tens of billions of euros in additional emergency liquidity in the coming weeks, was a response to what many Frankfurt see as the government’s intention to abandon Athens terms of its bailout based reforms.
The decision was revealed hours after the Greek Finance Minister, Yanis Varoufakis, out of a meeting with ECB President Mario Draghi, to assert that the European entity do “everything necessary” support member states like Greece.
In sharp contrast, measurement of the ECB, which required the support of a majority of heads of central banks of the euro zone, shows a widespread outrage with plans for the new Greek government in block 19 countries.
The ECB announced its decision, which comes into force on February 11, after the central bank officials met Wednesday in Frankfurt.
The new policy means that tens of billions of euros in Greek sovereign bonds, plus bank debt backed by Athens, no longer qualify as collateral for ECB funding to these lenders.
Instead, now depend on the central bank of Greece give those banks Emergency Liquidity Assistance (ELA, for its acronym in English), a step that will take sole risk and that keeps out financing problems of these lenders from the rest of the eurozone.
If the home central bank has liquidity problems depend on the indebted government of Greece, who can hardly afford this situation, provide financial assistance.
European Rigor
The unexpected shift in policy came after a request by the leftist government of Greece on the ECB to keep its banks afloat while trying to negotiate an easing its debt burden with its partners in the eurozone.
With its decision, the ECB actually refused to that request and increased the tribulations of Greece after Germany refused to reverse the austerity policies agreed with Athens ransom.
This is a setback for Varoufakis, who had previously promised swift negotiations with its international lenders to establish a new reform program, before giving an initial plan.
Greek banks also are in a delicate situation.
Two banks had already begun to receive emergency liquidity of the Bank of Greece after the exodus of deposits after the victory of the leftist SYRIZA in the elections of January 25 accelerated, according told Reuters industry sources.
The health of the largest banks in Greece is crucial to keep the country afloat.
For his part, President of the European Parliament, Martin Schulz, warned that if Greece does not fulfill its commitments to its European partners risks pushing the country into bankruptcy, according to an interview he gave German newspaper.
“If Greece unilaterally change the agreement, the other party is not required to continue to comply therewith,” Schulz said.
Schulz said the Greek government has no choice but to respect their commitments because that is the only way they can talk regarding giving concessions to Athens.
When asked to what might be these concessions, Schulz said that are alternatives to harsh austerity measures, but said neither he nor the president of the European Commission, Jean-Claude Juncker, will like that kind of action.
Germany resists
After promising to end five years of austerity, Prime Minister Alexis Tsipras and Varoufakis are meeting with senior officials in Europe seek support for a new agreement on Greek debt.
However, a document prepared by Germany for a meeting of EU officials on Thursday made it clear that Berlin wants Greece reversing its promises to raise the minimum wage, suspend sales of assets national, rehire laid-off state employees and reinstall a Christmas bonus for poor pensioners.
“The Eurogroup needs a clear commitment to Greece to ensure the full implementation of key reforms needed to keep the program going,” says the document seen by Reuters, referring to the finance ministers the euro zone.
“The goal is the perpetuation of the agreed reform (not reverse the measures), covering other areas such as revenue management, taxation, public financial management, privatization, public administration, health, pensions, social welfare, education and the fight against corruption, “he added.
The new Greek leaders have so far had their reception marked by caution, even in countries like France and Italy, the Greek government expected to support its call to ease its debt burden.
The French President François Hollande, said the eurozone rules apply to all member states. And the president of the European Parliament, the Socialist Martin Schulz said Greece risked falling into bankruptcy if not keeping the commitments agreed with EU partners.
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