The European Central has decided to increase the volume of emergency funding available to Greek banks and financial institutions to €65 billion. Greece was thus reportedly given what it had requested. In the meantime, leaders from Greece and the rest of the Eurozone met on Thursday (12 February) to discuss the future of the Greek debt. Alexis Tsipras, Greece’s Prime Minister, commented that “I think today we leave having made important steps”.
Since the funds available for the country expire at the end of this month, Greece’s new government is under pressure to negotiate an extension. The ECB announced last week that it would no longer accept Greek sovereign bonds as collateral for loans in its standard re-financing operations which basically meant that Greek banks would lose an important channel of financing. Greek debt is still subject to very poor rating and thus it cannot be accepted as collateral for loans under ECB rules.
Nevertheless, Greece was given a special exception to that rule as long as it complied with the terms of its bailout program managed by the EU and the International Monetary Fund (IMF). The ECB’s announcement effectively lifted that waiver, which was seen as a major blow to Athens. As a result, Greece’s borrowing costs rose sharply as Frankfurt-based ECB kept emergency liquidity assistance open, which is, however, a more expensive facility. Since May 2010, the Eurozone members and IMF have been providing financial assistance to Greece under an Economic Adjustment Program. So far, the country has received a total of €240bn to prevent its bankruptcy.