ECB says it will neither cut off nor increase emergency lending to Greek banks

Reuters / Marko Djurica
The European Central Bank said it would keep the Emergency Liquidity Assistance, which has been providing funds to the Greek banks, at the same level. Some media had earlier predicted it would be cut off.

“The Governing Council decided to maintain the ceiling to the provision of emergency liquidity assistance (ELA) to Greek banks at the level decided on Friday,” the bank said in a statement, adding that the decision may be reviewed at a later date.

Earlier, the BBC reported that the emergency lending program would be cut, citing well-placed sources. Greek banks have been using money provided under the ELA program to sustain cash withdrawals from bank accounts.

The Greek government may impose capital control – that is put a cap on how much money can be withdrawn over a period of time – to prevent a major bank run expected next week, the BBC Radio reported, saying that Greek Finance Minister Yanis Varoufakis confirmed this to them.

The minister, however, later denied, stating this, according to Reuters.

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Earlier on Saturday, the Eurogroup decided the Greek bailout program wouldn’t be extended beyond Tuesday. The country is expected to default on a €1.6-billion payment due to the International Monetary Fund on the same day.

The possibility of ELA termination was suggested by former ECB board member Lorenzo Bini Smaghi, who said the bank can no longer provide emergency liquidity to Greek banks.

"Given the uncertainty over Greece remaining in the euro, the ECB will no longer be able to supply liquidity to the Greek banks, who in turn will be unable to supply euros to their clients," he wrote on Sunday.

French Prime Minister Manuel Valls said the ECB should continue the emergency lending despite the looming default.

"The European Central Bank is independent, but I don't doubt it will assume its responsibilities," Valls said in an interview broadcast on Europe 1 radio. "I don't think it can cut off support, to put it another way."

Greece is planning to hold a national referendum on a deal proposed by foreign creditors to settle the country’s debt problem. The alternative to coming to a compromise agreement would be Greece exiting the eurozone.