Greek banks receive extra €3.3 billion emergency cash from ECB

The European Central Bank (ECB) has agreed to raise the emergency funding available to Greek banks to €68.3 billion.

The €3.3 billion increase in the so-called Emergency Liquidity Assistance (ELA) is critical for Greece’s banks.

Depositors have been taking savings out of the country, depleting the banks’ access to cash to lend.

However, the Greek central bank is said to have requested an additional €10 billion of emergency funding.

The ECB had already raised the amount available to Greek banks by €5 billion to about €65 billion last week.

The deal will give Athens breathing space to negotiate a loan deal with its European creditors.

Greece is asking the eurozone for a six-month extension of its European loan, a Greek government official said on February 18. It would not be a renewal of the current bailout agreement, which includes strict austerity measures.

On February 16, Greece rejected a plan to extend its €240 billion bailout, describing it as “absurd”.

Greece is likely to run out of money if a deal is not reached before the end of February.

“We should extend the credit program by a few months to have enough stability so that we can negotiate a new agreement between Greece and Europe,” Greek Finance Minister Yanis Varoufakis told Germany’s ZDF.

Government spokesman Gabriel Sakellaridis confirmed that meant Yanis Varoufakis would be asking for a six-month extension to Greece’s current loan.

Gabriel Sakellaridis told Greece’s Antenna TV: “Let’s wait today for the request for an extension of the loan contract to be submitted by finance minister Varoufakis.

“All along deliberations are going on to find common ground, we want to believe that we are on a good path. We are coming to the table to find a solution.”

He added the Greek government would not back down on issues that it considered non-negotiable.

German Finance Minister Wolfgang Schaeuble dismissed the Greek proposal, telling broadcaster ZDF on February 17: “It’s not about extending a credit program but about whether this bailout program will be fulfilled, yes or no.”

An impasse over the selection of a new president triggered an early election last month that swept Syriza into government.

The Greek stock exchange rose 3% on Wednesday in morning trading in Athens as news of the loan extension application emerged, but later closed up just 1.1%.

The eurozone has given Greece until February 20 to decide if it wants to continue with the current bailout deal.

Greece wants to replace the bailout with a new loan that it says would give it time to find a permanent solution to the debt crisis.

On February 17, Greek PM Alexis Tsipras called for a vote in the Greek parliament on whether to scrap the austerity program on February 20, the same day as the eurozone deadline.

“We will not succumb to psychological blackmail,” Alexis Tsipras told parliament.

“We are not in a hurry and we will not compromise.”

JP Morgan claimed over the weekend that €2 billion worth of deposits was flowing out of Greek banks each week. It estimated that if that were to remain the case, they would run out of cash to use as collateral against new loans within 14 weeks.

The bank’s estimate is based on a calculation that a maximum of €108 billion of deposits is left in Greek banks.

The most up-to-date figures from the Greek central bank show deposits dropped 2.4% month-on-month in December to €160.3 billion from €164.3 billion, marking the third consecutive monthly fall.

Dutch Finance Minister Jeroen Dijsselbloem, who is also chairing the Eurogroup meetings of eurozone finance ministers, warned on Monday night there were just days left for talks.

Jeroen Dijsselbloem said it was now “up to Greece” to decide if it wanted more funding or not.

Greece has proposed a new bailout program that involves a bridging loan to keep the country going for six months and help it repay €7 billion of maturing bonds.

The second part of the plan would see Greece’s debt refinanced. Part of this might be through “GDP bonds” – bonds carrying an interest rate linked to economic growth.

Greece also wants to see a reduction in the primary surplus target – the surplus the government must generate (excluding interest payments on debt) – from 3% to 1.49% of GDP.

In Greece last week, two opinion polls indicated that 79% of Greeks supported the government’s policies, and 74% believed its negotiating strategy would succeed.