Galery

1

Eurozone representatives have discussed during the last days a possible six-month extension to the current support programme for the Greek economy. The extension is necessary to provide leeway for talks with the new Greek government on closing the programme and its replacement.

The current programme, which had already been extended by two months, is expiring in late February. The government was hopeful to have it replaced by an enhanced conditions credit line (ECCL) under the European Stability Mechanism (ESM), which would not have to be used at all.

"It will be necessary to continue the programme after February. It is inevitable," an informed eurozone source argued. "Most likely it will be for another six months," he added.

The extension will have to be requested by the next Greek government, which will take over after the elections on 25 January.

However, many believe that the ECCL won't suffice and Athens will need some additional assistance from the European commission because of the new sharp increase in costs on credit and the continuing anxiety over the policies of the next government.

In addition, the ECB has warned it would be unable to provide additional liquidity to the Greek banking sector without a new programme, which would ease Greece’s access to cheaper Eurozone lending in exchange for reforms.

The final decision on the programme extension has yet to be taken; it will probably be discussed on the 26th January at the Eurogroup meeting.

"The ECCL may only be granted to a country, which enjoys access to the credit markets. Such a credit line provides security and lulls the markets out of their anxiety," another source argued. "It could be claimed that by the end of last year Greece could get its hands on such a credit line. Now, given the existing uncertainty, the upheavals in the banking sector and the profitability of the Greek long-term bonds, currently surpassing 10%, Greece's chances to obtain the ECCL have dwindled," the source added.

"Greece's situation is much less favourable than it was six weeks ago. What the country now needs is another programme," says the Eurozone representative, and adds that the programme will have to be extended by at least 5-8 months.

No amounts of funding, a possible third memorandum or any other details have been mentioned during discussions. What was deliberated were possible scenarios rather than specific solutions.

Another reason for concern is the run on Greek banks. Approximately €60 million per day are believed to have been withdrawn from banks on the average – or at least this is what European sources maintain. This is one reason for Friday's request by Eurobank and Alpha Bank for a €5 billion injection to the bank of Greece by ELA.

However, according to representatives of the Greek banking sector, €700 million were siphoned off banks on Friday alone, after the two banks demanded extra liquidity. Compared to Thursday, withdrawals were increased by 10% for the large deposits, and by 15% for savings accounts.

The banks believe their customers are rattled by prospects of being unable to access their savings from cash points, and this has been driving them in withdrawal frenzy.

Meanwhile, Greek media published reports that two other systemic institutions - Piraeus Bank and the National Bank of Greece, have turned to ELA for help. According to Kathimerini, however, the National Bank has not filed such a request, and its representatives claimed they were not planning to do so either.