Galery

1

Anastasia Balezdrova

"The European Central Bank is a rule-based institution, not a political one. There is a rule that bans monetary financing – governments printing money to buy their own debt.  This will directly violate the Bank’s constitution." With these words, President of the European Central Bank Mario Draghi categorically cut the expectations of the Greek government that the financial institution could accept its request for an increase in the number of bonds that it could issue to obtain financing.

Draghi said that, so far, the Greek banks have received from the European Central Bank funding amounting to 100 billion euro. "This equates to 68% of Greek GDP. No other country has received such funding, so no one can claim that the European Central Bank does not support Greece," he added.

"Our decisions depend a lot on the decisions of the European Commission and the Eurogroup. To provide funding to any member state, it must be involved in a financial assistance programme or in the monitoring process of this programme," said Draghi.
 
He made his statements during a press conference following the meeting of the Governing Council of the European Central Bank in Nicosia. It decided to launch on 9 March the programme for quantitative easing (QE), under which the European Central Bank will buy government bonds of the 19 euro zone member states.

Under the programme, the member states will obtain liquidity amounting to 1.1 trillion euro. "The monthly limit will be 60 million euro and the programme will continue until 2016 and may last longer, until the inflation rate in the euro zone is close to 2%," said Draghi.

Greece, however, cannot receive any of this money unless it signs an agreement with its lenders and carries out the structural reforms that are critical for its economy. Mario Draghi was clear that the funding from the European Central Bank will start again only if Athens meets these conditions.

It is worth noting that he drew particular attention to the communication policy of the Greek cabinet, which has a negative impact on the interest rates on Greek government bonds and on bank solvency.

Earlier, the Governing Council of the European Central Bank had decided to extend the period in which Greek banks could obtain funding from the Emergency Liquidity Assistance (ELA), but only to the amount of 500 million euro, thus increasing the "ceiling" for Greece from 68.3 billion euro to 68.8 billion euro.

According to analysts, this decision has somewhat stabilized the Greek banking system which is seriously affected by the ongoing outflow of deposits.

The data of the Bank of Greece show that in January Greek banks received from the Emergency Liquidity Assistance funding to the amount of 5.2 billion euro. In late January, their dependence on the European financial system (the European Central Bank and the Emergency Liquidity Assistance) amounted to 87.4 billion euro. By comparison, at the end of 2012 it was 56 billion euro.

The main reason for the dependence of Greek banks on the liquidity of the European system is due to the significant capital flight. In January, the amount was 12 billion euro.

At the same time, an article in the economic edition Bloomberg claims that Greece has money only for the next two weeks. On Friday, Athens must pay 300 million euro as a first payment of the loan granted by the International Monetary Fund, which amounts to almost 1.5 billion euro and which must be paid in full by the end of March. In parallel, the hole in the state budget amounts to 2.1 billion euro. At present, the only source of funding for the Greek government is the money of insurance funds, hospitals and universities.

In this situation, the Eurogroup meeting on Monday at which Greece will ask for the granting of 1.5 billion euro from the last tranche of the bailout attains critical importance. The meeting will discuss the 6-reform package of Minister of Finance Yanis Varoufakis, which was rejected at last night's session of the Euro Working Group, as stated by sources. Both Brussels and Athens refuted the specific information but neither of them provided information on the nature of the proposed reforms.