Greece seeks breathing room from ECB chief Draghi

Tue May 5, 2015 7:10am EDT
 
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By John O'Donnell and Frank Siebelt

FRANKFURT (Reuters) - Greek Deputy Prime Minister Yannis Dragasakis meets European Central Bank President Mario Draghi on Tuesday, as his government seeks financial breathing room to prevent a default and stay in the euro.

Talks between Greece's leftist government and its international lenders are stumbling over disputes about pension and labor reforms as the country edges toward a debt repayment deadline to the IMF it will struggle to meet.

With time running out for an interim agreement that Greek Prime Minister Alexis Tsipras had aimed for by May 9, Athens faces an immediate cash crunch, which its politicians believe the ECB can help resolve.

If euro zone finance ministers were to acknowledge progress in political talks when they meet next Monday, officials in Athens hope this would prompt the ECB to loosen restrictions on it selling short-term debt - filling its funding hole.

Persuading the ECB and its decision-making Governing Council, including central bank heads from the diverse 19-country euro zone, will however be difficult, in the words of one senior official.

The council meets on Wednesday in Frankfurt to decide on extra emergency funding for Greece's banks as negotiations on a cash-for-reform deal continue in Brussels between Greece and the International Monetary Fund, ECB and the European Commission.

People with knowledge of ECB deliberations predict that the council will agree to a further extension of Emergency Liquidity Assistance (ELA) for Greece's fragile banks. But many are doubtful that it will do much more.

Critics led by Germany's Bundesbank argue the ECB should take a harder line.   Continued...

 
Greek Prime Minister Alexis Tsipras (R) talks to Deputy Prime Minister Yannis Dragasakis during the first meeting of new cabinet post elections in the parliament building in Athens January 28, 2015.  REUTERS/Marko Djurica