Exclusive: ECB rejects bumper Greek plea but existing support to stay - sources

Mon Jun 29, 2015 11:41am EDT
 
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By George Georgiopoulos and John O'Donnell

ATHENS/FRANKFURT (Reuters) - The European Central Bank rejected Greece's request for 6 billion euros of extra emergency funds on Sunday, but is expected to continue limited support for Greek banks until the July 5 referendum, people with knowledge of the matter said.

The size of the request underscores the scale of the panic gripping Greek savers, and would have left the ECB in little doubt about the dramatic consequences of rejecting it.

However, the prospect that existing central bank funding will not be withdrawn offers hope that some banks will briefly open their doors, for example to pay pensions.

Greeks had rushed to withdraw their money after Prime Minister Alexis Tsipras on Saturday promised a snap vote next Sunday on the stringent terms demanded by creditors in return for cash to prevent Greece defaulting on its debts.

The Bank of Greece in turn asked the ECB's policy-setting Governing Council to approve a top-up to an 89-billion-euro emergency credit line on Sunday, to cover the shortfall.

"The request by the Bank of Greece was for 6 billion euros of ELA (Emergency Liquidity Assistance)," said one of the people with knowledge of the talks. "The recommendation submitted to the ECB was signed by the governor (of the Bank of Greece)."

The ECB, which had been steadily increasing the amount of funding available to the banks, froze it on Sunday, meaning banks were unable to open and forcing Tsipras to impose capital controls to stop withdrawals.

As a small concession, however, Greece is expected to be able to continue tapping what remains of the emergency funding support already allocated, keeping the banks just above water.   Continued...

 
A Greek national flag flutters atop the parliament building in Athens, Greece June 29, 2015. REUTERS/Alkis Konstantinidis