ECB gives Greece thumbs up with funding boost

Thu Jul 16, 2015 11:29am EDT
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By Balazs Koranyi and John O'Donnell

FRANKFURT (Reuters) - The European Central Bank increased emergency funding for Greek banks on Thursday, ending a freeze of almost three weeks and urging Europe to find a way to cut the country's debt burden.

ECB President Mario Draghi underlined his assumption that Greece will remain part of the 19-member bloc, rebuffing suggestions by Germany's finance minister that Greece could leave, after Greek lawmakers approved a painful reform package.

The ECB will grant a further 900 million euros in so-called Emergency Liquidity Assistance (ELA) to Greek banks over the coming week, a small but important back-up necessary to reopen banks shuttered for nearly three weeks as Greece teetered on the edge of quitting the euro.

The decision came even before Europe had finalised the details of a 7 billion euro temporary loan to Greece, money needed for Athens to repay the ECB 3.5 billion euros of bonds plus roughly 700 million euros of interest on Monday.

That showed Draghi's determination to act, despite the ongoing political uncertainty over Greece's future.

He said he was confident Greece would repay the ECB on Monday and pay the International Monetary Fund, to which it has already defaulted.

In a rare move, Draghi also issued an explicit message of support for addressing Greece's heavy debts, a long-standing demand from Athens but one that is opposed by Germany and others, who fear the political fallout from granting such relief.

"It's uncontroversial that debt relief is necessary and I think that nobody has ever disputed that," Draghi told journalists. "The issue is what is the best form of debt relief within our framework, within our legal institutional framework. I think we should focus on this point in the coming weeks."   Continued...

European Central Bank president Mario Draghi (3L) arrives for a news conference after a monetary policy meeting at the ECB headquarters in Frankfurt, Germany, July 16, 2015. REUTERS/Kai Pfaffenbach