WRAPUP 1-Draghi ties ECB's Greek funding to bailout compliance

Thu Mar 5, 2015 11:29am EST
 
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* ECB won't allow Greece to issue more short-term debt

* Banks emergency lifeline to stay till programme on track

* ECB can't buy Greek bonds under QE programme -Draghi

By John O'Donnell and Angeliki Koutantou

NICOSIA/ATHENS, March 5 (Reuters) - The European Central Bank will resume normal lending to Greek banks only when it sees Athens is complying with its bailout programme and is on track to receive a favourable review, ECB President Mario Draghi said on Thursday.

He also made clear the euro zone bank would not raise a limit on Athens' issuance of short-term debt to help leftist Prime Minister Alexis Tsipras avert a funding crunch, since the EU treaty barred monetary financing of governments.

The tough line, spelled out after the ECB's policymaking Governing Council met in Cyprus, added to pressure on Greece's radical new rulers to implement promised reforms under a bailout they had vowed to scrap but were forced to extend for four months to avoid running out of money.

"The ECB is a rule-based institution. It is not a political institution," Draghi told a news conference in Nicosia.

"The ECB is the first to wish to re-start the financing to the Greek economy provided the conditions are in place, and the conditions are that a process which suggests a successful completion of the review be put in place quickly. That is the condition and we will certainly welcome such a development."   Continued...