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ECB raises ELA for Greek banks by 900 mln euros
The European Central Bank (ECB) governing council on Thursday decided to raise the Emergency Liquidity Assistance to Greek banks by 900 million euros (979 million U.S. dollars).
ECB President Mario Draghi made the announcement at a press conference following the governing council meeting here. He said the ECB accommodated the Greek central bank's request and raised the cap of ELA over one week.
In response to a question, Draghi explained that the ECB decided to freeze the level of ELA after the breakdown of the talks on the Greek debt issue and the likely default to International Monetary Fund. Some even maintained that the ELA to Greek banks should be cut to zero, which would have caused an immediate collapse of the banking system.
The Greek parliament has passed a new bailout package by the creditors. The conditions for raising the ELA for Greek banks have been restored, Draghi said.
He argued that the provision of liquidity was never meant to be unlimited and unconditional.
According to Draghi, the ECB has acted within its mandate and it is not up to the ECB whether Greece should be a member of the euro area.
"The ECB continues to act on the assumption that Greece is, of course, and will remain a member of the euro area," he said.
The ELA to Greek banks increased from zero to almost 90 billion euros and the Eurosystem has a total exposure to Greece of 130 billion euros, Draghi revealed.
Draghi also disclosed that he was convinced that the Greece would be able to repay the ECB 3.5 billion euros of bonds on Monday and also pay the International Monetary Fund.
With regard to the debt issue of Greece, Draghi maintained that "it's uncontroversial that debt relief is necessary."
The ECB kept key interest rates unchanged on Thursday. Elaborating on the decision, Draghi said the downside risks surrounding the economic outlook for the euro area have generally been contained as a result of ECB monetary policy decisions. (1 euro = 1.09 U.S. dollars)
[Source: Xinhua, Frankfurt, 16Jul15]
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