Greek emergency funding would be a decision for ECB council: Constancio

[January 31, 2015]  By Marc Jones
 
 CAMBRIDGE, England (Reuters) - ECB Vice-President Vitor Constancio said on Saturday that a decision on whether to give Greece emergency funding would be up to the central bank's Governing Council.

He was commenting on options available for Greek banks if the country's new anti-bailout government quits its EU/IMF program.

Constancio said that the central bank's emergency liquidity assistance (ELA) facility -- designed as a stop gap for banks facing temporary problems -- was an alternative to its regular funding, but its provision would need to be approved by the European Central Bank's 25-member Governing Council.

"There is the possibility of so-called ELA. In any case that will be ultimately a decision of the Governing Council, which I don't want to predict at this stage," Constancio said during a question and answer session at Cambridge University.
 

Greek bank stocks <BOPr.AT><NBGr.AT><ACBr.AT> have plunged this week in the wake of the election victory of the anti-bailout party Syriza, with some like Bank of Piraeus <BOPr.AT>, which is heavily reliant on ECB funding, down almost 50 percent.

The victory of Syriza has sparked worries about the country's future in the euro zone if it ends its rescue program and dovetailed with reports of individuals and firms pulling their money out of Greek bank accounts as a precaution.

If the Greek government does pull out of its program, its banks would no longer be able to use the ECB's normal funding operations in any meaningful way, leaving ELA, which is more expensive and requires regular reappraisal, as the only option.

The ECB currently allows them to swap junk-rate Greek government bonds for standard funding only because the country is in a repair program.

Constancio's comments differed slightly from others on Saturday from Finland's ECB member Erkki Liikanen.

Speaking on Finnish TV, Liikanen said the ECB would have to stop providing Greek banks with funding if Greece's bailout deal, due to end at the end of February, was not extended.

"We (ECB) have our own legislation and we will act according to that... Now, Greece's program extension will expire in the end of February so some kind of solution must be found, otherwise we can't continue lending," Liikanen said.

"I don't believe that one can hide from the realities in the economy."

(Editing by Hugh Lawson and Stephen Powell)

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