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 The bank had been ready to increase Emergency Liquidity Assistance (ELA)
after Athens approved the bailout deal but it first needs to ensure
that Greece has the temporary financing to repay a 3.5 billion euro
plus interest payment due to the ECB on Monday.
An emergency funding boost would have helped restore confidence
after Greece was nearly forced from the euro -- a debate that
challenged ECB President Mario Draghi's pledge that the currency was
irreversible.
Comments from Greek Prime Minister Alexis Tsipras that he was forced
to accept the deal also raised concern at the ECB, one source
familiar with the discussion said, as it suggested that Athens may
not be completely serious about carrying out its end of the deal.
A temporary 7 billion euro ($7.64 billion) loan has already been
agreed in principle but technical details will take until Friday to
iron out, officials said, indicating that the ECB's governing
council may have to reconvene in a telephone conference.
National parliaments are also expected to vote on the deal with
lawmakers in Finland, known for its skeptical stance on Greece,
already giving the go ahead. Germany's Bundestag is set to vote on
Friday.
The ECB also keep its key interest rates unchanged at a record, in
line with expectations, after the bank already said rates have now
hit their "lower bound".
Attention now turns to Draghi's 1245 GMT (8:45 a.m. EDT) press
conference where uncertainty over Greece, the longer term viability
of the currency block and persistent suggestions from Germany that
Greece could leave the euro are set to dominate.
German Finance Minister Wolfgang Schaeuble has said a temporary exit
from the euro is still an option for Greece and his government
raised the idea that Athens could meet short-term domestic
obligations with IOUs, a step many believe amounts to the same thing
as a leaving the currency block.
Even once ELA is raised, banks are likely to open only with reduced
operations and cash withdrawal limits at least until a bailout
package is passed and banks receive at least some of the 25 billion
euros earmarked for recapitalization.
ELA has been held steady since late June, forcing banks to close and
limiting cash withdrawals to 60 euros per day, disrupting an economy
already in recession. It has shrunk by a quarter since the start of
the country's troubles.
Still, a limited bank opening would create the impression of
normality and allow the Greek central bank to release cash that one
official said was now held in its vaults for an emergency, via the
banks into the economy.
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Nearly a third of economists polled by Reuters still expect Greece
to eventually leave the euro and the International Monetary Fund
said Athens needs far more debt relief than European governments
have been willing to contemplate.
Though Germany ruled out a 'haircut' to this debt mountain, it said
extending maturities was an option and the European Commission
suggested 'very substantial re-profiling'. The IMF said Greece may
need a 30-year grace period on servicing all its European debt,
including new loans, and a dramatic maturity extension.
UPTURN?
"Were it not for Greece, the ECB would be enjoying a gradual,
domestically-driven, QE-boosted Eurozone recovery while keeping a
cautiously optimistic tone at its regular policy meeting on
Thursday," Credit Agricole said in a note.
Indeed, lending data indicate that growth is gaining momentum with
both business and household lending expected to increase in the
third quarter, boosting growth and suggesting that the ECB's
60-billion-euro per month asset buying scheme was feeding through to
the economy.
With risks ahead, the bank is expected to reaffirm its commitment to
quantitative easing at least until September 2016 with the
possibility of increasing the scheme.
Chinese market volatility will likely cause concern while commodity
prices could lower inflation.
(Additional reporting by Francesco Canepa; Editing by Jeremy Gaunt)
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