Greek debt crisis: ECB will maintain ELA emergency loan support to Greek banks

 
Lynsey Barber
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ECB support for Greece will continue (Source: Getty)

The European Central Bank (ECB) will keep supplying Greece with emergency loans to keep the country's banks running after Greek PM Alexis Tsipras called a surprise referendum on its latest bailout deal.

“We continue to work closely with the Bank of Greece and we strongly endorse the commitment of Member States in pledging to take action to address the fragilities of euro area economies,” said ECB president Mario Draghi.

The ECB will maintain the current levels of Emergency Liquidity Assistance (ELA) of just under €90m flowing into the country, but will not increase credit and "stands ready to reconsider its decision".

The lifeline for Greece which has kept the money flowing had been put at risk following the Greek government's decision to hold a referendum on 5 July. Despite earlier reports that the central bank would end its support, the bank's council decided to maintain the level agreed on Friday following a meeting today.

A withdrawal of support would have left Greece with little option but to introduce capital controls - restricting cash withdrawals from banks in order to prevent a run on them.

However, the decision not to increase the funds will pile pressure on Greek banks and may still lead to cash controls being imposed and the closure of Greek banks on Monday.

The Greek finance minister Yanis Varoufakis told the BBC before the ECB's decision it is "a matter that we will have to work overnight on, with the appropriate authorities in Greece and Frankfurt", but tweeted that the Greek government was opposed to "the very concept".

People have already been lining up to withdraw money from cash machines in the country as the risk of its potential exit from the Eurozone looms.

More than a third of Greece's cash machines ran out of cash before being replenished, Reuters reports, with estimates of more than €500m of cash being withdrawn from the Greek banking system on Saturday.

“The Bank of Greece, as a member of the Eurosystem, will take all measures necessary to ensure financial stability for Greek citizens in these difficult circumstances,” said Bank of Greece governor Yannis Stournaras.

"The Governing Council is closely monitoring the situation in financial markets and the potential implications for the monetary policy stance and for the balance of risks to price stability in the euro area. The Governing Council is determined to use all the instruments available within its mandate," the ECB said in a statement.

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