Greece secures €1.5bn in additional funding

Greece has won access to more emergency funding for its banks as euro-area governments prepared for another round of talks on the country’s financial crisis.

The ECBs Governing Council raised the cap on emergency liquidity assistance by about €1.5bn to €75.5bn in a teleconference yesterday, people familiar with the decision said. Stocks and bonds rose.

Eurozone finance ministers will meet in Riga tomorrow in their latest attempt to persuade Greece to commit to economic reforms so aid payments can be released before the country runs out of money.

As deposit outflows mount amid the uncertainty, the ECB is supporting the nation’s lenders by allowing the Greek central bank to replenish the cash — though policymakers have said that can’t continue indefinitely.

“If it can’t go on like this, it won’t”, said Holger Schmieding, chief economist at Berenberg Bank in London, who sees a 30% chance Greece will default and exit the euro.

Greek prime minister Alex Tsipras should “make the right choice — and better do it fast,” he said.

Greek lenders have a buffer of €2.9bn in cash after the increase in emergency liquidity assistance, one of the people said.

Weekly emergency liquidity assistance injections are intended to match deposit outflows, and liquidity buffers are kept at about €3bn to give the Bank of Greece and the ECB time to react in an emergency.

An ECB spokesman declined to comment. The ECB is studying measures to rein in emergency liquidity assistance funding to reduce the risks should political talks falter, according to people with knowledge of the matter.

Staff have proposed increasing the discounts imposed on the securities banks post as collateral when borrowing from the Bank of Greece. Adjustments to the so-called haircuts haven’t yet been formally discussed by the Governing Council.

Greek Finance Minister Yanis Varoufakis told reporters late on Tuesday that the country and its creditors are narrowing their differences, though the Latvian meeting is probably too soon to seal an agreement.

Bloomberg