Greek deal: ECB will wait on Greek vote before another aid move

The European Central Bank has held off from expanding its aid for Greek lenders, signalling a desire to wait for the country’s legislators to approve reforms linked to a new bailout.

The governing council kept the cap on emergency liquidity assistance unchanged, an ECB spokesman said. Policy makers will probably wait for a two-day meeting in Frankfurt starting tomorrow before deciding whether to raise the limit.

Greece’s parliament will convene tomorrow to vote on a bailout package that includes a bank recapitalisation, potentially giving the ECB room to ease its liquidity restraints.

“If there hadn’t been an agreement, if it wasn’t clear, the ECB wouldn’t have been able to continue its liquidity support for Greece,” French President François Hollande said after the summit.

The €25bn equity infusion for banks envisaged by the bailout may provide grounds for policy makers to eventually raise the cap on ELA.

Greek banks have been shut since the ECB’s June 28 decision to cap ELA at just under €89bn. They can still cope this week without the need to curb ATM withdrawals further, a Greek official said.

ECB president Mario Daraghi has repeatedly said he would take his lead from political developments. His task was becoming trickier as negotiations dragged on, with a €3.5bn debt repayment from Greece to the ECB due on July 20.

The governing council’s meeting this week is a scheduled monetary-policy discussion at which interest rates and policy for the euro area will be set.

As part of Greece’s bailout deal, a €50bn fund will be established which will be financed by Greek asset sales.

“The first €25bn raised through this fund would go for the recapitalisation of the banks,” Maltese prime minister Joseph Muscat said after the summit.

“The rest will be split in half, which would repay debt and the other half would go toward new investments.”