Greek Banks Received $125 Billion In “Secret Aid”
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The European Central Bank (ECB) secretly approved 100 billion euros ($125 billion) in emergency liquidity assistance (ELA) to Greece’s struggling banking industry, revealed the Financial Times this week, who also discovered similar discreet aid to other troubled eurozone nations.
The European Central Bank (ECB) secretly approved 100 billion euros ($125 billion) in emergency liquidity assistance (ELA) to Greece’s struggling banking industry, revealed the Financial Times this week, who also discovered similar discreet aid to other troubled eurozone nations.
According to FT, the lack of a formal announcement of the aid may be due to the nature of the ELA program, which is designed to help ailing EU economies without causing the further alarm among investors.
Luc Coene, Belgium’s central bank governor also explained in an interview earlier this month that, “you don’t say when you are in an emergency situation, because then you make the situation worse.
[quote]“So I really don’t see the usefulness of being more transparent,” he said.[/quote]Related: Euro-oddity – The ECB’s Peculiar Stance On Greece’s Debt: Joseph Stiglitz
Related: Bailouts Alone Will Not Solve Europe’s Fiscal Problems: Leszek Balcerowicz
According to analysts at Barclays, other recipients of the ELA program included Ireland –accounting for 41 billion euros – and Cyprus with 4 billion euros. Any ELA application in excess of 500 million euros require approval by the ECB’S governing council, with a two-third majority vote needed to stop any application.
Laurent Fransolet, a Barclays analyst, believes that the ELA aid may be one of the key reasons why Greece has yet to leave the eurozone.
[quote]“Cutting off ELA would be the way to push Greece out of the eurozone – if that was wanted, or if Greece really wanted to leave. But I don’t think the ECB is going to take that decision,” noted Fransolet. [/quote]“I think the ECB would go to the political powers and have them take the decision”.
Greece’s four largest banks are expected to get 18 billion euros in recapitalisation funds from the Hellenic Financial Stability Fund (HFSF) this week, in order to be considered solvent enough to receive additional funding from the ECB.
Related: Greece Must End Its Doomed Marriage With The Eurozone: Nouriel Roubini
Related: Silver Lining In The Greek Tragedy
Related: Is Greece Still Headed Down A Dangerous Dead-End Path? : Mohamed El-Erian
According to a Reuters report, the ECB is eager to keep Greece within the eurozone as an exit may cause hundreds of billions of euros in losses to Germany and its partners.
[quote]”Large-scale ECB intervention would be necessary to stabilize the system (if Greece exits), along with intervention from Germany, the European Stability Mechanism (ESM), its predecessor the European Financial Stability Facility (EFSF) and the IMF, potentially costing hundreds of billions of euros,” said Georgios Tsapouris, an investment strategist at Coutts.[/quote]
