Exclusive – ECB Holds Athens Lifeline Unchanged as Bundesbank Protests

The European Central Bank held a crucial cash lifeline for Greece unchanged on Thursday, a person familiar with the discussion said, as the head of the Bundesbank objected to the way Greek banks are being funded.

ECB policy-setters held the limit on their emergency funding for the banks steady for the second day running, a source familiar with their talks said, having previously increased it steadily over many weeks.

Greece’s central bank may not have asked for an increase, though the country’s lenders have seen their reserves dwindle daily as savers spooked by the prospect of default continue to withdraw cash. It is not clear how much longer they can cope without further hikes in such funding back-up.

The decision raises pressure on the government in Athens as time runs out for it to agree a cash-for-reforms deal with its creditors to avert a default.

It comes as Bundesbank President Jens Weidmann gave his strongest criticism yet of the use of emergency credit to prop up Greece’s banks. Weidmann said those banks should not continue to buy the short-term debt of their government.

Reuters

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