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Eurozone Finance Ministers and E.C.B. Buy Time for Greece European Finance Ministers and the E.C.B. Buy Time for Greece
(about 2 hours later)
FRANKFURT — The European Central Bank on Thursday gave a vote of confidence to Greece by expanding an emergency line of credit for the country’s banks, while the eurozone’s finance ministers agreed to keep Greek bailout negotiations in motion. BRUSSELS — European finance officials on Thursday pledged support and money to Greece, even as the prospects of reaching a final bailout deal were clouded by political uncertainty in Athens and German doubts about the need to preserve Greek membership in the eurozone.
The emergency loan increase — 900 million euros, or almost $990 million — is meant to help meet the banks’ needs for an additional week. Finance ministers of the 19 countries that use the euro currency agreed to “grant in principle” a new bailout package for Greece that could total 86 billion euros, or $94.5 billion. And those ministers were joined by their counterparts from the rest of the 28-nation European Union in agreeing to give Greece short-term loans of as much as €7 billion to meet its immediate needs.
The central bank’s move came as eurozone finance ministers agreed separately on Thursday to “grant in principle” a new bailout of more than €80 billion. But the ministers kept up the pressure by demanding that Athens “swiftly” adopt further measures to overhaul its economy, in keeping with a contentious deal announced early Monday, after all-night negotiations between Greece and leaders of other countries in the eurozone. Meanwhile, the European Central Bank offered its support by expanding an emergency line of credit for Greece’s banks by €900 million, to total nearly €90 billion. It was not immediately clear whether that extra money would enable Greek banks, closed since June 29, to reopen next week. But the decision is likely to be welcomed in Greece as a sign that the central bank intends to continue providing support while the country’s bailout negotiations continue.
The decisions by the eurozone finance ministers and by the European Central Bank came hours after the Greek Parliament acceded to demands from its creditors and passed the first in a series of measures intended to improve the performance of the economy and impose budget discipline on the government. Those various decisions on Thursday came hours after the Greek Parliament acceded to demands from its creditors and passed the first in a series of measures intended to improve the performance of the economy and impose budget discipline on the government.
Separately, the European Commission, the executive arm of the European Union, proposed on Thursday that Greece be given €7 billion in short-term loans from an emergency fund financed by all 28 members of the union. This proposal has run into strong opposition from countries that do not use the euro, like Britain, which object to their money being used to solve the euro area’s problems. But all of the positive signals from European finance officials had a tentative tone, in keeping with the tenuous nature of a proposed bailout program that even the Greek prime minister has said he opposes but that he considers a lesser evil than being forced out of the eurozone.
If such money is dispensed, it might enable Athens, among other steps, to repay about €2 billion in arrears to the International Monetary Fund, as well as €4.25 billion owed to the European Central Bank next Monday. The European Central Bank, for example, extended the emergency line of credit for only one week. The eurozone finance ministers said they were supporting the bailout only on the condition that Athens “swiftly’’ adopt more measures to overhaul its economy. And the €7 billion in short-term loans must still be confirmed in writing by Friday afternoon.
If that money is dispensed, it might enable Athens, among other steps, to repay about €2 billion in arrears to the International Monetary Fund, as well as €4.25 billion owed to the European Central Bank next Monday.
The central bank’s president, Mario Draghi, said at a news conference on Thursday that he was confident Greece would be able to make those payments. He did not elaborate, but said, “I want to thank all of the members of the E.U. that have made that possible.”The central bank’s president, Mario Draghi, said at a news conference on Thursday that he was confident Greece would be able to make those payments. He did not elaborate, but said, “I want to thank all of the members of the E.U. that have made that possible.”
The one concrete decision was the central bank’s agreement to increase the emergency line of credit for Greek banks, even if the amount does not give the lenders much extra breathing room. But the decision is likely to be welcomed by Greek banks and their depositors as a sign that the central bank intends to continue providing support while the country’s bailout negotiations continue. But whether Greece can agree to a new bailout program is still far from certain. Germany’s finance minister, Wolfgang Schäuble, suggested on Thursday that Greece might be better off leaving the eurozone.
It was not immediately clear whether the money would enable Greek banks, closed since June 29, to reopen next week. Mr. Draghi said it was “hard to predict.” Mr. Draghi declined on Thursday to comment directly on Mr. Schäuble’s comments, which have caused a furor in Europe. “Our mandate is to act based on the assumption Greece will be a member of the euro area,” Mr. Draghi said.
He said the tentative bailout accord that Greece reached with its eurozone creditors on Monday had the essential components that the central bank had been urging for Greece, including economic growth, social fairness and financial stability. He said Monday’s agreement was meant to “ensure that Greece will become a thriving economy in the euro area.” Still, even some members of the European Central Bank’s policy board, the Governing Council, are known to be skeptical about the prudence of continuing to provide loans to Greece’s teetering banks.
Whether Greece can agree to a new bailout program is still far from certain. Germany’s finance minister, Wolfgang Schäuble, suggested on Thursday that Greece might be better off leaving the eurozone. And some members of the European Central Bank’s policy board, the Governing Council, are known to be skeptical about the prudence of continuing to provide loans to Greece’s teetering banks.
Asked at the news conference whether the Governing Council decision to increase the emergency loans had been unanimous, Mr. Draghi avoided a direct answer. He said that agreeing to increase the loans, under the central bank’s rules, required only a two-thirds majority.Asked at the news conference whether the Governing Council decision to increase the emergency loans had been unanimous, Mr. Draghi avoided a direct answer. He said that agreeing to increase the loans, under the central bank’s rules, required only a two-thirds majority.
The European Central Bank effectively forced Greek banks to close on June 29 when it capped the emergency cash it provides to them at €89 billion. During earlier debates, some members of the Governing Council were in favor of withdrawing all emergency lending from Greek banks, which would have caused them to fail and the economy to collapse.