Secret ECB funds prop Greece’s banks: report
22 May 2012
Greece's banking system is being propped up by an estimated €100 billion or so of emergency liquidity provided by the country's central bank, which has been secretly approved by the European Central Bank (ECB) in Frankfurt, according to CNN.com.
Though there has been no official announcement and no terms or conditions have been disclosed, in the event of Greece opting to leave the euro zone, the immediate cause might be an ECB decision to pull the plug, CNN said.
Extending ''emergency liquidity assistance'' (ELA) to banks in deep distress in the weakest economies is a less-noticed feature of the euro zone crisis, according to CNN. The funds fall in a different category of normal supplies of liquidity and are meant originally as a temporary facility for national authorities to use when banks were hit with problems. ELA had come as a lifeline for the financial system of Ireland and is now even more so in Greece.
According to analysts, the facility over which the ECB exercises ultimate control vests it with considerable power to determine countries' fates.
Whether that power would ever be exercised is unclear and ELA remains a subject, which the ECB is deeply reluctant to provide information - even on where or when it was provided.
''You don't say when you are in an emergency situation, because then you make the situation worse. So I really don't see the usefulness of being more transparent,'' Luc Coene, Belgium's central bank governor, explained in a Financial Times interview this month.
However, the ECB in a slip up in its weekly financial statement published on 24 April, showed an unexpected €121 billion increase under the innocently titled heading ''other claims on euro area credit institutions,'' the result of putting all ELA under the same item. According to definition, €121 billion was the minimum amount of ELA offered by the ''eurosystem'' - the network of eurozone central banks.
