ECB Restricts Greece Access to Funds

The European Central Bank put more pressure on the new government of Greece by limiting access to direct liquidity lines. The ECB referred to concerns regarding the nation’s commitment to current bailout commitments.

This denotes the rising disagreement between Athens and other states in the euro region. This came after Finance Minister Yanis Varoufakis conferred with ECB President Mario Draghi to obtain support for the Greek plan to get rid of the 240 billion-euro bailout and renegotiate the country’s financial obligations to creditors.

In a statement, the central bank opted to rescind the waiver on marketable debt instruments released or completely guaranteed by Greece.

The decision of the governing council was based on reality that it is not workable to presume that the program review will succeed. This is also in accordance with the current policies in the EU system.

Since 2010, Greek lenders managed to obtain funding from the ECB for junk-rated security. With this development, it is now imperative to seek funding from national central banks at higher interest rates. Greece and its creditors are currently in disagreement on this concern with this move triggering the likely departure of the nation from the EU.

The euro declined after this statement was released and traded at $1.1339. It was down by 1.2 percent.

The country’s debt currently committed as collateral under the refinancing scheme of ECB will not be eligible after February 11.

However, the Bank of Greece asserts liquidity will go on since ECB financing can be transformed into Emergency Liquidity Assistance.

The ECB said the aid program will run out on February 28.

Emergency Liquidity Assistance is priced with a yearly interest rate of 1.55 percent compared to the present ECB refinancing charge of about 0.05 percent.

This latest act of the ECB is a hint of more severe position by European creditors.