Greek banks were handed another funding lifeline yesterday as panicking savers continued to withdraw cash from the country’s crippled lenders.
The European Central Bank extended so-called emergency liquidity assistance (ELA) by nearly €1billion to around €89billion – the fourth increase in a week.
Greek banks have become dependent on ECB support as customers worried that the country and its financial system are on the brink of collapse withdraw billions of euros of savings.
But the lifeline could be cut in the coming days – forcing Greek banks to close – if Athens does not secure a deal with its creditors to stop the country defaulting on its debts.
Greece desperately needs to secure €7.2billion of bailout funds to stay afloat but has spent months wrangling with the International Monetary Fund, ECB and European Commission over the reforms required to release the cash.
Athens must repay the IMF €1.6billion by June 30 but cannot afford to do so without additional support – leaving it on the brink of defaulting on its debts and being expelled from eurozone.
The Greek stock market rose another 6 per cent yesterday having gained 9 per cent on Monday on hopes a deal will be reached. The Greek banking sector was up another 10 per cent following a 21 per cent advance in the previous session.
But the euro fell as low as 70.81p against sterling – making £1 worth €1.4122 – and to below $1.12 against the US dollar. The slump came despite figures showing the eurozone is growing at its fastest pace for four years. ‘The eurozone is weathering the Greek storm relatively well,’ said Markit’s analysts.