* The ECB hardens Greek banks funding rules
* Athens will only financing burden of its banks
* A German paper rejects postponing measures Austerity
* The announcement wake worry, euro fell against the dollar
John O’Donnell
FRANKFURT, February 5 (Reuters) – The European Central Bank (ECB) announced on Wednesday night against the odds it would no longer accept Greek government bonds in exchange for its financing operations, a decision which reports on the Bank to Athens financing burden of Greek banks and isolates Greece unless it reaches an agreement with its creditors.
By forcing the Greek bank to provide tens of billions of euros to its banks emergency cash in the coming weeks, the ECB and reply to what many see in Frankfurt as abandonment by the Greek government’s bailout plan in place in exchange for structural reforms.
This hardening came hours after the Greek Finance Minister, Yanis Varoufakis, following a meeting with the President of the ECB, Mario Draghi, had expressed confidence that the ECB would do “whatever it takes “to support the Member States the time of the negotiations.
The initiative of the ECB, which has required the support of a majority of the governors of the central banks of the euro area, shows instead that the dismay dominates not only in Frankfurt but through all 19 members of the European bloc.
This measure will be effective February 11, was announced by the ECB following a meeting of governors in Frankfurt Wednesday.
It means that the tens of billions of euros of Greek government bonds and bank bonds guaranteed by Athens, will no longer be used as collateral in exchange for refinancing the banks by the ECB.
It will now be for the Greek central bank to finance the country’s banks through the provision of emergency liquidity assistance (ELA / ELA), a funding it will bear the risk, thus isolating the difficulties of these banks from the rest of the euro area.
A DECISION THAT WAKE CONCERN
If the Greek central bank was therefore in difficulty, it would be to Greek government, already heavily indebted, to intervene.
The dollar rose against the euro, posting its biggest gain in almost two weeks after the decision that awakens the concerns about the future of Greece in the eurozone. The euro lost 1.15% against the dollar at 1.1347, after falling to 1.1315.
“It makes the most intense things regarding Greece,” said Camilla Sutton, strategist at Scotiabank in Toronto. Although the country is still far out of the euro zone, the announcement of the ECB increases the risk, she says.
This unexpected measure comes as the new Greek government following the party of the radical left Syriza comes to call on the ECB to finance its banks while negotiating a debt relief with its European partners.
In dismissing the appeal, the ECB added the difficulties of Greece in which Germany refuses any postponement of austerity measures agreed as part of its aid plan.
This decision represents a setback for Yanis Varoufakis, Greek new Minister of Finance, who had called for rapid negotiations with its international creditors for a new reform program, after the abandonment of the previous bailout.
It places the country in a difficult position . Three of the four major Greek banks have begun to tap into emergency funds from the Bank of Greece, the large withdrawals from their customers who reduced their level of liquidity, told Reuters two sources close to the case.
Having promised his constituents to end five years of austerity, the Greek Prime Minister Alexis Tsipras and Yanis Varoufakis doing the rounds of European capitals, seeking support for a new agreement on the country’s debt .
GERMANY RESISTANT
But according to a document prepared by Berlin that has acquired Reuters, Germany wants Athens renounce some of his campaign promises to renew with economic policy on which the previous government had committed to international creditors.
These promises include among others raising the minimum wage, the discontinuation of certain unpopular privatizations, the reinstatement of dismissed employees or restoration of the Christmas bonus for the poorest pensioners.
“The Eurogroup needs a clear and rapid engagement of Greece to ensure the full implementation of key reforms needed to keep the program in place, “said the German document.
The new Greek leaders were given a very warm welcome, even by leftist governments such as France and Italy, which hoped to Athens support.
Francois Hollande, who received Tsipras Wednesday at the Elysee Palace, stressed that compliance with European rules and commitments was obvious to all, including Greece. (See)
After meeting with the President of the European Commission Jean-Claude Juncker, Tsipras said that Greece met the EU rules and find a solution to its economic problems in the context of this regulation.
Without the support of the ECB and its creditors, Greece may soon plunge into a severe financial crisis may force it to leave the euro zone.
n Athens ‘is currently no need for urgent funding – the first issue of treasury bills since the elections took place without difficulty Wednesday. – but some 10 billion euros of debt will mature this summer
The ECB would like Athens had reached a tentative agreement with the Eurogroup before the next meeting of finance ministers of the euro zone, scheduled on February 16, said a source in the European Central Bank.
Varoufakis far has said his country did not intend to extend the assistance program, which expires on 28 February. However, he raised the possibility of exchange of government bonds held by the ECB and the countries of the euro area against securities whose interests would be indexed to the growth against economic or perpetual bonds.
This hypothesis has been welcomed by the financial markets Wednesday, which mainly concerned the same partial clearing of debts, but aroused more skepticism among those responsible for the euro area. (With Jan Strupczewski in Brussels, Paul Taylor in London and Elizabeth Pineau and Ingrid Melander in Paris, Marc Angrand, Guy and Juliette Rouillon Kerivel for the French service, edited by Henri-Pierre André)
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