No further increase in emergency liquidity for Greece; PM Tsipras readies to face vote

People enter a National Bank branch following its opening in Athens, Greece, on July 27, 2015.
People enter a National Bank branch following its opening in Athens, Greece, on July 27, 2015.PHOTO: REUTERS

ATHENS (REUTERS) - Greece did not request a further increase in Emergency Liquidity Assistance (ELA) from the European Central Bank yesterday Wednesday, in a sign Greek banks are not burning through cash as fast as previously feared, sources said.

The reports come as Greek Prime Minister Alexis Tsipras, struggling to contain a revolt in his left-wing Syriza party, said that his government would not implement reform measures beyond those agreed with lenders at a euro zone summit.

"I know well the framework of the deal we signed at the euro zone summit on July 12," he told Sto Kokkino radio. "We will implement these commitments.. Nothing beyond that," said Mr Tsipras who is under pressure from Greece's creditors to go beyond the two packages of so-called prior actions passed by parliament and include unpopular steps to curb early retirement and tax breaks for farmers.

With Greece close to the financial abyss last month, Mr Tsipras was forced to make concessions on reform and austerity in order to open talks on a third bailout worth up to 86 billion euros (S$130 billion).

These funds are expected to shore up confidence in its ailing banking sector, which is currently exercising restrictions on liquidity withdrawals to 420 euros a week to prevent exodus of cash. But capital controls may need to stay in place until a bailout package is finalised, now scheduled for late August.

However, Bank of Greece defied some expectations and did not request another increase from the ECB in emergency liquidity which was increased by 900 million euros in each of the past two weeks. The cap remained at around 91 billion euros indicating that banks are maintaining a cash buffer.

"Greek banks have an ample cushion of liquidity for the moment," a senior banker at a private Greek bank said. "The real test will come when the government decides to relax restrictions on capital controls."

Mr Tsipras, who faces a tough party central committee today Thu, has warned that he could be forced to call early elections if he no longer had a parliamentary majority on bailout reforms demanded by creditors.

He faces an uncertain vote in the 200 member Syriza central committee with sacked former energy minister Panagiotis Lafazanis leading a leftist faction that rejected the July deal and is demanding a tougher line with the creditors.

Compounding his problems, former finance minister Yanis Varoufakis continues to pour abuse on the agreement in daily media interviews and articles, accusing the creditors of trampling on Greek sovereignty and justifying his own secret planning while in office to set up an alternative currency. "It was a financial war," Mr Varoufakis told Germany's Stern magazine in an interview released on Wednesday. "Today you don't need tanks to beat someone. You've got your banks."

In Germany, Greece's biggest creditor country, the leader of Chancellor Angela Merkel's Bavarian sister party warned that a Greek exit from the euro zone would cause "utter chaos" but might have to be accepted if Athens did not implement reforms.

"No one can predict the consequences of a Grexit other than that a lot of Greece's debts would have to be written off and at the same time monetary help would be necessary," Bavarian state premier Horst Seehofer told German newspaper Die Welt. "On top of that there would be utter chaos. If Greece were not prepared to reform, a path like that would have to be accepted but one shouldn't strive for it oneself or organise it," he added.