The Governing Council of the European Central Bank made a decision Sunday to freeze the level of emergency liquidity assistance to Greek banks.
The emergency liquidity assistance (ELA) currently stands at just under 90 billion euros ($100 billion), the Associated Press reported earlier Sunday.
The ECB said its Governing Council stands ready to review the decision.
Mario Draghi, ECB President, said in a statement: “We continue to work closely with the Bank of Greece and we strongly endorse the commitment of Member States in pledging to take action to address the fragilities of euro area economies.”
With €1 billion or more having already been withdrawn this weekend, the Greek banking sector faces an acute liquidity crisis and without access to more ELA, the game is over and capital controls are likely a foregone conclusion despite Varoufakis’ contention that such an outcome is “a contradition of terms” in a monetary union.
The ECB knew this of course when the board of governors decided against raising the cap and indeed, the central bank has now confirmed that without further access to emergency liquidity, Greek banks likely cannot operate going forward and a bank “holiday” may now be necessary.
The announcement of European Central Bank:
The Governing Council of the European Central Bank today welcomed the commitment by ministers from euro area Member States to take all necessary measures to further improve the resilience of euro area economies and to stand ready to take decisive steps to strengthen Economic and Monetary Union.
Following the decision by the Greek authorities to hold a referendum and the non-prolongation of the EU adjustment programme for Greece, the Governing Council declared it will work closely with the Bank of Greece to maintain financial stability.
Given the current circumstances, the Governing Council decided to maintain the ceiling to the provision of emergency liquidity assistance (ELA) to Greek banks at the level decided on Friday (26 June 2015).
The Governing Council stands ready to reconsider its decision.
Mario Draghi, ECB President, said: “We continue to work closely with the Bank of Greece and we strongly endorse the commitment of Member States in pledging to take action to address the fragilities of euro area economies.”
Yannis Stournaras, Governor of the Bank of Greece, said: “The Bank of Greece, as a member of the Eurosystem, will take all measures necessary to ensure financial stability for Greek citizens in these difficult circumstances.”
The Governing Council is closely monitoring the situation in financial markets and the potential implications for the monetary policy stance and for the balance of risks to price stability in the euro area. The Governing Council is determined to use all the instruments available within its mandate.