More Greek banks have called in August for help from the central bank to finance their daily operations, reported the head of the institution.
Because they have no longer guarantees that can be accepted by the ECB, some Greek banks appealed in August to the emergency fund provided by the central bank. Greek lenders are dependent on the ECB that provides liquidity to finance their daily operations because of their exclusion from international markets following the rating downgrade.
Central bank governor George Provopoulos assured that his institution is ready to provide further liquidity if necessary, according to Thomson Reuters news agency. “Since the beginning of fiscal crisis, central bank of Greece helped maintain liquidity in the banking system”, said Provopoulos. “Bank of Greece granted emergency loans in August”, he added.
Moreover, the crisis in Greece has deepened at the end of the week after creditors have suspended talks with Athens on rescue funds for the Greek state, following disagreements on the ways in which a budget deficit that is getting again out of control can be covered. On these talks depends the payment of 8 billion euro in the first financial aid package of 110 billion set last year to Greece, without which the government in Athens would be in default, according to The Wall Street Journal. The suspension of talks pushed bond yields to levels that show that Greek investors see it as a certainty for Greece to default soon.
“The Greek party insists that the budget deficit targets could not be achieved due to the recession. The troika – IMF, ECB and EC – is saying that the recession has had its role, but Greece simply not kept its promises, so that many steps will be needed to cover lost ground”, said a source close to the situation.
Talks began this week and should have concluded on 5 September. The delegation representing international lenders is expected to return to Athens on 10 September after the government will prepare a project for the 2012 budget.
Athens is expecting a deficit of 8.1 to 8.3% of GDP this year compared with the official target of 7.6%, while not ruling out a deterioration of the situation. “I expect a difficult default until March, maybe this year. The chances for a second program are small”, said an IMF economist.