European Central Bank policymakers have sanctioned further emergency funding for Greece’s banks, a banking source said, amid clear signs that the wider eurozone economy is picking up.
A recent ECB survey showed that banks were expecting the strongest demand for company loans in over a decade, RTE reported.
This means its President Mario Draghi will be able to claim an early success for the €60 billion ($63.5b) a month money printing scheme the ECB launched last month.
The ECB’s borrowing rates are all but guaranteed to be held at record lows by policymakers meeting Wednesday.
Wrangling Continues
But continued wrangling between Greece and the eurozone over reforms for aid is casting uncertainty over the 19-country currency bloc.
Nonetheless, the €1 trillion-plus money printing scheme to buy chiefly government bonds is underpinning confidence and some predict Draghi will underscore his commitment to quantitative easing.
Time is running out, however, for Athens to improve a package of reforms required for the release of euro zone loans that it requires to stay afloat.
Draghi may address problems in Greece after the ECB’s decision-making Governing Council extended the limit on emergency liquidity that can be drawn by Greek banks. This has been rising as savers, worried about the country’s prospects, withdraw deposits.
The European Central Bank raised the cap on emergency liquidity assistance (ELA) that Greek banks can draw from the country’s central bank by €800m, taking the ELA ceiling to €74 billion, a banking source said Tuesday.
Eurozone Economy Improving
He is also likely to address the eurozone’s improving economic prospects. In its World Economic Outlook Tuesday, the International Monetary Fund raised growth expectations for all the major economies in the bloc.
The ECB’s actions are creating fertile conditions for growth, with the euro at a 12-year low buoying exporters and borrowing in many countries cheaper than ever.
The QE program has already prompted a dramatic rise in the value of bonds and investors are now wondering whether it could become too costly for the ECB to buy in top-rated countries such as Germany.
After Wednesday’s press conference, Draghi will travel to Washington to join finance ministers and central bankers from the Group of 20 top economies at the International Monetary Fund’s Spring meeting.
