Greece has reached the deadline it couldn’t afford to miss – repaying the European Central Bank.
The country ordered payments on Monday totaling €6.8 billion to the ECB, the International Monetary Fund and the Greek central bank, a Greek finance-ministry official said on condition of anonymity.
“The issue of repayment to the ECB was pivotal, because failure to make the payment would have had a knock-on impact on the ECB’s willingness to continue providing Emergency Liquidity Assistance to the Greek banks,” said Ken Wattret, an economist at BNP Paribas in London. “As the realisation dawned that Greece was facing a very disorderly, painful exit from the monetary union, the government stepped back from the brink.”
Greek banks reopened on Monday, after three weeks of closure, though withdrawal limits and restrictions on transfers remain in place. While the country is seeing the first signs of stabilisation, hurdles still loom with a parliamentary vote on its bailout on Wednesday and more aid talks ahead.
Lawmakers must decide on a second package of prerequisites for further financial aid, including tax increases on farmers. Last week’s vote prompted a rebellion by some members of the Syriza party, forcing Tsipras to reshuffle his cabinet on Friday.
Monday’s payments comprise €4.2bn in maturing debt and interest to the ECB, €2.05bn to the IMF, and €470 million to the Bank of Greece, a second finance ministry official said.
An ECB spokeswoman declined to comment on whether payment was received by the institution. European Union law bans the central bank from financing governments, meaning a default would probably require it to pull support from Greek lenders, leaving an exit from the single currency all but assured.
As banks reopened, people in Athens lined up for basic services such as payment orders and check deposits. Branches can now replace the daily cash withdrawal limit of €60 with a weekly limit of €420, though transfers abroad from Greek accounts are still banned. Greek financial markets remain closed, the country’s market regulator said in an e-mailed statement.
In the negotiations to grant Greece the funds to pay its debts, politicians cut it fine. Euro-area leaders agreed on a bailout package worth as much as €86bn in an overnight summit that ended last Monday morning. The Greek parliament approved the austerity measures linked to the aid in the early hours of Thursday morning, and the currency bloc signed off on €7bn of bridge financing the next day.
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