ECB to consider whether or not to continue financial aid to Greece

The European Central Bank will consider whether to continue providing emergency liquidity assistance (ELA) to Greece at a scheduled meeting this morning, following the rejection by Greek voters of the terms of a bailout agreement with creditors.

Greek finance minister Yanis Varoufakis held an emergency meeting with the country's top bankers and the governor of the Greek central bank last night in Athens, with the Greek government expected to make an official request to the ECB for more emergency liquidity.

"The Bank of Greece will make a request today, and we believe there are valid grounds for there to be an increase in ELA liquidity . . . There is no reason not to increase liquidity," the Greek government's spokesman told ANT1 television.

The euro fell as voters rejected austerity demands, fueling concern the indebted nation is on track to exit the currency union.

Greek banks, which have been closed since last Monday and are due to reopen tomorrow, are on the brink of collapse, with collateral and deposits declining. The ECB froze the ELA limit it was providing to Greek banks at just under €89 billion last Sunday, but it may choose to take further action today.

Bailout expiration

Under its legal mandate, the ECB can provide emergency funding only to banks that are solvent.

The fact that Greece is now without an official bailout package since the expiration of its second bailout last Tuesday and is effectively locked out of private markets also may increase the pressure on the ECB to act.

In a positive sign, ECB executive board member Benoit Coeure said yesterday, before the result of the referendum was announced , that the ECB stood ready to take additional measures if the situation warranted it.

"In the current circumstances of great uncertainty in Europe and the world, the ECB has been clear that if we need to do more we will do more. We will find the necessary instruments," Mr Coeure said.

“Our will to act in this matter should not be doubted,” he added.

Bundesbank profits

Jens Weidmann, the head of the German Bundesbank, is regarded as one of the more hardline

opponents of further ELA for Greece, amid concerns that the euro area’s central bank could be exceeding its mandate.

But German business newspaper Handelsblatt reported this weekend that the central bank governor had warned German chancellor Angela Merkel that a Greek exit from the euro area would hit the Bundesbank's profits, and hence have an impact on the national budget.

Greek depositors have been limited to €60 cash withdrawals since capital controls were imposed eight days ago, though some banks opened during the week to allow pensioners to withdraw up to €130.

The imposition of capital controls in Greece is not the first time withdrawal limits have been put on euro zone banks – Cyprus became the first euro zone country to see capital controls imposed as part of its March 2013 bailout.

The head of the Greek banking association denied on Saturday a report in the Financial Times that Greek banks were considering a "bail-in" of depositors with savings of more than €8,000 in Greek bank accounts as part of a recapitalisation plan that would be implemented in conjunction with the European Commission, European Central Bank and the IMF.

The newspaper reported that deposits of more than €8,000 could face haircuts of up to 30 per cent.

In a message from his Twitter account, Mr Varoufakis described the report as a “malicious rumour”.