Fearful that one of euro zone’s members could drop out of the bloc, the European Central Bank is set to keep Greece on a funding drip until the end of the month but a default will leave it little choice but to start turning off life support.
As political negotiations to release euro zone loans for Athens descend into chaos, it has fallen to the ECB to keep Greece afloat, by allowing the country and its lenders run up an ever higher overdraft with the euro zone.
Greece must repay the International Monetary Fund 1.6 billion euros by the end of June if it is to avoid a default that could push it out of the euro.
The mood is darkening not only amongst political leaders but also the 19 euro zone central bank chiefs who, together with the ECB’s executive, have approved 83 billion euros of back-up funding for Greece’s banks.
People familiar with the debate amongst this group told Reuters that central bankers are preparing to pare back this Emergency Liquidity Assistance (ELA) if no political agreement is reached.
“As long as discussion are in progress with some hope of a deal it would be crazy for the ECB to withdraw ELA,” said one person familiar with the discussions.
