May 22, 2012
There has been no official announcement. No terms or conditions have been disclosed. But Greece’s banking system is being propped up by an estimated €100 billion or so of emergency liquidity provided by the country’s central bank — approved secretly by the European Central Bank in Frankfurt. If Greece were to leave the eurozone, the immediate cause might be an ECB decision to pull the plug.
Extensive use of “emergency liquidity assistance” (ELA) to help banks in the weakest economies has been one of the less-noticed features of the eurozone crisis. Separate from normal supplies of liquidity and meant originally as a temporary facility for national authorities to use when banks hit problems, ELA proved a lifesaver for the financial system Ireland and is now even more so in Greece. As such, it has given the ECB — which has ultimate control over the facility — considerable power to determine countries’ fates.
Whether that power would ever be exercised is unclear. ELA is a subject on which the ECB is deeply reluctant to provide information — even on where or when it is provided.
“You don’t say when you are in an emergency situation, because then you make the situation worse. So I really don’t see the usefulness of being more transparent,” Luc Coene, Belgium’s central bank governor, explained in a Financial Times interview this month.