NEWS,07.01.2013

BoE unlikely to resume printing money

The Bank of England is unlikely to revive its money-printing campaign, a Reuters poll showed on Monday, even though the British economy is teetering on the brink of another recession.Economists in the survey attached a median 45% chance of the central bank resuming the quantitative easing programme which it suspended in November. However, policymakers are likely to pin their hopes on a new scheme to encourage bank lending for reviving the economy as the government makes deep spending cuts."We are going to see a continuation of difficult circumstances of growth remaining weak and inflation staying above target," said Simon Hayes at Barclays Capital.With rates near zero, the BoE has already purchased £375bn of British government bonds meaning approaching half of all conventional gilts belong to the central bank. On top of this exercise to push money into the economy, it has also launched a Funding for Lending Scheme (FLS), providing cheap credit to banks to encourage them to offer loans to customers.While the benefits of the FLS are not expected to filter through to the economy until later this year, data released on Friday showed November mortgage approvals were at their highest monthly total since last January. Banks polled for the BoE's quarterly Credit Conditions Survey said they would increase the availability of mortgages significantly in the first three months of 2013 after a record rise in the three months to December 11. "Signs that the Funding for Lending Scheme is gaining traction hint at some economic recovery over 2013 which we judge makes a further increase in the asset purchase target less likely," said Philip Shaw at Investec.The Bank's hands have been somewhat tied as inflation has held persistently above its 2% target and is not expected to fall below that for a long time. But the poll of 64 economists did not foresee any interest rate rise from the record low 0.5% until July 2014 at the earliest. Only a handful of policy-watchers in the poll, taken over the past week, saw a rate rise before then. One particularly hawkish forecaster is looking for an increase in August but there is no other prediction of higher rates in the poll before the second quarter of 2014.Work in progressGlobal regulators gave banks four more years and greater flexibility on Sunday to build up cash buffers so they can use some of their reserves to help struggling economies grow. Bank of England Governor Mervyn King, who steps down later this year, said the new rules will give the banking system more room to finance a recovery.King will be replaced by Canadian central bank chief Mark Carney in July, who is leaving behind an economy which weathered the global financial crisis quite well to take on one struggling to regain its footing. UK manufacturing activity hit a 15-month high in December, a survey showed last week. However, later figures indicated Britain's dominant service sector shrank for the first time in two years, suggesting the economy as a whole slipped back into contraction in the last three months of 2012. Britain bounced out of its second recession in four years in the third quarter of 2012, supported by London's hosting of the Olympic Games and extra working days, but it is forecast to achieve only tepid growth if any for some time. This is thanks partly to the government spending cuts and tax rises to tackle the budget deficit. The economy has grown little since 2010 when a coalition of Conservatives and Liberal Democrats came to power.Britain has struggled as the chances of recovery in the eurozone, its main trading partner, have faded further into this year. Economists are divided over whether the European Central Bank will cut its policy rate in the next few months.

Sarb appoints Bradlow to head new dept

The South African Reserve Bank (Sarb) said on Monday that it had appointed Daniel Bradlow as the head of the newly-established international economic relations and policy department‚ with effect from February 1.Bradlow’s key responsibilities would include providing strategic direction to the department‚ monitoring and analysing developments in international and regional institutions and forums.Bradlow is currently the South African Research Chairs Initiative professor of international development law and African economic relations at the University of Pretoria and professor of law at American University Washington College of Law.He has worked as a consultant for a number of international and regional development banks‚ international organisations‚ government agencies and foundations and has conducted training programmes for officials from central banks‚ ministries of finance‚ and other government departments from a number of countries in Africa and Asia.His experience includes research and writing about the International Monetary Fund‚ the World Bank‚ G20‚ international financial standard setting bodies‚ the legal aspects of debt and financial management‚ and aspects of negotiating and structuring of international financial and business transactions. He has also served on expert working groups that have been involved in policy-relevant research and advocacy activities related to the governance of various international institutions.He was educated at the University of the Witwatersrand; Northeastern University; Georgetown University; and holds an LLD (international development law) from the University of Pretoria.

French labour deal remains elusive

 

French employers will reject moves to overhaul rigid labour rules unless unions drop demands to tax short-term contracts more heavily than long-term ones, their leader said on Monday, suggesting talks this week could fail.Socialist President Francois Hollande called on employers and unions to strike a deal by the end of 2012 that would grant companies more flexibility in hiring and firing while giving more job security to workers on short-term contracts.Talks between the Medef employers' union and main labour groups spilled into January after talks broke up in December without a deal, with each side accusing the other of making unacceptable demands. The government says it will impose its own deal if the two sides fail to reach an agreement.As talks resume this week, Medef chief Laurence Parisot said employers would be unable to sign a deal imposing higher costs for hiring on seasonal or short-term contracts.French per unit labour costs are currently among the highest in the European Union, above Germany but below Denmark, and are often cited by economists as a brake on growth and a factor in maintaining chronically high unemployment."At this point in our discussions, including talks we had all day yesterday, on Sunday... the Medef will not sign the deal," Parisot said on Radio Classique. "The issue of taxation for short contracts is a vital question."Parisot accused Hollande's Socialist government of indirectly interfering in the talks to the employers' disadvantage.The government is pushing for a deal to address concerns that France has a two-speed labour system, with those on long-term job contracts enjoying too much job security and those on short-term contracts too little.FlexibiltyEmployers want an agreement that will allow companies to adjust their wage burden more nimbly in a downturn, as well as simplifying the rules about firing workers to make the process more predictable and keep costs in check.Two hardline unions reject measures to add flexibility. All five unions represented at the talks want greater job security for workers on flimsy contracts, calling for employers who use them to be penalised by paying higher taxes or more unemployment contributions.Unions reject greater flexibility in work contracts and demand more job security for short-term workers. They want employers using short-term contracts to pay more tax or higher contributions to the national fund that pays out unemployment benefits.Labour Minister Michel Sapin said the government would present a draft law regardless of the talks' outcome. However, he expressed faith in a deal being reached by January 11, when talks are due to conclude."They're negotiating, it's their responsibility, and I'm letting them negotiate," he told Canal+ television.Hollande's government has enough Socialist and allied lawmakers in parliament to pass a labour reform.But without a deal between unions and employers, it will be more exposed to criticism from both sides and unions may influence left-wing lawmakers into watering down any reform.The head of the CGT union, Bernard Thibault, said last week he would oppose more labour flexibility with "all his force".

2012 London jobs nosedive

The number of new jobs created in the City of London fell by more than a third last year as financial firms focused on cost-cutting, research by recruitment agency Astbury Marsden shows.The agency estimates that 35 115 new City jobs were created in 2012, down 35% on the year before. Only about 800 new jobs were created in December, it said, compared with 1 490 in December 2011.Banks worldwide are shedding jobs as stricter regulations and eurozone worries take their toll on trading income and investment banking operations."2012 was a busy year for HR departments across the City as cost-cutting remained a key focus for senior management and board members throughout the year," Mark Cameron, chief operating officer at Astbury Marsden, said."Tighter regulation including higher capital requirements forced up costs at a time when revenues dipped due to a number of factors, including a continued weak economy and less trading activity," he added.Cameron said that cuts had been particularly significant in 2012 because banks had implemented major restructuring, including the winding down of entire business units. Swiss bank UBS axed 10 000 staff and wound down its fixed-income business. On a more optimistic note, Cameron said that most of the obvious and immediate cuts have already been made and the worst may be over.The recruitment company also said that hiring prospects could be improved by signs that lawmakers are getting to grips with the euro zone crisis and by the deal struck by US politicians to delay budget spending cuts and avoid hefty tax increases.

China starts building nuclear power plant

A Chinese state news agency says the country has begun building a new nuclear power plant after lifting a construction moratorium imposed following Japan's Fukushima disaster.The Xinhua News Agency says the 3 billion yuan ($475m) power plant in Rongcheng, an eastern coastal city in Shandong province, will incorporate advanced safety features developed by Chinese researchers. China is the world's biggest energy consumer and nuclear power is a key element in official efforts to curb surging demand for fossil fuels.Beijing suspended approval of new nuclear power plants to carry out safety reviews following the Japan's 2011 earthquake and tsunami that wrecked the Fukushima plant. That moratorium was lifted in October.

 

Liquidity rules for banks eased

The world's top banking regulatory body on Sunday eased the first global liquidity rules scheduled to start applying to banks in 2015 and aimed at improving their ability to survive financial crises.The Basel Committee on Banking Supervision said at a press conference here that it had widened the definition of the easy-to-sell assets that banks will have to hold to survive periods of stress.The Basel III standards had been initially proposed in 2010 but banks and financial institutions have since lobbied intensely to make the rules more flexible and result in lower costs for the sector. The details of the Liquidity Coverage Ratio (LCR), which was drafted to avoid a repeat of the 2008 banking crisis and unanimously endorsed on Sunday by the Basel group's top oversight body, give the banks a reprieve. Its provisions include a much broader definition of the minimum assets every bank needs to hold, making it less costly for them to maintain the required buffer. "The changes to the definition of the LCR, developed and agreed by the Basel Committee over the past two years, include an expansion in the range of assets eligible as HQLA (high quality liquid assets)," the committee said. The new LCR's full details will also be fully implemented only in 2019, instead of 2015 as initially proposed."Specifically, the LCR will be introduced as planned on 1 January 2015, but the minimum requirement will begin at 60%, rising in equal annual steps of 10 percentage points to reach 100% on 1 January 2019," the Basel group announced. Mervyn King, Chairman of the Basel group's top oversight body and Governor of the Bank of England, described the agreement announced Sunday as "a very significant achievement.""For the first time in regulatory history, we have a truly global minimum standard for bank liquidity," said King.The Basel Committee brings together representatives regulators from 27 nations."Importantly, introducing a phased timetable for the introduction of the LCR, and reaffirming that a bank's stock of liquid assets are usable in times of stress, will ensure that the new liquidity standard will in no way hinder the ability of the global banking system to finance a recovery," King said.Stefan Ingves, chairperson of the Basel Committee and of Sweden's Sveriges Riksbank, said the global regulator could now focus on the Net Stable Funding Ration, another pillar of the Basel III reforms."The completion of this work will allow the Basel Committee to turn its attention to refining the other component of the new global liquidity standards, the Net Stable Funding Ratio, which remains subject to an observation period ahead of its implementation in 2018," he said.

Big banks pay billions over foreclosures

Ten mortgage servicers agreed on Monday to pay $8.5bn to end a case-by-case review of foreclosures required by US regulators. Banks including Bank of America, Citigroup, JPMorgan, Wells Fargo and six others will pay $3.3bn directly to eligible homeowners, and will also pay $5.2bn in loan modifications and forgiveness, regulators said. The Office of the Comptroller of the Currency and the Federal Reserve Board said they accepted the agreement to get relief to consumers more quickly than through the reviews. In April 2011 the agencies required the servicers to review foreclosure actions from 2009 and 2010 to evaluate whether borrowers had been unlawfully foreclosed on or otherwise suffered financial harm due to errors in the foreclosure process.

NEWS,07.12.2012

Ensuring Scotish Sovereignty: Exploring the Public Bank Option

 

The Royal Bank of Scotland (RBS) and the Bank of Scotland have been pillars of Scotland's economy and culture for over three centuries. So when the RBS was nationalized by the London-based UK government following the 2008 banking crisis, and the Bank of Scotland was acquired by the London-based Lloyds Bank, it came as a shock to the Scots. They no longer owned their oldest and most venerable banks.Another surprise turn of events was the triumph of the Scottish National Party (SNP) in the 2011 Scottish parliamentary election. Scotland is still part of the United Kingdom, but it has had its own parliament since 1999, similar to U.S. states. The SNP has rallied around the call for independence from the UK since its founding in 1934, but it was a minority party until the 2011 victory, which gave it an overall majority in the Scottish Parliament. Scottish independence is now on the table. A bill has been introduced to the Scottish Parliament with the intention of holding a referendum on the issue in 2014.Arguments in favor of independence include that it will allow the Scottish people to make decisions for Scotland themselves, on such contentious issues as having nuclear weapons in their seas and being part of NATO. They can also directly access the profits from the North Sea oil off Scotland's coast.Arguments against independence include that Scotland's levels of public spending (which are higher than in the rest of the UK) would be difficult to sustain without raising taxes. North Sea oil revenues will eventually decline.One way budgetary problems might be relieved would be for Scotland to have its own publicly-owned bank, one that served the interests of the Scottish people.  True economic sovereignty means having control over the national currency, credit and debt.It was in that context that I was asked to give a presentation on public banking at RSA Scotland (the Royal Society of Arts) in Edinburgh on Nov. 22.  Among other attendees were a special adviser and a civil servant from the Scottish government.  The presentation was followed by one by public sector consultant Ralph Leishman, director of 4-consulting, who made the public bank option concrete with specific proposals fitting the Scottish context.  He suggested that the Scottish Investment Bank (SIB) be licensed as a depository bank, on the model of the state-owned Bank of North Dakota. Lively debate followed. The SIB is a division of Scottish Enterprise (SE), a government economic development body. SE encourages economic development, enterprise, innovation and investment in business, which is achieved by the SIB through the Scottish Loan Fund. As noted in a September 2011 government report titled "Government Economic Strategy": Securing affordable finance remains a considerable challenge... Evidence shows that while many large companies have significant cash holdings or can access capital markets directly, for most Small and Medium-sized companies bank lending remains the key source of finance. Unblocking this is key to helping the recovery gain traction." The limitation of a public loan fund is that the money can be lent only to one borrower at a time.  Invested as capital in a bank, on the other hand, public funds can be leveraged into nearly ten times that sum in loans. Liquidity to cover the loans is provided by deposits, which remain in the bank available to the depositors. Any shortage in liquidity can be covered by borrowing at low interest from other banks or the money market.  As observed by Kurt von Mettenheim, et al., in a 2008 report  titled "Government Banking: New Perspectives on Sustainable Development and Social Inclusion from Europe and South America" (at page 196): "In terms of public policy, government banks can do more for less: Almost ten times more if one compares cash used as capital reserves by banks to other policies that require budgetary outflows."Leishman stated that the SIB now has investment funds of 23.2 million pounds from the Scottish government. Rounding this to 25 million pounds, a public depository bank could have sufficient capital to back 250 million pounds in loans.  For deposits to cover the loans, the Scottish Government has 125 million pounds on deposit with private banks, currently earning little or no interest. Adding just 14 percent of the General Fund cash and cash equivalent reserves held by Scotland's local governments would provide another 125 million pounds, reaching the needed 250 million pounds, with six times that sum in local government revenues to spare.My assignment was to show what the government could do with its own bank, following the model of the Bank of North Dakota (BND).  n the Saturday following the RSA event, The Scotsman published and article Alf Young that summarized the issues and possibilities so well that I'm taking the liberty of abstracting from it here.North Dakota is currently the only U.S. state to own its own depository bank. The BND was founded in 1919 by Norwegian and other immigrants, determined, through their Non-Partisan League, to stop rapacious Wall Street money men foreclosing on their farms.All state revenues must be deposited with the BND by law. The bank pays no bonuses, fees or commissions; does no advertising; and maintains no branches beyond the main office in Bismarck. The bank offers cheap credit lines to state and local government agencies. There are low-interest loans for designated project finance. The BND underwrites municipal bonds, funds disaster relief and supports student loans. It partners with local commercial banks to increase lending across the state and pays competitive interest rates on state deposits. For the past ten years, it has been paying a dividend to the state, with a quite small population of about 680,000, of some $30 million (18.7 million pounds) a year.Young writes:"Intriguingly, North Dakota has not suffered the way much of the rest of the U.S. -indeed much of the western industrialized world -- has, from the banking crash and credit crunch of 2008; the subsequent economic slump; and the sovereign debt crisis that has afflicted so many. With an economy based on farming and oil, it has one of the lowest unemployment rates in the U.S., a rising population and a state budget surplus that is expected to hit $1.6 billion by next July. By then North Dakota's legacy fund is forecast to have swollen to around $1.2 billion. With that kind of resilience, it's little wonder that twenty American states, some of them close to bankruptcy, are at various stages of legislating to form their own state-owned banks on the North Dakota model. There's a long-standing tradition of such institutions elsewhere too. Australia had a publicly-owned bank offering credit for infrastructure as early as 1912. New Zealand had one operating in the housing field in the 1930s. Up until 1974, the federal government in Canada borrowed from the Bank of Canada, effectively interest-free.From our western perspective, we tend to forget that, globally, around 40 per cent of banks are already publicly owned, many of them concentrated in the BRIC economies, Brazil, Russia, India and China. "Banking is not just a market good or service.  It is a vital part of societal infrastructure, which properly belongs in the public sector. By taking banking back, local governments could regain control of that very large slice (up to 40 percent) of every public budget that currently goes to interest charged to finance investment programs through the private sector. Recent academic studies by von Mettenheim et al., and Andrianova et al show that countries with high degrees of government ownership of banking have grown much faster in the last decade than countries where banking is historically concentrated in the private sector.  Government banks are also less corrupt and, surprisingly, have been more profitable in recent years than private banks.Young concluded his article: "As we left Thursday's seminar, I asked another member of the audience, someone with more than thirty years' experience as a corporate financier, whether the concept of a publicly-owned bank has any chance of getting off the ground here.'I've no doubt it will happen,' came the surprise response. 'When I look at the way our collective addiction to debt has ballooned in my lifetime, I'd even say it's inevitable.'"The Scots are full of surprises, and independence is in their blood. Recall the heroic battles of William Wallace and Robert the Bruce memorialized by Hollywood in the Academy Award-winning movie Braveheart.  Perhaps the Scots will blaze a trail for economic sovereignty in the EU, just as the North Dakotans did in the U.S.  A publicly-owned bank could help Scotland take control of its own economic destiny, by avoiding unnecessary debt to a private banking system that has become a burden to the economy rather than a pillar in its support.

American economy and the Rationalization of Inequality

 

Republicans love touting the benefits of trickle-down economics and are still doing it in the big debate over tax cuts for the wealthy. The idea is simple: The more money the people on top make, the more the people below will benefit from the dripping down of that prosperity. The hidden agenda here, of course, is the rationalization of inequality. By linking the welfare of working-class Americans directly to the prosperity of the rich, the Republicans can protect the insulated interests of corporations and the wealthy without the fear of backlash. In reality, however, the only thing that trickles down in the Republican universe is you-know-what. Our economy is actually a trickle "up" economy instead, based on a lopsided pyramid scheme that ensures the rising up of prosperity rather than the dripping down. Consider the example of investment banking, a white-collar profession that raises money for companies and provides advice for mergers, divestitures, and other strategic alternatives. I chose this example because the pyramid structure illustrated by it is magnified a thousand times in blue-collar environments, the retail industry, and other sectors where wage inequality between rank-and-file workers and senior management is even higher, and so it is telling that even in a relatively upscale business like investment banking, the contrasts are so extreme. The investment banking hierarchy is essentially a large bureaucracy. At the bottom (ignoring maintenance staff like janitors and security guards) are the administrative assistants, who support several bankers at one time and make about $35,000 a year. Above them are the analysts, a cadre of college graduates whose life consists of 120-hour work weeks and an endless stream of menial tasks for $65,000 to $90,000 a year. Next up, and supported by the analysts, are the associates freshly minted MBAs with more than a $100,000 in school loans hanging over them who can look forward to taking home between $100,000 and $175,000 a year. If these young men and women, who work 90-hour weeks while trying to juggle a family, survive long enough to become vice presidents, their compensation can rise to $200,000-$300,000 per year. So far so good, but here is where the gravy train takes a sharp turn towards the absurd. Above the vice presidents are the directors, which is a training zone for the next pay grade (or a graveyard for those who don't have what it takes). Directors rely on the workers below them to do all the grunt work, including research, financial analysis, and client presentations, while they mainly babysit clients and occasionally come up with ideas to pitch to them. Their pay for these relatively cushy tasks ranges from $350,000 to $500,000 per year; but even this is meager compared to what their superiors make. Managing directors, who work even less and spend more time golfing instead, can make anywhere from a million to several million dollars a year. Finally you have the really big fish the CEOs, presidents, executive vice presidents, and others who manage the entire circus, think deep thoughts, and schmooze with politicians to get regulations loosened. What makes these gigs so coveted is not just the fact that few ever manage to leapfrog into that echelon but that the pay scale can jump to tens of millions of dollars (and for celebrity executives, even hundreds) per year for work that is only moderately more challenging than that of the managing directors. It may be lonely at the top, but it's pretty lucrative too.It should be clear from the above that the wealth generated in these organizations gathers mainly at the top of the pyramid, while the people at the bottom, who do a lot of the heavy lifting and are instrumental in building that wealth, receive only a fraction of those riches. Sure, the pay scales in investment banking are pretty good by the standards of other industries, but it is the proportional difference between the compensation at the top and the bottom that makes a difference. This large income gap leads to an exponentially faster accumulation of wealth in a few hands, which in turn widens the prosperity gap even more. In other words, prosperity is not really trickling down but trickling up.The problem with this is obvious. The more wealth trickles up in our system, the more it frustrates those at the bottom without whose efforts that wealth could not be created in the first place. Moreover, since money is a finite resource, disproportionately large compensation for senior executives is ultimately paid for not just by other employees, but by customers (whose pockets that money comes from) and shareholders (who receive less benefit from their investment) as well. In a true trickle-down economy, the benefits of productivity and innovation would be shared fairly by all stakeholders, not just the select few with authority to dictate compensation and how the profits of a company are distributed. So while the idea of such a system might be appealing conceptually, it is not the way our economy really works, and if the Republicans really believe in trickle down, they should stop trying to whitewash the exploitative pyramid schemes of their wealthy donors and come up with a real model for equality instead.

NEWS,04.08.2012

Spain creeping towards full bailout

Spanish Prime Minister Mariano Rajoy inched closer today to asking for an EU bailout for his country, but said he needed first to know what conditions would be attached and what form the rescue would take.His comments, at his first post-cabinet meeting news conference since taking office last December, came a day after the European Central Bank signalled it was preparing to buy Spanish and Italian bonds but only after EU bailout funds were triggered and countries had asked for help.A source said separately that Spain would not decide whether to apply for several weeks.Buying bonds and providing aid would all be designed to bring down what have been prohibitive borrowing costs in the indebted countries.Rajoy said he was ready to do what is best for Spain, going far further than he did on Thursday when, during a press appearance with Italian Prime Minister Mario Monti, Rajoy three times declined to say whether he would seek the aid."I will do, as I always do, what I believe to be in the best interest of the Spanish people," Rajoy said yesterday."We still don't know what these measures are," he said, reference to a comment by ECB President Mario Draghi that the bank was examining non-conventional measures to defend the euro."What I want to know is what these measures are, what they mean and whether they are appropriate and, in light of the circumstances, we will make a decision, but I have still not taken any decision," he said.A source familiar with Rajoy's thinking confirmed this possibility was actively looked at and that Rajoy was ready to bear the political cost of a request.In a letter to Herman Van Rompuy on Friday, Rajoy urged the president of the European Council to work towards creating a euro zone-wide banking and fiscal union as soon as possible.He said he believed that the outline for a single supervisory system for the banking sector should be ready before the end of this year.Rajoy added he believed granting the European Stability Mechanism (ESM), the permanent bailout fund, a banking licence that would allow it to tap almost unlimited funds from the European Central Bank (ECB)ECB President Mario Draghi on Thursday said the fund was barred by European law from tapping the central bank for funding."In any case, whatever mechanism is put into place should be an umbrella mechanism, one that is applied equally to all the countries that meet its requirements," Rajoy said in the letter.Spain has already asked for aid for its stricken banks."People have said the main reason why he is not seeking help is because he is too proud. But this is not true. He requested an assistance for the banks because it was the adequate instrument to solve a specific problem. There is no opposition to do it again," the source said.An aid request would entail negotiating a memorandum of understanding with other euro zone countries and would likely bear strong conditionality, something Rajoy wants to discuss in detail before moving forward.Although Spain already complies with stringent EU and International Monetary Fund demands to reform its economy and has announced a package of 65 billion euros of tax hikes and spending cuts in July, the government fears it could now be asked to reform further the pension system.The measure is the last campaign pledge Rajoy has not been forced to break so far and could undermine even more the support for the government after it already fell sharply in recent weeks as hundreds of thousands of Spaniards took the streets to protests against austerity steps.A euro zone official told Reuters last week Spain had for the first time conceded at a meeting between Economy Minister Luis de Guindos and his German counterpart Wolfgang Schaeuble it might need a full bailout worth 300 billion euros if it's borrowing costs remain unsustainably high.Rajoy's office however denied that talks on this issue had taken place.People who discussed the question with Rajoy explain that he may still hope to avoid making the request because he thinks by just knowing that the EU rescue funds and the ECB are geared up would be enough to shield Spain from market pressures."The thinking is that the instruments need to be in place and possibly the risk premium will go down so much that there will be no need to go any further," said one senior politician.

Euro Crisis 2012: Greece Reportedly Saved From Bankruptcy By European Central Bank

 

The European Central Bank (ECB) has saved Greece from bankruptcy for the time being by securing it interim financing in the form of additional emergency loans from the Bank of Greece, German newspaper Die Welt said on Saturday.The ECB's Governing Council agreed at its meeting on Thursday to increase the upper limit for the amount of Greek short-term loans the Bank of Greece can accept in exchange for emergency loans, the newspaper said in an advance copy of the article due to appear in its Saturday edition.Until now the Bank of Greece could only accept T-Bills up to a limit of 3 billion euros ($3.70 billion) as collateral for emergency liquidity assistance (ELA) but it has applied to have this limit increased to 7 billion euros, the daily said, citing central bank sources.The ECB Governing Council gave this wish the green light, the paper said.The move should enable the Greek government to access up to an extra 4 billion euros of funds, the paper said, adding that this should ensure the country keeps its head above water until the "troika" of the European Union, the European Central Bank and the International Monetary Fund decide on the disbursement of the next tranche of money from its aid program in September.The ECB declined to comment, the paper said.