EUROZONE-GREECE/BUNDESBANK Bundesbank chief says Greek capital controls should stay until new bailout

Record ID: 147930

  • Title: EUROZONE-GREECE/BUNDESBANK Bundesbank chief says Greek capital controls should stay until new bailout
  • Date: 9th July 2015
  • Summary: MONITOR SHOWING BUNDESBANK WEBSITE
  • Embargoed: 24th July 2015 13:00
  • Keywords:
  • Location: Germany
  • Country: Germany
  • Topics: General
  • Reuters ID: LVA53RRRDJ83A26JJX57OAUQ02MD
  • Aspect Ratio: 16:9
  • Story Text: Capital controls in Greece should stay in place until a new bailout has been agreed, the head of Germany's central bank said on Thursday (July 9), arguing that the country's banks should get no extra central bank support until Athens has signed a deal.
    "Central banks - although they do have the means - have no mandate, in my view, to safeguard the solvency of banks and governments. That kind of implicit redistribution is a matter for governments or parliaments (to handle) if at all," Jens Weidmann told an audience in Frankfurt.
    "Despite the practical difficulties involved in telling the liquidity of insolvency in real time, central banks need to show where their limits lie. Besides Greece, doubts about the solvency of banks are legitimate and rising by the day. It needs to be crystal clear that responsibility for further developments in Greece and on any decisions on transferring financial resources lies with the Greek government and the countries providing assistance, not the governing council," he added.
    Jens Weidmann's typically blunt remarks underscore the degree of opposition in Germany to further support for Greece after months of acrimonious negotiations that have taken it to the brink of leaving the euro.
    His statement that Greek banks should get no additional liquidity support, just as they are about to run out of cash, strike an uncompromising stance but one that has increasing support in the euro zone.
    Weidmann, who also sits on the European Central Bank's Governing Council that set the level of Emergency Liquidity Assistance (ELA) for Greek banks, said it was up to euro zone countries and not the ECB to resolve the Greek problem.
    "The government council recently ensured that the provisional liquidity assistance was frozen and I welcome the fact that further deposit outflows have been stemmed by capital controls. ELA has no longer been used to finance capital flight caused by the Greek government. This certainly represents a step forward and shifts the responsibility to where it belongs, with the governments and parliaments," the 47-year-old economist said.
    "In any case, the euro system should not increase liquidity provision and capital controls need to stay in force until an appropriate support package has been agreed by all parties and the solvency of both the Greek government and the Greek banking system has been ensured. In the event that further short-term assistance is thought to be desirable or necessary, it is up to fiscal policy makers to provide ad hoc financial support," he added.
    He did, however, appear to leave the door slightly open to helping Greece temporarily. Any such decision would be taken by ECB President Mario Draghi's executive and the euro zone's 19 central bank chiefs.
  • Copyright Holder: REUTERS
  • Copyright Notice: (c) Copyright Thomson Reuters 2015. Open For Restrictions - http://about.reuters.com/fulllegal.asp
  • Usage Terms/Restrictions: Video restrictions: parts of this video may require additional clearances. Please see ‘Business Notes’ for more information.
Register