The European Central Bank is threatening to choke off funding to Greece ’s lenders in the hope it won’t actually need to. Parliamentary elections on Jan. 25 hinge on whether Greek voters are willing to accept a strings-attached successor to the country’s international bailout package. Under President Mario Draghi , the Frankfurt-based ECB has made its position clear: No program means no guarantee of cash from us. Draghi is reprising an ECB tactic honed in the Irish and Cypriot stages of Europe’s debt crisis, where the prospect of vanishing central-bank funds helped prod politicians into action. Amid anti-austerity promises by the Syriza party, which leads in polls, the ECB is signaling a willingness to withdraw 30 billion euros ($35 billion) of finance even if it tips Greece into a crisis that ultimately sees it leave the single currency. “While these things might be threatened, bandied around, it would be remarkable if such a step were actually taken,” said James Nixon, chief European economist at Oxford Economics Ltd. in London. “The negotiation starts off with the threat of mutually assured destruction. But to actually withdraw funding from Greek banks is the sort of thing that would mean Greece is well on the road to exiting the euro.”
Posted on: Tue, 13 Jan 2015 09:22:57 +0000