All eyes on the ECB amid concern over future of Greece's banks
The institution was set for key talks to decide whether to extend a lifeline to Athens
All eyes were on the European Central Bank yesterday after the resounding "No" in the Greek referendum, with the ECB seen as the only institution capable of calming market panic and preventing the Greek economy from collapsing.
Until now, the ECB had agreed to keep Greek banks - and, by extension, the debt-wracked Greek economy afloat - on life support via the euro zone's Emergency Liquidity Assistance or ELA facility. But the overwhelming "No" vote made the ECB's position far more difficult.
"Without a clear prospect of an immediate bailout deal that could prevent a full-scale sovereign default after Greece's de facto default on the IMF last week ... it is very hard for the ECB to authorise continuing emergency support for Greek banks, let alone to allow an increase in such support," said Berenberg Bank economist Holger Schmieding.
ECB president Mario Draghi was scheduled to talk via telephone conference with EU Commission chief Jean-Claude Juncker, Eurogroup head Jeroen Dijsselbloem and the head of the European Council Donald Tusk later yesterday.
Draghi would then chair a meeting of the ECB's governing council to discuss ELA, after the Bank of Greece requested the ELA ceiling be lifted.
"While politicians in the euro zone are preparing for possible new talks, it is once again up to the ECB to do the dirty work," said ING DiBa economist Carsten Brzeski.