Good job, Greece! You get €900 million today, €7 billion tomorrow, and vast riches in the future.*
After the Greek parliament in Athens approved a raft of austerity measures in the wee hours of the morning, their country was showered with gifts** by once reluctant paymasters.
In Frankfurt, all eyes were on a press conference with Mario Draghi, the European Central Bank president, for guidance on when—or whether—the ECB would boost emergency loans for Greek banks. The banks have been closed for nearly two weeks, with strict limits on withdrawals, to preserve cash. Shut out of the markets, the ECB’s largesse is now the only thing keeping them afloat.
But the ECB capped its support for Greek banks when talks between Athens and its creditors over a new bailout deal broke down, forcing the closures. Now that Greece has started doing what lenders want again, Draghi revealed that the ECB is boosting emergency lending for Greek banks by €900 million ($980 million) this week.
Meanwhile, in Brussels, EU member states are poised to approve a €7 billion, three-month loan to Greece tomorrow. This will be enough for Athens to clear its debt with the IMF and pay back a loan due to the ECB on July 20. And euro zone finance ministers said today that they’re happy enough with how things are going to start “swiftly negotiating” a multi-year bailout deal with Greece worth up to €86 billion over the coming weeks.***
Draghi was particularly forceful on issues that will win him friends in Athens. It is “uncontroversial” that some form of debt relief is needed, he said. He also batted away questions about “Grexit,” stating flatly and forcefully that the ECB “always acts on the assumption that Greece will remain a member of the euro area.” He suggested that “credible compliance” with a new bailout program could persuade the ECB to make Greece’s junk-rated government bonds eligible for purchase under the ECB’s €60-billion-per-month quantitative easing program, the monetary-policy equivalent of a bazooka.
This sudden outbreak of affection between Greece and key creditors isn’t unconditional, of course.**** Plenty more pain is in store for the beleaguered Greek economy, thanks to many more actions it must take in return for yet more bailout funding. And hardliners can’t seem to stop daydreaming about booting Greece from the euro zone. But at least for today, Athens can enjoy getting more carrots than sticks.
* Vast riches subject to terms and conditions.
*** Past results are not a guarantee of future bailouts.
**** Violating these terms may result in expulsion from monetary union.