ECB’s Nowotny says no to loosening funding for Greece now

FRANKFURT (Reuters) – A European Central Bank policymaker played down the prospects for an immediate loosening of funding for cash-strapped Greece, saying that when it came to accepting the country’s bonds as security for central bank credit, the answer remained no.

The critical comments from Ewald Nowotny, who as head of the Austrian central bank also sits on the ECB’s policy-setting Governing Council, echo those of European officials, who have played down Greek government optimism that a deal is near.

“There is always a lot of noise in such a situation and I think the important point is to distinguish the noise from the facts,” Nowotny told CNBC television.

“For us, it is quite clear that we have certain conditions to be met. The one condition is … whether we can accept for instance Greek assets, Greek bonds, as collateral. The answer is, for the time being: No,” said Nowotny.

In February, the European Central Bank abruptly canceled its acceptance of Greek bonds in return for funding, shifting the burden onto Athens’ central bank to finance its lenders and isolating Greece unless it strikes a new reform deal.

The move, which means the Greek central bank provides banks with tens of billions of euros of emergency liquidity, was in response what many in Frankfurt saw as the Greek government’s abandoning of its aid-for-reform program.

Nowotny said there had since been no change of heart.

“One has to be quite clear. We do not have a possibility to do some, let’s say, financing outside our rules.”

“I know there had been some ideas floating around that we might give some kind of interim financing just like that. I don’t see any legal possibility for that,” he said.

(Reporting by Georgina Prodhan and John O’Donnell; Editing by Toby Chopra)

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