Since the ECB governing council shocked markets with a statement that it would no longer accept Greek government-backed assets as collateral. The focus has been shifting to Greece´s use of Emergency Liquidity Assistance (ELA). That the ECB granted a higher ceiling for Greece´s ELA led Jens Weidmann, president of the Bundesbank, to warn “that Greece cannot rely on ELA to prop up its banks”.
As the Eurointelligence newsletter assured markets on 5. February 2015: “The decision does not constitute an end to Greek banks´ access to liquidity as some reports initially suggested: it means that Greek banks will now derive most of their funding from the ELA”
As the ECB governing council minutes during the buildup of the Cyprus banking meltdown –that were leaked to the New York Times – revealed, Weidmann fought in vain in the ECB governing council against Cyprus financing an insolvent Laiki bank for more than a year my misusing ELA funds.
We have analyzed on this website and in a larger contribution to the International Economy – see “From Deauville to Cyprus”, TIE Spring 2013 – how in the case of Cyprus´s the misuse of ELA escalated into the biggest and most frightening governance disaster of the ECB and the Euro system.