FRANKFURT, Feb 5 (Reuters) - The European Central Bank should be strict in granting emergency funding to banks, ECB policymaker Jens Weidmann said in a German newspaper interview, further increasing pressure on Greece’s financial sector.
The ECB abruptly cancelled its acceptance of Greek bonds in return for emergency liquidity assistance (ELA) on Wednesday, shifting the burden onto the central bank in Athens to finance its lenders and isolating Greece unless it strikes a new reform deal.
It will now be up to Greece’s central bank to provide its banks with ELA, a step it takes at its own risk, but over which the ECB’s policymaking Governing Council retains discretion.
“ELA should only be awarded for the short term and to solvent banks,” Weidmann, who is also chief of Germany’s Bundesbank, told business daily Boersen Zeitung in an interview published in its Thursday edition.
“I am of the view that we should apply strict standards with ELA. If that should have consequences for financial stability, then politicians must live up to their responsibilities,” he said.
“Governments and parliaments must take decisions about whether and how to keep banks afloat, or wind them up. After all, this can concern taxpayers’ money.”
Writing by Paul Carrel; editing by John Stonestreet