ECB raises emergency funding for Greek banks - sources

The move is the third day in a row that the ECB has sanctioned additional funding.

The Prime Minister of Greece Alexis Tsipras leaving at the end of a special EU Euro Summit about the Greek crisis held at the EU Council building in Brussels on 23 June 2015. Picture: AFP.

FRANKFURT/ATHENS - The European Central Bank (ECB) increased its funding lifeline to Greece's banks again on Tuesday, sources with direct knowledge of the decision said, allowing the country's banks to stay open as Athens inches towards a deal with creditors.

The latest increase amounted to "a bit less than one billion euros," one of the people told Reuters. This raises the value of the ECB's emergency liquidity assistance (ELA) programme to around €89 billion ($100 billion).

"This is following the positive signal from the leaders' summit meeting," the person said. Two further sources confirmed that the limit had been increased.

The move, which is the third day in a row that the ECB has sanctioned additional funding, follows Athens' presentation on Monday of new budget proposals.

However, Greek lawmakers reacted angrily on Tuesday to concessions Athens offered in debt talks and parliament's deputy speaker warned the proposals would struggle to win approval, puncturing optimism that a deal to lift Greece out of crisis might be quickly sealed.

European leaders on Monday welcomed the new budget proposals from Athens as a basis for a possible agreement to unlock frozen aid and avert a default that could trigger a Greek exit from the euro zone.

Stock markets also welcomed the plan, with European shares extending the previous session's sharp rally and climbing to a three-week high on Tuesday, with growing expectations that Greece was getting closer to striking a deal.

But Prime Minister Alexis Tsipras, who was voted into office in January on a pledge to roll back years of austerity in a country battered by recession, must keep his leftist Syriza party as well as his creditors onside for a deal to stick.

"I believe that this programme as we see it ... is difficult to pass by us," Deputy parliament speaker and Syriza lawmaker Alexis Mitropoulos told Greek Mega TV on a morning news show.

If parliament does fail to back the latest offer, which included higher taxes and welfare changes and steps to curtail early retirement, Tsipras might be forced to call a snap election or a referendum that would prolong the uncertainty.

Athens urgently needs money to avoid defaulting next week on a €1.6 billion loan to the International Monetary Fund, while jitters over the health of Greece's banks have prompted savers to pull billions of euros out of their accounts.

European Council President Donald Tusk, who chaired an emergency summit of leaders of the 19-nation currency bloc, called the Greek proposals "a positive step forward". He said the aim was to have the Eurogroup finance ministers approve a reform package on Wednesday evening and put it to euro zone leaders for final endorsement on Thursday morning.

But German Chancellor Angela Merkel, whose country is Greece's biggest creditor, was more cautious, saying there were no guarantees that a final agreement could be reached.

Greek newspapers on Tuesday saw a deal in sight but warned that, with the exact terms not finalised, the creditors could ask for tougher measures.

"The deal is not only visible but there are sound expectations that it will be concluded in the next days," Greek daily Ethnos said. "While this dissipates reasonable fears of catastrophic consequences in the event of a failure in the negotiations, the difficulties are ahead of us."

One difficulty "is approving the agreement in parliament without reactions from lawmakers in the two ruling parties that could ... upset the government's stability."