ECB Has The Tools to Deal with Greek Vote Result, Says Vice-President

        By Liis Kangsepp
        VILNIUS, Lithuania--The European Central Bank has the tools to deal with any situation that may emerge from Greece's looming referendum, the bank's vice-president Vitor Constancio said on Friday, although he declined to speculate how a "no" vote could affect the eurozone or the ECB's lending facilities for Greece.
        Greek citizens are due to vote Sunday on whether to accept or reject economic and fiscal policy demands set out last week by institutions that oversaw the country's now-expired bailout, which include the ECB, the International Monetary Fund and European Commission.
        "The referendum is relevant exclusively for us because it affects the probabilities of an agreement regarding financial assistance adjustment in Greece," Mr. Constancio said at a news conference on the sidelines of a conference here. "If there is a 'no' result then it will be more difficult for such an agreement to be reached and that has consequences for our analysis and decisions. If the result will be 'yes,' then it's the opposite--it makes it easier to come to an agreement. That's the only aspect that counts for us, no other interpretations are relevant for us."
        He said that it was difficult to speculate on scenarios in case of a 'no' vote, but that coming to an agreement with the Greece government will become more difficult and take longer. "ThaEURt of course would imply that the situation also in Greece becomes more difficult because the situation of banks will become weaker, if an agreement is not possible in short period of time," he said.
        This would have implications on the ECB's assessment of the condition of Greece's banking sector, he said. "It's also very difficult to anticipate the reactions of markets, they will be important in determining the consequences," he added.
        But he stressed that the ECB can cushion any fallout from developments in Greece.
        "I think that we have at the level of the ECB, of the eurosystem, enough instruments to deal with any situation that may emerge in order to mitigate possible negative effects of the euro area as whole," he said. The eurosystem includes the 19 central banks that make up the euro.
        On Sunday, the ECB decided to freeze the amount of emergency loans it provides to Greek banks at about EUR89 billion ($99 billion). Without more central bank loans, Greek banks have been closed this week and a limit of EUR60 has been set on daily ATM withdrawals.
        Mr. Constancio declined to speculate on how a 'no' vote in the referendum would affect these loans.
        "We will have to wait and see how the governing council as whole will analyze the situation," Mr. Constancio said, adding that the ECB is prepared to use its instruments "fully in any situation that may emerge in Greece."
        (END) Dow Jones Newswires

        July 03, 2015 06:44 ET (10:44 GMT)

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