European Central Bank's Nowotny: If Greece Misses Payment, Funds Will Be Cut Off

By Nicole Lundeen 

        VIENNA--The European Central Bank will be forced to cut off liquidity to Greece should the Mediterranean country miss its July 20 deadline to pay back the central bank, a member of the ECB's governing council said Monday night.
        "That would be a state bankruptcy, a default in English," Ewald Nowotny said in an interview with Austrian state television news program ZiB 2. "In this situation, it would no longer be possible for the ECB to provide further liquidity."
        A decision on how to solve Greece's financial problems needs to come quickly as the country's economy can't just be frozen, he added.
        "Money flows are needed to function," Mr. Nowotny said, adding that Tuesday's talks are very important and that a sense of being able to reach an agreement is necessary.
        Even if Greece and its creditors are able to come to an agreement before July 20 on a third bailout package under the European Stability Mechanism, it is unlikely that the bailout fund could be tapped by then as any agreement would need to approved by parliaments in several eurozone member countries. In this case, one current discussion is whether the ECB could provide Greece with money through a bridge program in anticipation of the payments to be made by the ESM, Mr. Nowotny said. "Whether that's possible is a point that needs to be discussed," he added.
        Should Greece decide to issue IOUs to pay its bills, it would be a measure that would only work for a week or two at the most, Mr. Nowotny said. The IOUs "aren't a replacements for a currency," he said.
        Asked whether Greece could use its 10-euro printing press to print the money it needs, Mr. Nowotny said the printing of euros without permission from the ECB would be a criminal act with the result that Greece would leave the eurozone and the European Union as well, which "isn't in Greece's interest."
        Write to Nicole Lundeen at nicole.lundeen@wsj.com
        (END) Dow Jones Newswires

        July 06, 2015 18:28 ET (22:28 GMT)

#FX
#Forex
#SaleForex
#Vienna
#ECB
#Nowotny
#GreecePayment
#CutOff
#Funds