FRANKFURT — As Athens and Brussels engage in a showdown over Greek debt, the ultimate power broker may reside in neither of those European capitals.
Instead, the outcome may largely be determined in Frankfurt, where Mario Draghi presides over the European Central Bank.
The new leftist-led Greek government, facing a Friday deadline for coming to terms or risking a cutoff of loan money, plans to submit a new proposal on Thursday. Depending on the specifics, it might receive no better reception from eurozone finance ministers than previous Greek proposals in recent weeks.
But the ability of Greece and its banks to remain solvent could depend just as much on Mr. Draghi and a series of decisions by the European Central Bank that might determine the financial fate of Greece — and perhaps the future of the entire 19-country currency union.
With political leaders deadlocked, it will be up to Mr. Draghi and the central bank’s Governing Council to decide whether to keep struggling Greek banks afloat. The decision could amount to a verdict on whether the Greek government can avoid financial collapse, continue to service its debts and remain a member of the currency bloc.
–
”If the E.C.B. believes one of the banks is insolvent or undercapitalized, then they would have to pull the trigger,” said Nicolas Véron, a senior fellow at Bruegel, a research organization in Brussels. “But we are not there yet, and I don’t see we would be there very soon.”
The consequences of cutting off aid would be dire. The government would have to impose capital controls to keep money from fleeing the country. The economy would get even worse. Greece might have to leave the euro.
Mr. Draghi certainly does not want to go down in history as the person who set in motion forces that drove Greece from the eurozone. But a prolonged political stalemate could leave him and the central bank’s Governing Council no choice.
An earlier version of this article misstated the bank that the E.C.B. determined had only a relatively small capital shortfall. It was Eurobank, not the National Bank of Greece.
Niki Kitsantonis contributed reporting from Athens.
