Greece’s entry into the European Central Bank’s quantitative easing (QE) program keeps getting put off, just as criticism is mounting over the effectiveness of the bond-buying program and the potential legal hazards for Frankfurt – concerns that are doing nothing to make it easier for the country to get on board.
The constant delays in the completion of the second bailout review, which should have been completed by February 2016, are putting the credibility of both Greece and the ECB in doubt, with some countries arguing that this effectively rules Greece out for the program, which could even lead to the lifting of the waiver that allows Greek bonds to be accepted as collateral for ECB liquidity to banks. That would be a very negative development as it would generate a new cycle of uncertainty in Greece, along with more pressure on banks and the economy.
According to the minutes of a recent ECB Governing Council meeting in Frankfurt, concerns were expressed about the possible legal risks stemming from extensive bond acquisitions. This creates worries that additional concerns may be raised about Greece by ECB members given the country’s troubled history and its limited credibility, thereby further delaying the buying of Greek bonds even in the case that Athens fulfills the necessary conditions.
Notably, even if the second bailout review were to be completed immediately – which is highly doubtful – the country’s inclusion in the QE program will not be automatic, as the ECB does not consider the short-term measures to ease Greece’s debts sufficient, and is asking for additional moves to be convinced about the sustainability of the Greek debt.
However, it is particularly unlikely that the medium-term measures for reducing Greece’s debt will be activated anytime soon, as certain countries have expressed strong opposition. Athens is hoping that measures will be presented which will be activated at some point in the future, allowing the ECB to give the green light for the acquisition of Greek bonds. Therefore the inclusion of Greece in the QE program before summer appears particularly difficult.