The proposal of a precautionary credit line for Greece after the end of the bailout program this summer returned to the table on Monday, as the mission chief of the European Central Bank in Athens, Francesco Drudi, reiterated that this is the best option according to Frankfurt.
In fact sources from European capitals say that the ECB is not the only institution in favor of a credit line; this view is also shared by the European Stability Mechanism and the International Monetary Fund. This shows that the government is set to come under pressure in the coming weeks and months to review its position, which would of course banish any talk of a “clean exit.”
Drudi arrives in Athens on Tuesday to take part in the negotiations over the fourth review. In an interview with newspaper Naftemporiki he stated clearly that a properly determined program of a precautionary character with strict and efficient terms is required in order for the ECB to maintain the waiver that allows Greek banks to obtain cheap liquidity from Frankfurt using junk-rated Greek bonds as collateral.
He went on to explain that retaining the waiver will help during periods of increased financial market volatility, and is a condition for including Greek bonds in the ECB’s qualitative easing (QE) program. He added that a credible agreement after the completion of the program would contribute to preventing fluctuations in bank deposits, thereby facilitating the lifting of the capital controls.
While Drudi echoed the views and arguments of Bank of Greece Governor Yannis Stournaras, he avoided using the term “precautionary credit line,” referring instead to a precautionary program. This has left the door open for a possible compromise on a formula that would only differ from the precautionary credit line in name.
He added that the decision is entirely up to the Greek authorities, but the European Commission is already working on an “increased surveillance” framework; it is becoming increasingly clear that its terms will be so strict that they will hardly be any different to a new bailout agreement, while the country will lose the benefit of the credit line that would protect it from market volatility.