European Central Bank chief Mario Draghi sent on Thursday a clear message that Greece will have to fulfill its obligations with consistency and determination as stated in the agreed program for the country to benefit from Frankfurt’s favorable policies, and revealed that it was the ECB that insisted that depositors should not be hurt by the upcoming recapitalization of Greek banks.
Responding to a question from Kathimerini at a news conference, Draghi said that for the ECB to again start accepting junk-rated Greek bonds as collateral, thereby offering local lenders cheap liquidity, Greece not only has to be in a program, but to implement it with consistency.
He also noted that the Greek side must show “strong ownership [of the program] and consistent and significant implementation,” adding that “there will be some milestones that will be...assessed in the weeks ahead and based on that assessment the Governing Council will take a decision.” These prior actions have not yet been determined while the next assessment that should follow them is certain to be delayed due to the upcoming elections in Greece.
Draghi practically put off the return of Greek bonds as collateral for liquidity until after the first program assessment has been completed. This return constitutes a condition for Frankfurt to start buying Greek bonds in the context of its quantitative easing (QE) program, according to the ECB head.
Furthermore, as Draghi said in response to a Kathimerini question, there are three other conditions for Greece to benefit from the QE: The first is that there should not be a bailout assessment unfolding at the time, the second that the country’s limit in ECB-held bonds is adhered to, and the third that a Greek debt sustainability assessment is drafted showing that the country’s arrears are manageable.
Ahead of the upcoming recapitalization of banks, Draghi confirmed that it was the ECB which insisted at this summer’s crucial Eurogroup meeting that depositors in Greece be protected in a bail-in process.