The ECB’s mission chief in Greece, Francesco Drudi, has called for a precautionary credit line “with strict and effective” conditions to make sure that Greece sticks to sound policies after exiting the bailout program this summer, adding that a credit line would help prevent volatility in bank deposits.
In an interview with Naftemporiki newspaper, Drudi said that continued commitment to reforms was the only way that Greece can achieve a return to sustained growth.
“A strong post program framework would also reduce risks stemming from unexpected shocks,” the ECB official added.
“From a monetary policy perspective, it is important to keep in mind that a well-defined program (also of a precautionary nature) with strict and effective conditionality needs to be in place for the ECB to maintain its waiver on the eligibility of Greek government bonds while credit ratings remain below investment grade,” he said.
Drudi said that a precautionary support framework would also prevent volatility in deposits which would in turn facilitate the relaxation of capital restrictions introduced since the summer of 2015. He added that it could enable Greece’s inclusion in the ECB’s quantitative easing (QE) program.
However, the ECB official said it was crucial that in the post-bailout era, Greece has the full ownership of reforms.
“The decision on whether to apply for a precautionary program should therefore fully rest in the hands of the Greek authorities,” he said.