The European Central Bank’s decision on Thursday to drop a gear in its extraordinary bond-buying program (PEPP) does not affect Greece at all, Greek central banker and ECB Governing Council member Yannis Stournaras told Kathimerini, adding that it is unlikely Frankfurt will stop supporting Greece.
The ECB decided that the eurozone economy has posted a significant recovery from the 2020 recession, leading Frankfurt to adjust its growth and inflation forecasts higher, and ease its pace of bond buying in the fourth quarter of the year. Therefore, said ECB head Christine Lagarde, the bank has chosen a recalibration, which by no means constitutes tapering: “The lady isn’t tapering,” she stated, paraphrasing former UK prime minister Margaret Thatcher.
Stournaras also underscored to Kathimerini that this is not tapering the PEPP: “I consider it a marginal adjustment owing to the improvement of conditions,” he said, with markets in the eurozone also reacting positively to the ECB announcements.
According to Stournaras, the ECB decision does not affect Greece at all. He went on to express confidence that Frankfurt will not end its support to Greece after the end of PEPP or the expiry of the waiver (in June 2022) that allows Greek banks to borrow cheap cash using Greek bonds as collateral despite them not being investment-grade.
“I do not consider it possible that the ECB will abandon us as long as we follow the right economic policy. In any case, that will be discussed and decided later at the Governing Council,” Stournaras told Kathimerini.
Asked during Thursday’s press conference about Greece’s case, Lagarde stated it is premature to discuss it yet and that in December it will be considered. Lagarde further said it has not yet been decided how the ECB will move in general after the end of the PEPP, and whether some of its flexible dimensions will be maintained, reiterating this will be discussed in December. Lagarde added the ECB will continue until December to make purchases with flexibility, heeding market moves.
Analysts do estimate that, once PEPP is over, Frankfurt will considerably raise the pace of bond purchases through its conventional quantitative easing (QE) program.