The European Central Bank will offer threefold support to Greece after the end of the extraordinary quantitative easing program (PEPP) in March, and despite Greece’s exclusion from the conventional QE program (APP), Frankfurt will reserve the option of purchasing Greek bonds worth at least 20 billion euros and therefore cover the Greek state’s issuing activity, sending a strong and clear message to markets.
That support will come through the extension of the bond reinvestment period, the flexibility that the reinvestment will have, and the possibility of reactivating the PEPP if required. Importantly, all ECB Governing Council members were in favor of that support to Greece, thanks to the systematic work by all Bank of Greece officials involved over the last six months.
‘This is a very strong signal for Greece,” said ECB chief Christine Lagarde at a press conference, noting that the country “has clearly recorded great progress, especially at the front of reforms, and its credit rating has improved considerably.” In the statement about its decisions at the council meeting, the ECB referred specifically to Greece, which was due to the country not enjoying investment grade yet, as Lagarde explained.
Frankfurt has therefore decided to extend the period of reinvesting the capital from bonds acquired during the PEPP after their maturity until the end of 2024, compared to the previous deadline of 2023, thereby extending its support to Greece.
It further clarified that reinvestments can be made with an emphasis on Greek bonds, meaning it will acquire Greek debt even using capital from other countries’ bonds that mature.
The third means of support is via the possibility of reactivating the PEPP: “Net purchases in the context of the PEPP could resume if that is deemed necessary, in order to tackle any negative effects related to the pandemic,” the ECB stated. That must follow an ECB board decision, and there is no limit to the funds that could be used then.