Analysts and rating agencies consider as “credit positive” last Thursday’s decision by the European Central Bank to continue supporting Greece, even after the expiry of its extraordinary bond-buying program. Frankfurt plans to offer Greece full coverage until it regains investment grade, cover the Greek state’s bond issues and continue providing cheap funding and support for its banks.
“This decision is hugely important, and de facto replaces the flexibility of the PEPP purchases,” LC Macro Advisors chief economist Lorenzo Codogno said in a note to investors. “If necessary, it allows ECB purchases to move away from the capital keys for a prolonged period. In other words, it guarantees an effective tool to counter fragmentation or, if you wish, an unwanted widening of yield spreads at the periphery once the PEPP expires,” he added.
Marko Mrsnik, senior director in the European Sovereign Ratings Group at S&P Global Ratings, tells Kathimerini that the ECB decision “will continue to benefit Greece’s access to funding at affordable rates and supports our view of Greece’s sovereign creditworthiness.” He points out at “in addition, Greece has substantial fiscal buffers including access to significant liquidity reserves (estimated at about 16% of GDP at year-end 2021) and the transfers of SMP/ANFA returns from the Eurosystem which both markedly reduce its borrowing needs. Moreover, we expect borrowing needs to decline as of 2022 on the back of the reduction in budget deficit.”
Deutsche Bank fixed income research director Ioannis Sokos comments that “the outcome is a good one for Greece simply because the ECB made explicit reference to Greece in the paragraph where it referred to flexibility around PEPP reinvestments. I think that should act as a protection in case the GGBs are tested and the market widens.”
HSBC economist Fabio Balboni agrees. “Perhaps more than the decision on reinvestments itself, what’s most important is Christine Lagarde noting that the mention of an individual country was ‘rare’ and it was a ‘strong signal’ supported by the whole Governing Council. To us, this constitutes the strongest possible signal that the ECB has no intention to leave Greece behind until the crisis has been fully overcome, which might well be enough to bridge the gap till the country regains investment grade,” he tells Kathimerini.