ECB talks tough on state bonds

Senior European Central Bank officials said on Friday that the lender will not be buying any Greek bonds this month as part of its expected bond acquisition program and will definitely not have Greece’s debt to Frankfurt restructured, as poll-leading party SYRIZA has championed.

Greek government debt purchased by the ECB to help Greece during the sovereign debt crisis cannot be restructured, Executive Board member Benoit Coeure said in an interview with France 24 TV station.

“It is illegal and contrary to the treaty to reschedule a debt of a state held by a central bank. The European treaties are very clear on this,” Coeure told the station. He also said discussions about a possible Greek exit from the euro made “no sense.”

Another Executive Board member, Ardo Hansson, stated on Friday that Frankfurt will delay the announcement of its quantitative easing (QE) measures, adding that the results of the recent moves by the eurozone’s central lender have not yet been fully assessed and that the political conditions in Greece make the acquisition of state bonds even more difficult. Any bond-buying program to be announced this month will not concern Greek state debt, he added.

Meanwhile Finance Minister Gikas Hardouvelis attempted to allay fears of a post-election bank run in Greece, although the outflow of deposits from Greek lenders has been significant in the last few weeks and political uncertainty could hamper the country’s nascent economic recovery.

Hardouvelis told The Wall Street Journal that “the probability of a bank run is very small, the public understands that deposits are safe.” However he did add that as the election campaign is still in its early stages, “we have to watch depositors’ behavior very carefully.” Some 3.5 billion euros have been removed from Greek bank accounts since November, according to bank estimates, but the minister added that the sum “is small compared with the roughly 70 billion euros that have fled Greeks banks over the past five years.”

On the impact of uncertainty on the economic recovery, he warned that “if you lose the first quarter of the year, where the economy could have taken off, and then perhaps the second quarter, that gives you half the growth that you would have otherwise had.”