ECB puts off decision on Greek access to cheap money

ECB puts off decision on Greek access to cheap money

The European Central Bank deferred giving Greece access to its cheap money on Thursday, saying it was waiting for Athens to resolve a number of issues with its international creditors before banks could re-access a lifeline cut off a year ago.

Thursday's decision, though expected after a brief setback in talks this week, saw Greek stocks extend earlier losses and fall 0.9 percent, with the banking stock index down 3.1 percent. The two-year Greek government bond yield rose.

Later Thursday, Greece's parliament had scheduled a vote designed to tie up those loose ends in creditor talks, clearing a last hurdle with creditors and allowing the payment of a tranche of bailout money.

While Greece is still rated ‘junk’ by credit agencies, the ECB cannot waive a its own requirement that government paper it accepts is investment grade, unless creditors deem the country fully compliant with its rescue program.

“Possibly at the next meeting of the ECB we could see a lifting of the waiver,” Greek Prime Minister Alexis Tsipras told his cabinet in comments broadcast live on state TV.

That is not expected for about three weeks.

At a news conference in Vienna, ECB President Mario Draghi said the bank had discussed the issue of reinstating the so-called ‘waiver,’ but said the bank was not ready to act yet.

“We had a presentation, we had no decision. The Governing Council acknowledges the significant progress made in the last few months,” Draghi said.

“Once the prior actions (under the bailout agreement) are implemented, the Governing Council will take a decision leading to the reinstatement of the waiver,” Draghi said.

Greece and its lenders wrapped up the bulk of reforms needed to get bailout cash last week, but left some loose ends which must be tied up before Athens gets 10.3 billion euros ($11.48 billion) of sub-tranches by September.

Later Thursday, parliament was expected to adopt further pension reforms and set a timetable for the sale of a stake in the country's power grid operator.

Greek banks lost access to the ECB's main refinancing operations in early 2015 when Athens refused to meet its bailout commitments, exacerbating its debt crisis and almost pushing the country out of the eurozone.

Since then, the lenders have relied on the ECB's Emergency Liquidity Assistance, where the average interest rate charged is estimated to be around 100 to 150 basis points above the ECB's benchmark interest rate.

“A small delay is not an issue,” said George Poulopoulos, chief financial officer (CFO) at Piraeus Bank, Greece's largest lender. “Once the Euro Working Group gives its clear signal on the prior actions it is expected that the waiver will be reinstated at the ECB's next governing council meeting.”


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