Central banker says precautionary credit line does not amount to new bailout

Central banker says precautionary credit line does not amount to new bailout

Greek central bank governor Yannis Stournaras reiterated on Wednesday his call for a precautionary credit line for Greece after it exits its adjustment program in August, saying it does not amount to a new bailout.

Stournaras said the precautionary arrangement would help the country borrow from the markets in a sustainable way.

"The precautionary credit line in no way amounts to a new memorandum," he said at an event of Greek alumni of the London School of Economics.

He argued it is "desirable" for the European Central Bank to maintain its "waiver" on Greek government bonds at a time when the spreads between Greek and main interest rates in the eurozone are on average more than 350 basis points (3.5 pct), influencing the borrowing costs of the government, businesses and households.

To keep the waiver, the country must agree on a precautionary credit line, he continued. "However, if the government does not want it, other ways to avoid losing the waiver will have to be explored," he said.

The central banker said Greece should create a significant "cash buffer" through the issue of new bonds, in conjunction with the disbursements of the European Stability Mechanism.

The government has repeatedly rejected Stournaras's view for the need of a precautionary credit scheme, fearing it would translate into new conditions from the country's creditors.

Greece returned to the markets in July 2017 achieving low borrowing costs in its first foray after three years. 

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