Draghi rules out QE and waiver extension for Greece
European Central Bank President Mario Draghi on Thursday put a definitive end to any hopes of Greece’s inclusion in the bond-buying program (QE) and the extension of the waiver that allows Greek debt to be accepted as collateral for regular auctions of ECB cash, despite the junk rating of Greek bonds.
In a press conference after Thursday’s ECB Governing Council meeting, the Italian banker said that “Greek state bonds are not eligible for QE as that would require the waiver. The waiver for Greek bonds expires upon the end of the program.”
Draghi’s comments earlier this month at the European Parliament’s Economic and Monetary Affairs Committee had led some international firms, such as HSBC, to believe there may be a window of opportunity for Greece to enter the ECB’s quantitative easing program. However, the Eurogroup meeting heard ECB Governing Council member Benoit Coeure extinguish any expectations that had been created. The pretext for his intervention was the unilateral extension of the value-added tax discount on five Greek islands, which has changed the timetable for the disbursement of the final bailout installment.
ECB officials have repeatedly stressed that the waiver would remain in place only if the government chose a precautionary credit line after the conclusion of the program, instead of enhanced surveillance.
Credit Suisse noted that the choice of enhanced surveillance has some key disadvantages, including the loss of the waiver that otherwise would have granted Greek banks cheaper central bank money.
However, according to Standard & Poor’s, the fact that the financing of Greek credit institutions is relatively small, amounting to about 4 billion euros, the local banking sector is not expected to face a major problem upon the loss of the waiver.
Draghi further welcomed the progress that Greece has made regarding the conclusion of the bailout program and ended the press conference expressing the ECB Governing Council’s solidarity with Greece for the drama it faces with the forest fires.