Greece secured two vital sources of liquidity from the European Union on Thursday that will help it to rebound next year: the extension of the European Central Bank’s extraordinary bond-buying program (PEPP) and the unblocking of the Next Generation EU fund following the agreement of the majority of EU states with Hungary and Poland.
Frankfurt has expanded its program against the pandemic’s impact by another 500 billion euros to reach €1.85 trillion and extended its application for another nine months – i.e. until March 2022. Furthermore, reinvestments will continue until at least the end of 2023.
For Greece, the quantitative easing measures that have applied since last April and which allow its bonds to be accepted as collateral despite their “junk” status will be extended until June 2022. Still, when asked on Thursday what will happen with the Greek bonds once the PEPP program expires, ECB head Christine Lagarde only said the matter had not been discussed at the lender’s Executive Board meeting.
According to a senior Finance Ministry official, these decisions “secure a certain source of demand for whatever issue we make next year.”
Besides Frankfurt, there was good news coming from Brussels too, as the European Council meeting confirmed that the impasse from the Hungarian and Polish veto is over. This has opened the way for the financing from the Next Generation EU fund and the implementation of the bloc’s seven-year budget.
The lifting of the uncertainty, a banking source said on Thursday, is leading to the government’s baseline scenario for the start of inflows over the second half of next year. The only question that remains now concerns the loans from the fund, amounting to about €13 billion.
The government’s proposal for the use of those resources for credit for private investments (provided that they are at least 50% financed through bank loans and private capital) has not yet received an approval. This would constitute a novelty for the European Commission too, sources say, as other countries might follow that example.