Thursday, June 2, 2016

ECB holds back on ultra-cheap loans to Greek banks

Financial Times
June 2, 2016

The European Central Bank has dealt a blow to Greece’s attempts to rehabilitate its ailing financial system, saying it would wait at least three more weeks before allowing Greek banks access to its ultra-cheap loans.

The delay came at Thursday’s ECB meeting in Vienna where policymakers left interest rates on hold even though they marginally raised forecasts for eurozone growth and inflation. The cautious stance defied market expectations of a more robust upgrade in economic projections.

Senior officials in Athens had believed the ECB governing council would use the Vienna meeting to reinstate a waiver that allows the central bank to accept Greek government bonds as collateral for their cheap loans, despite the bonds’ junk credit rating. Greek optimism stemmed from last week’s deal to release €7.5bn in EU bailout funds next month after a long stand-off.

Instead Mario Draghi, the ECB president, said while the council discussed the waiver, no decision would be made until Athens had completed all elements of the first review of its €86bn bailout, a prerequisite to getting the €7.5bn tranche.


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