Brussels, 16/07/2015 (Agence Europe) - The European Central Bank (ECB) says there is a window of opportunity at the moment, subject to respect of strict conditions, for Greece to benefit from quantitative easing ahead of the summer break (QE is the ECB's purchase of public and sovereign bonds).
At the end of July, Greece needs to repay to the ECB some of the Greek bonds that the ECB bought in the previous SMP programme. The president of the ECB, Mario Draghi, said after a meeting of the Governing Council on Thursday 16 July that when Greece comes to repay the SMP bonds in July: “There will be some room for QE.” He explained that the bank is already doing QE for Cyprus.
ECB vice-president Vítor Costâncio said that two conditions would apply to a country like Greece whose public debt rating is below a certain minimum: “It has to be under an EU/IMF programme, and there has to be credible compliance with the programme. The ECB will have to assess this compliance, and this may come at the end of the first review, although there is the possibility to review it before, at the discretion of the ECB.”
On Thursday, the ECB gave the Greek banking sector some oxygen by raising the emergency lending threshold (ELA) by €900 million in a week (see related article).
Through the QE launched in March 2015 (see EUROPE 11268 and 11236), the ECB had bought €216 billion of pubic bonds as at 10 July. “The asset purchase programmes continues to proceed smoothly. Our monthly asset purchases of €60 billion are intended to run until the end of September 2016 and, in any case, until we see a sustained adjustment in the path of inflation that is consistent with our aim of achieving inflation rates below, but close to, 2% over the medium term,” said Draghi, adding that in order to smooth out the effect of the slackening of business in August, more securities had been bought in the run-up to the summer break, to the tune of €3 billion in May and June.
In response to a reporter who asked about the recent amendment to the list of public bodies, such as Italy's electricity company ENEL, whose shares may be bought under QE, Draghi said the list was not carved in stone and had been the subject of strategic reflection at the ECB. Draghi, the former governor of the Bank of Italy, said that they didn't want to include private companies because that would make it a totally different programme.
The ECB says QE is needed to support recovery in the eurozone which is continuing to take root, despite the recent turbulence around Greece. The medium-term inflation prospects confirm the bank's analysis.
Boosting EMU. Quizzed about the impact on the euro of Germany's questioning of the integrity of the eurozone (see EUROPE 11358), Draghi called for decisive institutional integration between countries in the euro. Talking about the recent eurozone summit, he said: “Discussions have shown that this economic and monetary union is imperfect, vulnerable, and does not deliver all the benefits it could if it would. There is a need for decisive action on further integration” in the form of completion of monetary union and progress on a Capital Union.
The ECB decided to keep interest rates unchanged with the major refinancing rate staying at 0.05%, the marginal loan facility at 0.3% and the deposit facility at -0.2%. (Mathieu Bion)