Greek central bank chief: ECB should keep waiver on Greek bonds post-bailout

By George Georgiopoulos

ATHENS (Reuters) – The European Central Bank should maintain its “waiver” on Greek government bonds, continuing to accept them as collateral even if they stay sub-investment grade after the country exits its bailout, Greece’s central bank chief said on Wednesday.

The ECB reinstated its so-called waiver on Greek government paper in June 2016, enabling Greek banks to access cheap funding. Athens expects to exit its third international bailout in August and rely on financial markets for borrowing.

One of the prerequisites for the ECB’s waiver on sub-investment grade paper is for the issuing country to be under a supervised financial assistance program.

“The main issue in the coming months is the improvement of the country’s credit rating, which will allow the Greek state to return to markets on a sustainable basis after the end of the (bailout) program in August 2018,” Yannis Stournaras, head of the Bank of Greece, said in a speech at the London School of Economics.

He said that for this to happen, Athens’ European partners must specify the medium-term debt relief measures they have promised to render its debt viable, adding that remaining capital controls should be lifted after the bailout exit.

Stournaras stressed the need for an adequate liquidity cushion built via new bond issues before Athens exits the program and said that keeping the ECB waiver on Greek bonds would be helpful.

“It would reduce the cost of funding for Greek banks, both from the ECB and through repo transactions,” he said.

“The maintenance of the waiver for as long as the country’s credit rating remains considerably sub-investment grade is desirable,” Stournaras said.

The central banker projected that the Greek economy’s recovery will pick up this year with growth accelerating to 2.0 percent from 1.4 percent last year.

Greece has received 260 billion euros in financial aid since 2010, and its third bailout expires in August. Athens is eager to show it can stand on its own feet in accessing new money.

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