Saturday , February 15 2025
Home / News / Economy / Draghi signals Greek debt measure not enough for QE inclusion

Draghi signals Greek debt measure not enough for QE inclusion

European Central Bank President Mario Draghi effectively put an end to a debate about the inclusion of Greek bonds in the ECB’s asset-purchase program, saying commitments offered by creditors earlier this month still don’t provide sufficient clarity on the country’s future debt path.

The debt measures Greece adopted are “still insufficient to properly assess both their quantitative effect and the timing of their impact on the dynamics of Greece’s public debt,” Draghi wrote in a letter to Greek European Parliament member Nikolaos Chountis published on Monday. “Until sufficient detail has been provided on the debt measures, serious concerns persist regarding the sustainability of Greece’s public debt.”

The ECB has signaled that lack of clarity over debt relief would hinder its assessment of the sustainability of Greek debt, which is a pre-condition for considering the purchase of the country’s bonds under quantitative easing, currently scheduled to run until the end of 2017. Greece’s euro-area creditors agreed to release 8.5 billion euros ($9.5 billion) in new loans on June 15 but postponed until mid-2018 a binding decision on what measures they will provide to ease the country’s burden.

“The Governing Council will decide independently on whether and how to conduct purchases of Greek sovereign debt securities,” Draghi wrote in the letter. “The program has not been designed to target yield developments in individual euro-area countries.”

The government of Prime Minister Alexis Tsipras is counting on quantitative easing to aid Greece’s return to international debt markets. With economists seeing bond purchases being gradually tapered throughout 2018, the program will probably be nearing its conclusion when debt-relief details are announced.

“On the borrowing rate at which Greece could tap the markets without aggravating its debt prospects, kindly note that this does not depend only on the future interest rate,” Draghi wrote. “An improvement in growth prospects for the Greek economy would create the capacity to absorb a higher borrowing rate without having any detrimental effects on debt sustainability.” (Bloomberg)

Check Also

Greece gives official go-ahead to Chevron for hydrocarbon exploration in “Block A2” and “South of Peloponnese”

Greece’s Energy and Environment Ministry has officially given the green-light to a  proposal by Chevron …

4 comments

  1. The truth is that even if Draghi were convinced about the sustainability of the debt, he would still have been prevented by Germany from using QE on Greek bonds. Mild painkillers such as QE could slow down the demolition process.

  2. The poor little Italian is trying so hard to be taken seriously – what a joke he is.

  3. Greece needs to bite the bullet and just default.
    Germany has no intention of letting Greece recover until the Euro is in the clear. With fiascos like the Italian banking bailout still going on then Germany needs a scapegoat and an example of what will happen to other EU countries if they don’t comply with Germany’s demands.
    How long has the rescue of Greece been going on for now? Nearly ten years and nothing has improved, in fact the austerity is worse than ever. Why do Greeks keep believing life will get better?
    Everyone now accepts that Greece should have defaulted back at the beginning and left the Euro. The initial sharp pain would have been over and Greece well on the way back to recovery whilst the EU countries continued to kick the can.
    But Greeks will just continue to suck it up and take whatever punishment gets thrown at them.
    Greece, for your own sake, do something.

  4. Gee what a surprise. Same old, eh.
    One day soon Draghi and co will flee to Paraguay….