The European Central Bank (ECB) would not agree to Greece issuing more short-term debt, because that would be tantamount to it illegally financing the Greek government, ECB executive board member Benoit Coeure said in a German newspaper interview on Saturday.
Echoing comments from ECB President Mario Draghi, Coeure told the Frankfurter Allgemeine Sonntagszeitung in comments set to be published yesterday that the ECB would not allow Greece to raise a limit on issuance of short-term debt so that leftist Greek Prime Minister Alexis Tsipras can avert a funding crunch.
“The ECB cannot finance the Greek government,” Coeure said. “We’re not allowed to do that. That is illegal.”
On Thursday, Draghi said the ECB would resume normal lending to Greek banks only when it sees Athens is complying with its bailout program and is on track to get a favorable review.
He also made clear the eurozone bank would not raise a limit on Athens’ issuance of short-term debt to help Tsipras’ government, since the EU treaty barred monetary financing of governments.
The tough line, spelled out after the ECB’s policymaking governing council met in Cyprus, added to pressure on Greece’s radical new rulers to implement promised reforms under a bailout they had vowed to scrap, but were forced to extend for four months to avoid running out of money.
Coeure also told the German newspaper that the ECB would not accept more T-bills as collateral as long as Greece has no market access.
“If, in the current situation in which Greece has no market access, we were to accept more Greek [short-term] T-bills as collateral, that would clearly be state financing. We won’t do that. We can’t violate our treaty for Greece,” he said.
Lenders in Greece were forced to draw 5.2 billion euros (US$5.6 billion) in emergency liquidity assistance from the Bank of Greece in January after nearly zero in December last year. The assistance is expected to have increased sharply last month after the ECB stopped accepting Greek government bonds as collateral for funding on Feb. 4, shifting the burden onto Greece’s central bank to finance its lenders.
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