ECB said to be unlikely to include Greece in QE in coming months

TheEuropeanCentralBank /

Bloomberg — The European Central Bank is unlikely to include Greek bonds in its asset-purchase program for the foreseeable future, a person familiar with the matter said, as European creditors aren’t prepared to offer substantially easier repayment terms on bailout loans to improve the nation’s debt outlook.

Euro-area finance ministers will meet in Luxembourg on June 15 to discuss debt-relief measures that the ECB has said are needed before it will consider purchasing Greek bonds. The Eurogroup is expected to complete a review of Athens’s rescue program that would allow for the disbursement of 7.4 billion euros in aid needed for loan repayments in July.

And while the government of Prime Minister Alexis Tsipras is relying on quantitative easing to aid Greece’s return to the public debt market, the ECB won’t factor fiscal consequences into its policy-making decisions. 

An ECB spokesperson referred to recent comments by ECB Executive Board member Benoit Coeure and ECB President Mario Draghi on the institution’s approach toward inclusion of Greece in QE.

The ECB’s quantitative easing is scheduled to continue until December 2017, with economists saying purchases will be gradually tapered throughout 2018. This would leave little time for purchases of Greek bonds before the program’s end.

Meanwhile, France, which is trying to bridge differences on the debt issue, has proposed automatically reducing loan repayments when Greece misses growth targets, according to two people with knowledge of the talks. European officials see the proposal as a step in the right direction but doubt it will be enough to convince the ECB to include Greece in its bond purchase program if the IMF maintains its position that the country’s debt is unsustainable. Other euro-area member states so far have opposed France’s proposal, the people said.

French Finance Minister Bruno Le Maire, after meeting with his Greek counterpart Euclid Tsakalotos in Athens on Monday, said they were doing their best to reach an accord with the other countries on Greece and said they weren’t far from achieving a deal.

“It’s time to move with the next disbursement, because this uncertainty, which is dragging on, is already starting to negatively affect the Greek economy and there is no objective basis for this,” Valdis Dombrovskis, the European Union commissioner in charge of financial services policy, said last week. “It’s important to conclude the second review and to move ahead with the next disbursement.”