Sunday 10 October 2021, 00:00
An important victory of the Greek economy is “shown” by the statements of Giannis Stournaras to the Bloomberg agency. The Governor of the Bank of Greece stated that the European Central Bank will consider the continuation of the Greek securities markets after the end of the PEPP in March 2022. The issue of Greece will be addressed when the time comes.
The… time will come on December 16, when “hawks” and “pigeons”, North and South, will face each other in Frankfurt, in a crucial meeting that will decide the end of the extraordinary bond market program (QE Pandemic or PEPP) in March 2022. For Greece, the most important decision will be the one that will concern the “bridge”, in the program that will be valid from April 2022 and will treat the Greek titles, which normally do not participate in the ESF programs because our country has a lower rating than the investment grade.
All omens are positive today for Greece and it seems that Greek bonds will continue to participate in any program succeeding PEPP, fully confirming Liberal.gr, which since December 2020 has repeatedly transmitted information, according to existing ESF has no proposal to detach Greece from the liquidity line that applies to the entire Eurozone, essentially considering that Greece has secured the “investment grade”.
The first reason for this is the pandemic emergency and the need for a smooth recovery and equal treatment of member countries. Also, the ESF is obliged to take measures against speculation in Greek bonds. As G. Stournaras said, the members of the ECB will try to decide every provision after the end of the extraordinary program of 1.85 trillion. euro, which was implemented to address the sell-off in the bonds of heavily indebted countries.
The second reason is that Europeans believe that the pandemic had not broken out, the Greek economy today would have been upgraded to an investment grade and would have participated normally in QE.
This development will greatly facilitate both the Greek government and the new ones as the bond spreads will remain at a very low level for a long time, maintaining the environment of favorable financial conditions.
In order for Greece to participate in the “hybrid” program of 2022, the waiver must be decided by the ECB, ie the exceptional acceptance of Greek securities as a pledge. “We find it difficult to understand that I can not resign in Greece, if it was agreed, at the December meeting or at the latest in the January meeting, to implement a retention mechanism,” Citi said in a note the day before yesterday.
The most probable scenario remains that the Greek securities will participate permanently in QE or as it will be called the program that will be valid after March 2022 and until the country is upgraded to the investment level.
In addition, Citi believes that if the ESF has not decided either to expand the APP or to implement a new hybrid QE, which will tap into the APP containing some of the flexibility of the PEPP, the central bank’s assessment will be affected. This is because the belief that there should be a mechanism to support the government securities of the Eurozone and especially the countries of the periphery is dominant in the market, at a time when the ECB itself forecasts inflation in 2024 to be lower than the 2% target.