International companies for Greece are on hold
The rating agencies, indirectly but clearly, send messages to the Central Bank about the risk that Greece will face if it does not continue to buy bonds, at a time when the statements of ECB officials lower expectations. (RES)
Time has begun and it is counting down to her decision Central Bank for Greece and whether it will somehow continue to buy Greek bonds after the end of the emergency PEPP program. The debate is slowly moving away from what form this support may take and whether it will only exist in the end, with analysts estimating that the issue of Greece may not be considered in December but in January.
The rating agencies indirectly but clearly send messages to the central bank about the risk that Greece will be faced if the bond markets do not continue, at a time when the statements of ECB officials lower expectations. What is certain is that the “black” picture on the front of the pandemic, with the eruption of concerns about the development with the new South African variant, complicates things and complicates the puzzle for the ECB, most likely pushing it to maintain a waiting attitude and not to rush to declare the end of the crisis, which is “defined” by the end of the PEPP.
The statements of ECB member Isabelle Schnabel last week – who is also considered the favorite for Jens Weidmann’s position in the Bundesbank and takes a softer stance than that of the outgoing German central banker but does not side with the “pigeons” -, cast “shadows” on the optimism that has existed so far, as foreign analysts have long widely estimated that Greece will receive a new waiver (exemption) from the central bank and will participate in another form of quantitative easing after PEPP – of which the expiration is now “set” for March 2022. As he said, “Greece benefits a lot from the markets with PEPP. In the future there will continue to be a significant market presence with PEPP due to reinvestment. It remains to be seen whether this will be enough. “
Analysts interpret these statements as a message that the German economist is not in favor of including Greek government bonds in the “normal” QE and that the ECB will give weight to the reinvestment program.
And Snabel is not alone. Leading economist and ECB Executive Board member Philip Lane, who is clearly in the “pigeon” camp, is also more important in supporting Greece from PEPP reinvestments by the end of 2023 and not at all at the end of 2023 The central bank will continue to accept Greek bonds in the post-PEPP era.
Analysts estimate that the issue of Greece may not be considered in December but in January.
The “silence” observed by S&P and Moody’s during their recent scheduled ratings for Greece, at the time of the upgrade purchase, is largely due to the fact that this final ECB verdict is “pending” and it has become clear that reinvestment is not enough. to support the upward trajectory of the country’s ratings.
Citi had explained the “silence” of S&P during the scheduled evaluation in October, saying that the house will wait, among other things, for the ECB’s decisions on the post-eligibility of Greece’s PEPP. Société Generale has stressed that one of the “keys” for the upgrades of Greece is hidden in the attitude of the ESF.
Moody’s in a new report makes it clear why it did not publish its scheduled assessment for Greece on November 19, sending an indirect but clear message to the ECB: the possible end of the PEPP, which will happen by the end of March 2022 at the earliest to cause instability in the cost of borrowing in Greece and in the cost of debt service, with the demand for Greek debt in the markets being lower than the optimal for the financing needs of the state, he emphasizes. Thus, “the ECB decision on Greek bonds in 2022 is crucial and may not have an impact on borrowing costs,” he said.
From the above it is clear that an “unnecessary” from the ECB – as Capital Economics has characterized it – is in danger of derailing the progress that Greece is making and the stability that it has made a mistake, at a time when it is a matter of time – until the beginning of 2023 – to regain the investment level anyway, which makes the choice in quantitative easing. The “battle” with the “hawks” must be won.