Bundesbank President and ECB Council Member Axel Weber told reporters yesterday that the central bank could in the future accept as collateral in its refinancing operations government securities rated lower than the cut-off threshold (currently BBB minus, and back to A minus from the start of next year).
Here comes the monetary support! This reduces the problem for Greece with short-term borrowing from the ECB so that if the rating agencies take them down below investment grade they can get some funding with their collateral. Of course, there will be a higher haircut, but it would still be the best deal in town.
The pro for this change in policy would be potential relief for Greece. The con is that the ECB will be providing funds from its balance sheet which subverts it focus on price stability.
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