The European Central Bank's asset purchase program that was announced yesterday raised hopes that much needed liquidity would return to Eurozone economies.
Asset-backed securities are created by banks pooling mortgages and corporate, auto or credit card loans and selling them to insurers, pension funds or now the ECB. The purpose of the program is to pump money into the economy by expanding the ECB’s balance sheet.
However for Greece the scheme may actually prove an additional hurdle to the government’s plans to attempt to exit the Memorandum ahead of schedule, according to reporting by Bloomberg.
That is because for countries with low credit ratings to be eligible in the program – namely Greece and Cyprus - they will have remain under economic surveillance, according to the plan laid out by ECB president Mario Draghi at yesterday’s meeting with policy makers in Naples.
According to Bloomberg citing a central bank official, “Policy makers meeting in Naples yesterday were resolute that Greece should stay under economic surveillance to be eligible.”
It is known that several countries - Germany in particular – were opposed to the ECB buying securities of a lower standard than it usually requires, which would be the case for Greek banks making use of the program.
Both Greece and Cyprus have credit ratings that are below investment grade. According to the statements made by Draghi, the ECB will only buy securities in countries with credit ratings below BBB- if they are subject to bailout conditions.
Analysts cited by Bloomberg interpreted the caveat for Greece as a direct warning to Samaras against an early exit from