FXStreet (Guatemala) – Analysts at Rabobank explained that Draghi repeatedly stressed that any agreement between Greece and its creditor needs to be “strong”, meaning that it should be fiscally sustainable, whilst promoting growth, equality and social fairness.
Key Quotes:
“Such reforms should be done sooner rather than later, he emphasised, for the reason we’re still talking about Greece today is that there has been a huge difference between the design of the programmes and the subsequent implementation.”
“There was still something new to learn this afternoon, however. Asked about the circumstances under which the ECB would raise the ceiling for Greek T-bills (currently at c. EUR 15bn in total size and EUR3b for what Greek banks can hold of this), Draghi answered that there should be a credible perspective for a successful conclusion of the current review, plus a new disbursement of bailout aid. While this addition may only be technical in nature, the ECB again raised the bar somewhat for Greece. Another interesting aspect was that, while Draghi didn’t want to speculate on the likelihood of a Greek default, he made another veiled threat to Athens.”
“The GC has been considering Greek debt haircuts for a while now and will continuously assess how market developments affect the quality and value of the Greek collateral. Being a rule-based institution, this should be regardless of the state of the political negotiations. A significant increase in the haircuts on Greek assets would have devastating consequences for the Greek banking system. We wouldn’t want to take this threat too literally, though, as it’s clearly not in the ECB’s interest to be the euro area’s bogeyman. Looking at Syriza’s negotiating tactics, they are calling Draghi’s bluff as well.”
(Market News Provided by FXstreet)