ECB will continue to support Greece to tackle fragmentation

ECB will continue to support Greece to tackle fragmentation

European Central Bank Chief Economist Philip R. Lane has conveyed to Kathimerini the clear message that Frankfurt will continue to support Greece, explaining that the ECB is prepared to use “a broad range of means” to tackle the risk of fragmentation, which would translate into painfully high growth in Greece’s borrowing costs.

Lane, who came to Athens and met with Prime Minister Kyriakos Mitsotakis on Tuesday, also said that inflation will likely decline in the second half of 2022 in the eurozone, though the war in Ukraine constitutes a source of uncertainty. He noted that the ECB will keeping looking out for any indications of strong secondary effects that may impact inflation in 2023-24.

The expiry at the end of March of the ECB’s extraordinary bond-buying program (PEPP) generated some concern, as Greece had joined it by exception in order to borrow at low interest rates. Its inclusion in the conventional program for liquidity (APP) was not possible as the country’s rating was below investment grade. However, the ECB offered Greece a safety net in December, deciding to implement flexible reinvestments of the PEPP bonds and then announced last month it will extend the waiver to the rule on investment grade in Greece’s case. Still, concerns remain about a disproportionate rise in Greek bond yields, with the benchmark 10-year paper rising to 2.6%.

Kathimerini asked Lane whether the PEPP portfolio reinvestment would suffice to avoid the risk of fragmentation and a much higher cost of borrowing for countries like Greece.

“The PEPP portfolio,” said the Irish economist, “amounts to some 1.7 trillion euros and the flexibility toward its reinvestment supplies some strong firepower. However, the ECB is quite clear: We are ready to use a broad range of means to tackle fragmentation. In the context of the Governing Council’s mandate, under the pressure of conditions, flexibility will continue to constitute an element of monetary policy anytime factors threatening the implementation of monetary policy put price stability at risk.”

Previous Next
Test Caption
Test Description goes like this
Cookies Preferences
Choose Type of Cookies You Accept Using

These cookies are required for the website to run and cannot be switched off. Such cookie are only set in response to actions made by you such as language, currency, login session, privacy preferences. You can set your browser to block these cookies but our site may not work then.

These cookies allow us to measure visitors traffic and see traffic sources by collecting information in data sets. They also help us understand which products and actions are more popular than others.

These cookies are usually set by our marketing and advertising partners. They may be used by them to build a profile of your interest and later show you relevant ads. If you do not allow these cookies you will not experience targeted ads for your interests.