The Governor of the Bank of Greece, Yannis Stournaras, has reiterated his support for a precautionary EU credit line after Greece finishes up its current bailout memorandum in August.
While observing that the economy is on a recovery path, Stournaras said that Greece has a way to go before securing permanent funding from the markets, after the end of the current programme.
Speaking at an event organised by the Greek-Spanish Chamber on “The Future of the Greek Economy”, Stournaras said the post-bailout supervision regime, which will be in place until Athens pays off 75 percent of the funds it borrowed from the lending institutions, must clarified.
Similarly, clarification is needed regarding what the terms and conditions will be for a precautionary credit line.
Stournaras said such a credit line will benefit the economy by helping to lower the cost of borrowing. It will offer Greece security in funding its borrowing needs after the bailout ends in August, especially if the climate in international markets worsens.
ECB bond programme crucial
At the same time, it will allow the European Central Bank (ECB) to continue accepting, as an exception, Greek bonds as collateral for liquidity offered to Greek banks, until they once again regain a credit-worthy rating from the rating agencies.
The ECB programme is crucial for the smooth funding of Greek banks as long as Greece remains in the category below investment grade, according to the Bank of Greece.
Still, Stournaras believes that continuing reforms and fiscal adjustment have produced results, that competitiveness is improving, and that the banks are adequately capitalised.