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3rd Jul 2022

Draghi says ECB didn't 'blackmail' Greece

  • Draghi - No special ECB rules for Greece (Photo: ecb.europa.eu)

European Central Bank (ECB) president Mario Draghi has rejected suggestions the bank is blackmailing Greece by making it tougher for its cash-strapped government and banks to access funding.

“What sort of blackmail is this?,” said Draghi in response to questions by MEPs on the European Parliament’s economic affairs committee on Monday (23 March).

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Some members had hinted that the bank’s decision in February to withdraw a waiver that allowed the ECB to accept Greek debts as collateral amounts to undue pressure.

But Draghi pointed out the ECB is exposed to Greek liabilities totalling €104 billion Greece, up from around €50 billion in December, which he said is equivalent to 65 percent of the country's economic output.

“We are not creating rules for Greece. We are simply using existing rules. Greek bonds are below the normal level of collateral,” he added.

This decision came in response to the Syriza’s government’s announcement it would halt implementation of Greece’s bailout programme and attempt to renegotiate it.

But, starved of money from both its creditors and the ECB, Greece is now thought to be just weeks away from running out of cash, weakening its position in the bailout talks.

Questioned by German centre-left MEP Jakob von Weizsacker on whether the Greek banking sector had liquidity problems or is facing bankruptcy, Draghi said ‘‘the liquidity situation has been deteriorating” but remains solvent.

Draghi called on the Greek government and its creditors to agree a speedy compromise that would see Greece honour its debts and return to its bailout programme.

“We are ready to reinstate the waiver as soon as the conditions for successful conclusion of the review are in place," he said.

“What is needed is to restore a policy process of dialogue".

The hearing was Draghi’s first with deputies since the ECB began its €1.1 trillion government bond-buying programme.

Since then the euro has plunged to its lowest level in more than a decade against the US dollar, but the economic prognosis for the eurozone has improved. The ECB has revised its growth forecasts for 2015 up by 0.5 percent.

“The basis for the economic recovery in the euro area has clearly strengthened,” said Draghi, adding that this is “due to, in particular, the fall in oil prices, the gradual firming of demand, and the depreciation of the euro".

He said the bank’s programme - which involves buying €60 billion of public sector bonds each month until September 2016, is on track: "We see no signs that there will not be enough bonds for us to purchase”.

Responding to concerns expressed by German conservative MEP Burkhard Balz about low interest on savings caused by the quantitative easing programme, Draghi replied that the ECB is “aware of the situation which savers have to bear with” but that “as confidence and growth returns so will interest rates”.

Critics of the programme would “eventually reach a point of willing acceptance,” he told deputies.

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