ECB never questioned if Greece would remain in euro area, Draghi says
European Central Bank (ECB) President Mario Draghi on Wednesday said he was confident Greece would repay its debt to the monetary authority.
Greece, rated Caa2/CCC-/CCC, owes a €3.49bn payment to EU institutions led by the ECB on July 20.
His remarks came at a press conference in Frankfurt where he confirmed the ECB had raised emergency liquidity assistance (ELA) to the Mediterranean country's lenders by €900m over a week following the standard two-thirds majority vote by the Governing Council.
“Several positive things have happened to increase ELA,” he told reporters, referring to the new lifeline granted to Greek banks by the monetary authority after the country’s parliament passed the first round of austerity measures.
“We did it, however, acting on the assumption Greece would be member from euro-area. There was no question.”
He added that no decision was undertaken by the ECB on haircuts to ELA. “We raised it before and we raised it today,” he said.
In response to a reporter’s question about the possibility of extending its asset purchase programme to Greek assets, Draghi said the ECB was unable to buy bonds during a country’s review period and Athens would need to meet the appropriate investment grade rating in order to proceed.
He reiterated that the monthly €60bn asset purchase programme was intended to run until the end of September 2016 and until the ECB sees a sustained adjustment in the path of inflation in line with the target of just under 2%.
Draghi said the ECB expects inflation to remain low in the months ahead before rising towards the end of the year, taking into account the fall in oil prices.
Euro-area annual HICP inflation stood at 0.2% year-on-year in June 2015, down from 0.3% in May.
“Supported by the expected economic recovery, the impact of the lower euro exchange rate and the assumption embedded in oil futures markets of somewhat higher oil prices in the years ahead, inflation rates are expected to pick up further during 2016 and 2017," Draghi announced.
The press conference followed the ECB’s announcement that it would keep key rates unchanged, as expected by analysts. The main refinancing rate remained at 0.05% while the deposit facility and marginal lending facility was held at -0.20% and 0.3% respectively.