Speaking at an event organized by Greek graduates of the London School of Economics, Stournaras noted that the spreads between Greek and European interest rates averaged more than 350 basis points (3.5 percent).
This increases the borrowing costs of the government and also of businesses and households. So, it is important to maintain the waiver as long as the country’s credit rating remains significantly lower than the investment grade, according to the Bank of Greece.
However, a precautionary support line is a prerequisite for ensuring the waiver. “The precautionary support line is by no means a new bailout memorandum,” Stournaras pointed out.
However, if the government does not wish to do so, other ways should be explored in order not to lose the possibility of a waiver, the advantages of which are important for the borrowing costs of Greek banks, the Greek state, businesses and households and should not be ignored, the BoG governor noted.
In conclusion, the precautionary credit line, according to Stournaras, contributes to the state’s return to borrowing from the markets in a viable way after August. In this context, he said, the main concern of the Bank of Greece is that any decisions on the post-program surveillance framework will ensure the smooth, low-cost and unhindered financing of Greek banks and the Greek economy in general.
This is especially true if the government credit rating remains below the investment grade and if the conditions in the international money and capital markets deteriorate, he added.
In such an economic environment, it would be useful both to create a viable “liquidity reserve” through new bond issues coupled with the disbursements of the European Stability Mechanism and to maintain the waiver for the acceptance of Greek bonds as collateral in the Eurosystem’s monetary policy operations.