ECB Tells Greece It Wont Raise Limit on Short Term Debt

Greece cannot rely on the European Central Bank to raise a limit on Athens’ issuance of short-term debt, ECB President Mario Draghi suggested on Thursday.

He also said the rules meant the ECB could not buy Greek bonds under its new asset-buying program.

Asked about the short-term debt limit at a news conference following the ECB’s meeting in Cyprus, Draghi said that the bank was prohibited by European rules from direct or indirect financing of governments.

“The ECB is a rule-based institution. It is not a political institution,” Draghi said.

Athens is running out of options to fund itself despite striking a deal with the euro zone in February to extend its bailout by four months. Faced with a fall in revenues, it is expected to run out of cash by the end of March, maybe sooner.

One funding option would be to raise a 15-billion-euro ($16.69 billion) cap on Athens’ issuance of Treasury bills, or short-term debt. The cap has already been reached, and the ECB has a veto over lifting it.

The cap is sensitive because Greek banks have used the T-bills to access central bank funding and then invest in more T-bills, helping the state cover its short-term needs.

via Reuters

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Alfonso Esparza

Alfonso Esparza

Senior Currency Analyst at Market Pulse
Alfonso Esparza specializes in macro forex strategies for North American and major currency pairs. Upon joining OANDA in 2007, Alfonso Esparza established the MarketPulseFX blog and he has since written extensively about central banks and global economic and political trends. Alfonso has also worked as a professional currency trader focused on North America and emerging markets. He has been published by The MarketWatch, Reuters, the Wall Street Journal and The Globe and Mail, and he also appears regularly as a guest commentator on networks including Bloomberg and BNN. He holds a finance degree from the Monterrey Institute of Technology and Higher Education (ITESM) and an MBA with a specialization on financial engineering and marketing from the University of Toronto.
Alfonso Esparza