European Central Bank suspends Greek debt criteria
The European Central Bank suspended Monday criteria for Greek debt it accepts as collateral for loans of central bank funds, a major boost for the Greek government and banks.
The ECB governing council "decided to suspend the application of the minimum credit rating threshold in the collateral eligibility requirements for the purposes of the Eurosystem's credit operations in the case of marketable debt instruments issued or guaranteed by the Greek government," a statement said.
The move, which is to remain in effect "until further notice", means that banks in Greece and elsewhere will be able to keep getting ECB cash loans using government bonds and other marketable debt instruments as collateral despite their ratings by international agencies.
Last week, Standard & Poor's slashed Greece's sovereign credit status to junk levels, threatening to cripple the country's chance of avoiding default.
On Sunday, the ECB council approved a Greek plan to cut its swollen deficit and debt, and said Monday that the government's strong commitment "to fully implement the programme" was the basis for suspending criteria on Greek debt used as collateral.
On Sunday, European governments also endorsed a historic 110-billion-euro (146-billion-dollar) bailout to save Greece from bankruptcy and shore up the European single currency.
The first installment of a joint eurozone-IMF rescue package will be paid in the coming weeks, with the rest spread over three years and conditional on a swathe of painful cuts and tax rises in Greece, finance ministers said.
The ECB has also moved to prevent fears on financial markets from spreading to eurozone members like Portugal and Spain that came under pressure from ratings agencies last week as well.
© 2010 AFP