The European Central Bank chose not to give Greece access to its cheap money on Thursday, saying it would wait until Athens had tied up a number of loose ends in its agreement with international lenders.
Greek stocks extended earlier losses and were down 0.7 percent, with the banking stock index down 2.5 percent. The two-year Greek government bond yield rose.
At a news conference in Vienna, ECB President Mario Draghi said the bank had discussed the issue of reinstating a ‘waiver’ allowing the ECB to accept Greek government debt as collateral for central bank cash even if it does not have an investment-grade credit rating.
Such a waiver is now possible because Greece is under a new bailout agreement. But Draghi said the bank was not ready to act yet.
“We had a presentation, we had no decision. The Governing Council acknowledges the significant progress made in the last few months,” Draghi said. “Once the prior actions (under the bailout agreement) are implemented, the Governing Council will take a decision leading to the reinstatement of the waiver.
“It will require another policy meeting,” he said.
Greece and its lenders wrapped up the bulk of reforms needed to get bailout cash last week, but left some loose ends which must be tied up before Athens gets 10.3 billion euros ($11.48 billion) of sub-tranches by September.
Greek banks lost access to the ECB’s main refinancing operations last year when Athens refused to meet its bailout commitments, exacerbating its debt crisis and almost pushing the country out of the euro zone.
Since then, the lenders have relied on the ECB’s Emergency Liquidity Assistance, where the average interest rate charged is estimated to be around 100 to 150 basis points above the ECB’s benchmark interest rate.