Draghi Maintains His Silence on ECB’s Role in Greek Bailout

European Central Bank President Mario Draghi
Mario Draghi, president of the European Central Bank (ECB). Photographer: Hannelore Foerster/Bloomberg

Mario Draghi exited marathon talks in Brussels today without commenting on the European Central Bank’s role in a bailout for Greece, leaving it for finance chiefs to announce that ECB profits from Greek bond holdings will be funneled back to the debt-strapped nation.

The ECB will distribute the profits derived from its purchases of Greek bonds to national central banks, who will give the money to their governments to bolster Greece’s aid package, euro-area finance ministers said in a statement. In a new twist, governments also agreed to contribute the equivalent of the profits their national central banks make on Greek bonds in investment portfolios, the ministers said.

ECB President Draghi has yet to comment publicly on the ECB’s involvement in the wrangling over Greece even as he arranged to swap Greek bonds to avoid losses in a restructuring and sought similar treatment for the region’s 17 national central banks. While welcoming news that ministers agreed early today on a second aid package for Athens after 13 hours of talks, Draghi declined to comment when asked specifically by reporters about the ECB’s stance.

Draghi was last week negotiating with Greece to swap the Greek bonds in national central banks’ investment portfolios for similar assets that are immune to so-called collective action clauses, or CACs, to ensure they don’t take losses in a debt restructuring, according to euro-area officials.

ECB Bond Swap

National central banks will indeed swap the Greek bonds in those portfolios, another euro-area official said today on condition of anonymity. The swap will happen today and is identical to one the ECB carried out last week for the Greek bonds in its asset-purchase program, the official said. An ECB spokesman declined to comment.

Greece wanted the bonds in the portfolios to be included in a private-sector deal aimed at slicing about 100 billion euros ($132 billion) off its debt, the officials said. The central banks argued they would have dumped the bonds if they were normal investors and that they shouldn’t be forced to take losses on them.

A compromise may have been reached. Finance ministers announced today that “governments of member states where central banks currently hold Greek government bonds in their investment portfolio commit to pass on to Greece an amount equal to any future income accruing to their national central bank stemming from this portfolio until 2020.”

That will reduce Greece’s debt ratio by 1.8 percentage points by 2020 and lower its financing needs by about 1.8 billion euros, they said.

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