ECB’s Constancio Signals Greek Waiver Could End

Vitor Constancio signaled that the European Central Bank stands ready to end its acceptance of Greece’s junk-rated debt for bank funding if the government drops out of an aid program.

If a nation has ratings below investment grade, “then a waiver is granted provided that the country is under a program of the European Union/International Monetary Fund,” the ECB vice president said on Saturday in Cambridge, England. “That is a rule, so there will be no surprises if we find out that a country is below that rating and there’s no longer a program that that waiver disappears.”

The comments highlight the standoff between euro-area officials and Greece’s newly elected government, with Finance Minister Yanis Varoufakis saying he’ll work without a financial backstop rather than submit to more EU-imposed austerity. By March, the government may be operating without a safety net for the first time in five years as it challenges the euro area to agree to a new support framework that allows for more spending.

Greece won’t engage with officials from the troika -- the European Commission, IMF and ECB -- who have policed the conditions of its rescue since 2010, Varoufakis said at a joint press conference on Friday with Eurogroup Chief Jeroen Dijsselbloem in Athens.

Constancio said that Greek lenders may be able to use Emergency Liquidity Assistance from their own national central bank if they lose access to central refinancing operations. Even so, that must be approved by ECB policy makers.

ECB Meeting

“There is indeed the possibility of so-called ELA,” Constancio said. “But in any case that will be ultimately a decision of the Governing Council which I cannot predict or comment on at this stage.”

The ECB, which can order ELA to be shut off if it deems it inappropriate, will review the Greek central bank’s emergency line on Feb. 4. The same procedure takes place every two weeks.

Governing Council member Erkki Liikanen said on Saturday that Greece is capable of withstanding debt that falls due and making repayments. The nation’s debt-servicing ability “is better than figures show,” the Finnish central-bank governor said in an interview on YLE TV1.

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