The European Central Bank’s decision on Friday to stop accepting Greek government bonds as collateral was not the first such move made by Frankfurt but there was something distinctly ominous about the timing and implications of its choice.
“The ECB will assess their potential eligibility following the conclusion of the currently ongoing review, by the European Commission in liaison with the ECB and the IMF, of the progress made by Greece under the second adjustment program,” the central bank said.
The ECB has twice before this year refused Greek banks the ability to use government bonds to draw much-needed liquidity. The first was after the bond restructuring, or PSI, and the other was before the start of the bank recapitalization process. In both cases, Greek banks were excluded and had to rely on Emergency Liquidity Assistance (ELA) to gain access to funds. They have reportedly drawn more than 60 billion euros this way.