Compared to Brussels/the European Commission or even to Washington/the IMF, Frankfurt is quite low-key, even dangerously discreet insofar the perspectives of the Post-Programme status of Greece is concerned. ECB’s Mario Draghi has doled out advise, that Greece accept a precautionary line of credit (or a similar mechanism) when the current Adjustment Programme reaches its end in August 2018; BoG Governor Yannis Stournaras echoed that position in several public statements.
Still, it is now that more audible – and, more importantly – financial-sector-focused rumblings are heard from Frankfurt. For one, it is made clear to the Greek authorities that it is risky for them to consider the currently operating “waiver” that makes Greek paper acceptable at the ECB window would remain in place, were Greece to stop operating under some sort of Programme. The name and specifics of such a Programme would be of less importance than its very existence, as a basis for the Governing Council of the ECB to keep issuing a waiver for Greek paper-based refinancing operations.
The other part has to do with the current stress tests operation underway to determine the Greek systemic banks’ degree of robustness. The rumblings we are referring to say that, were light-handed macroeconomic data to be factored in the current stress tests round (mainly GDP growth for the next years, up to 2022), said round should not be considered the end of the tunnel. While the loop of fiscal stabilization for Greece is considered complete (not by the IMF, but this is another story altogether), financial-sector imbalances may well reappear sometime down the road in case Greek banks’ NPLs do not recede fast enough. While the ESM provides for relief in such a case, it would be systemically risky to open this kind of discussion while the “Future of Europe” debate is underway – and this debate, whereby among other things the ESM is expected to morph into a European Monetary Fund providing for routine solutions with less political drama, will probably last for some years and not for some months. So, Greece is advised to hold on to the straps of a parachute for its banks in the near future – in the form of the aforementioned precautionary programme, under whatever alias.