ECB chief: ‘There will have to be an el­e­ment of debt re­lief’

As far as the Euro­pean Cen­tral Bank is con­cerned, Grexit was never on the ta­ble, Mario Draghi says in in­ter­view with Kathimerini on Sun­day

Kathimerini English - - I N T E Rv I E W - BY ALEXIS PA­PACHELAS

Greece must be given some form of debt re­lief pro­vided it ful­fills the terms of the third bailout deal, Euro­pean Cen­tral Bank Pres­i­dent Mario Draghi said in an in­ter­view with Kathimerini on Sun­day.

Re­peat­ing con­cerns about cur­rent debt sus­tain­abil­ity, the ECB chief said that “there will have to be an el­e­ment of debt re­lief.”

Mean­while, the Ital­ian of­fi­cial calls on the Athens gov­ern­ment to take own­er­ship of the pro­gram while warn­ing that the debt-wracked na­tion will only re­turn to a sus­tain­able course if it sees through the struc­tural re­forms in­cluded in the agree­ment.

Draghi takes the op­por­tu­nity to send a mes­sage to the Greek peo­ple: “Do not let a sense of des­per­a­tion take over again. Fight to main­tain the sta­bil­ity that you have re­built at a great cost, and very soon you will see the ben­e­fits.”

The de­ci­sion to im­pose cap­i­tal con­trols, as well as the one to lift them, lies with the gov­ern­ment of Greece. It is quite clear that its de­ci­sion to put them in place was the re­sult of a se­ries of de­vel­op­ments that saw the Greek bank­ing sys­tem move into some very dif­fi­cult ter­rain, with mas­sive de­posit out­flows. Savers and de­pos­i­tors had lost their con­fi­dence in banks at that time. The bank hol­i­day and the cap­i­tal con­trols then de­cided upon by the Greek gov­ern­ment were the only way to sta­bi­lize the bank­ing sys­tem in the short run and, thus, to pro­tect both de­pos­i­tors and bor­row­ers. By the same to­ken, the Greek gov­ern­ment will de­cide to lift cap­i­tal con­trols when it is con­vinced that con­fi­dence has re­turned.

We face vary­ing crit­i­cisms in dif­fer- ent coun­tries. Some have said that we were too le­nient to­ward the Greek bank­ing sec­tor; oth­ers, that we were too harsh. One could say that this is the price we have to pay for our in­de­pen­dence. But the truth is that the ECB is bound by the Treaty on the Func­tion­ing of the Euro­pean Union, which pro­hibits mon­e­tary fi­nanc­ing. There was no spe­cial treat­ment in fa­vor of – or dis­crim­i­na­tion against – Greece. We have al­ways made it clear that emer­gency liq­uid­ity as­sis­tance (ELA) could be nei­ther un­lim­ited nor un­con­di­tional. It could only be given to sol­vent banks and against suf­fi­cient col­lat­eral. As the qual­ity of the col­lat­eral posted against ELA de­te­ri­o­rated and de­posit with­drawals kept in­creas­ing, these lim­its be­came rel­e­vant. In this con­text, the cap­i­tal con­trols were sim­ply a mea­sure taken by the Greek gov­ern­ment in re­sponse to the huge de­posit out­flows caused by a lack of con­fi­dence. The fo­cus now needs to be on the fu­ture and on nor­mal­iz­ing the sit­u­a­tion in the best and quick­est way pos­si­ble.

Let me be clear: The ECB is not driven by po­lit­i­cal con­sid­er­a­tions. It is the cen­tral bank of the 19 coun­tries of the euro area, in­clud­ing Greece. Fur­ther­more, the ECB can­not breach Ar­ti­cle 123 of the Treaty, which pro­hibits mon­e­tary fi­nanc­ing. May I also re­mind you that, at the time in ques­tion, the prospects for the Greek econ­omy were quickly de­te­ri­o­rat­ing. Since then, many things have taken a turn for the bet­ter in a very short pe­riod of time, and we have to give credit to the Greek prime min­is­ter, to the Greek gov­ern­ment and re­ally to the Greek peo­ple for that.

The Eurogroup state­ment of Au­gust 14 is clear about the timeline and con­di­tions for the re­cap­i­tal­iza­tion of the banks. A first tranche of 10 bil­lion eu­ros for pos­si­ble bank re­cap­i­tal­iza­tion and res­o­lu­tion needs has al­ready been made avail­able. A sec­ond tranche of up to an ad­di­tional 15 bil­lion eu­ros can be made avail­able af­ter the first re­view and no later than Novem­ber 15, sub­ject to the com­ple­tion of the planned as­set qual­ity re­view and stress test and the im­ple­men­ta­tion of the fi­nan­cial sec­tor de­liv­er­ables of the re­view.

The key aim of the re­cap­i­tal­iza­tion is to en­able these banks to func­tion nor­mally and to be in a po­si­tion to sup­port the eco­nomic re­cov­ery in Greece by pro­vid­ing credit and other fi­nan­cial ser­vices. Ro­bust cap­i­tal and liq­uid­ity po­si­tions are nec­es­sary con­di­tions for achiev­ing this ob­jec­tive, which is why the process of bank re­cap­i­tal­iza­tion and its smooth im­ple­men­ta­tion are so im­por­tant. Given that the up­com­ing re­cap­i­tal­iza­tion will in­volve sig­nif­i­cant amounts of public money, it is crit­i­cal that banks are con­trolled by highly pro­fes­sional boards com­ply­ing with sta­teof-the-art gov­er­nance stan­dards. This will also en­sure that the state funds used for re­cap­i­tal­iz­ing banks can be re­couped via pri­va­ti­za­tion [...]

You know, I have been asked this ques­tion so many times, in press con­fer­ences, in the Eurogroup and in the Euro­pean Coun­cil. My an­swer has in­vari­ably been that the ECB has al­ways acted on the as­sump­tion that the cur­rent mem­bers of the Euro­pean Mon­e­tary Union will stay mem­bers, Greece be­ing one of them. It is not for the ECB to de­cide which coun­try can be a mem­ber of the euro area. The ECB has acted and will con­tinue to act on that ba­sis.

As far as the ECB is con­cerned, it was never on the ta­ble. I think we have demon­strated that con­sis­tently in the past, no mat­ter what oth­ers have said or were said to have been say­ing.

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