Tsakalotos: Greece could be in the ECB’s QE program by this autumn

Greek Finance Minister Euclid Tsakalotos during a news conference at the ministry in Athens, Greece, January 18, 2016. REUTERS/Alkis Konstantinidis

Bloomberg — Greek bonds will soon become eligible for the European Central Bank’s asset-purchase program, paving the way for an easing of capital controls, and the gradual recovery of investor confidence, Finance Minister Euclid Tsakalotos said.

The continent’s most indebted state is currently excluded from the quantitative easing program, while its lenders have lost access to regular financing lines, as a quarrel between Prime Minister Alexis Tsipras and Greece’s creditors in 2015 raised doubts about its solvency and place in the euro area. The flow of bailout loans keeping Greece afloat is slated to resume this month, after the government committed to additional austerity.

“QE could follow as soon as July’s maturing debt is paid,” Tsakalotos said in an interview, referring to a July 20 payment of notes held by the ECB. “I feel confident Greek debt will be eligible”  by September, he said.

Asset purchases by the ECB that began in 2014 have morphed into a full-blown quantitative-easing program that has since been extended, expanded and broadened. Officials are now committed to buying 80 billion euros ($91 billion) a month until at least next March. But before Greek debt can be included, the ECB must first grant a waiver, allowing the country’s banks to pledge government securities as collateral for regular financing. Greek bonds would normally be ineligible because they aren’t rated investment grade.

Clear Runway

The ECB has signaled it will act when it’s confident the new aid program is on track. After the Governing Council met on June 2, President Mario Draghi said “it will require another policy meeting” but agreed that “there will be a decision leading to the reinstatement of the waiver.”

“Once you have QE, and depending on what your take is on the debt situation, you can take Grexit off the table,” Tsakalotos, a professor of economics at the University of Athens, said. “Then you have a straight runway for investors,” he said from his office overlooking the Greek capital’s main square of Syntagma across from Parliament.

Greek banks will reap benefits from the completion of the country’s bailout review, Bank of Greece Governor Yannis Stournaras said Wednesday according to an e-mailed transcript of his speech at an event in Athens. “ Greek banks are expected to participate in the coming targeted long-term refinancing operation, ” Stournaras said.