(Greece) – The European Central Bank, or ECB, has restored a waiver that will allow Greek government bonds to be used by banks as collateral when the country needs to borrow money from the ECB. This means that even bonds that are usually rated too low will be allowed to be used as collateral. This move essentially gives Greece access to cheap funding and brings the country closer to allowing their banks and financial institutions to recover.
Because they were frozen out of the bonds markets once they admitted to running out of money back in 2010, Greece has had to rely on bailout payments doled out by international creditors, which has been expensive. Now that they country has secured its first payment from the third bailout, which totals 7.5 billion euros, the ECB made the decision to allow Greece to have access to cheaper funding. Receiving the newest wave of bailout funds basically insures that Greece is now able to pay its bills.
The ECB has said that the next chance that Greece will have to borrow money using government bonds as collateral is on June 29. This allows the banks and financial institutions to borrow money at 0% interest in unlimited sums, as long as they have the collateral that can cover the funds in case they have to default on the loan. The bond waiver allows this to happen.
Back in 2009, news broke that Greece had an unmanageable amount of government debt, a fact that they were able to hide until then. They secured their first bailout in 2010 and the country has recently received its first payment since the first bailout. Although the austerity measures that have been attached to these bailouts have been controversial, the Greek government believes that these bailouts are necessary to eventually allow the economy to recover.