The European Central Bank has agreed to accept ‘junk’ rated Greek debt as collateral for normal ECB lending to banking institutions
Greek banks lost access to cheaper funds 16 months ago when the country was on the brink being kicked out of the Eurozone.
The availability of a reasonable funding avenue will go someway to revive the struggling economy and help restore confidence in the battered Greek banking sector.
Close to a decade-long economic contraction has wiped out over a quarter of Greek GDP since its peak in 2007 and unemployment stands at around 25 percent.
What will change for businesses and households after the European Central Bank’s decision? Not much in the short term. Banks will use the profits from the cheaper liquidity to “lighten” their overburdened budgets. When, however, the country’s participation in the QE programme follows, Greeks will see more cash in the market and at lower costs.
