The enforcer

The last time someone messed with Draghi

AS PART of his campaign to present a more conciliatory face to Greece’s European creditors, Yanis Varoufakis, the new Greek finance minister, dropped by the European Central Bank (ECB) in Frankfurt on February 4th. He met Mario Draghi, its president, in an encounter Mr Varoufakis described as “fruitful”. But there are sweet fruits and bitter ones. After his visit, the ECB’s governing council served up a bitter variety by deciding to make life tougher for Greek banks, already beset by big outflows of deposits. The decision was a warning shot to the new government over its unwillingness to abide by Greece’s bail-out arrangements.

When banks borrow from the ECB, they must provide eligible collateral. As a result of this week’s decision, from February 11th Greek banks will no longer be able to present bonds that have been issued or guaranteed by the Greek government. Their ability to do so until now, in spite of the fact that junk-rated Greek debt is not strictly eligible, has rested on a waiver of the ECB’s rules. That waiver has in turn depended upon the Greek government’s...Continue reading