The president of the of the ECB provided a loop hole to contribute to the Greek bailout. He said in the press conference:
“If the ECB distributes profits to governments, that’s not monetary financing” – there might be a way to provide ECB profits from Greek bonds to Greece – an indirect way of helping the debt struck country.
Draghi said these words after the moderator concluded the press conference. This was a “one more thing” moment – Steve Jobs style.
As with Quantitative Easing, Draghi is very smart to find an indirect way to help the economies without breaking the treaty and with a minimal aggravation of the hawks.
He said that the EFSF bailout fund is equivalent to governments. Giving ECB money to the EFSF is like paying governments, and that is forbidden in the EU treaty. But distributing profits is something else.
It’s important to note that also in the previous event back in January, Draghi didn’t categorically rule this out.
Draghi was very confident in the press conference and answered a lot of the criticism about the ECB. It seems that he also has a lot of time to read the financial press lately, especially regarding the LTRO.
EUR/USD eventually ended the press conference a bit higher, mostly enjoying the progress in Athens. 1.3280 remains a battle line.
Update: Jamie Coleman analyzes the last statement and says that it all goes down to price.
Also after the Greek approval of harsh austerity, the euro wasn’t able to break to higher ground. Doubts about implementation by the current and the next governments remain.
ECB aid to Greece can only be granted after a comprehensive deal is approved by the euro-zone finance ministers on February 15th. Previous EU deadlines haven’t proven very strict.
There’s only one strict deadline: March 27th: Greece needs to pay over 14 billion euros to bondholders on March 20th, and it is allowed one week of “grace”. Grace is something that Greeks long for.
For more on the euro, see the EUR/USD forecast.
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