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During the press conference, ECB president Mario Draghi was asked twice if the ECB will also take a haircut on Greek bonds. He avoided commenting on this directly. Also his Vice President said that PSI is Private Sector Involvement.

Sure, the ECB belongs to the public or official sector and not the private sector, but also he didn’t deny that the ECB would take a haircut. Is the door open to Official Sector Involvement? This could certainly help Greece.

The ECB holds Greek bonds through the ongoing SMP program, which is now used mostly for buying Spanish and Italian bonds at the moment. Greece was in fact the first country to receive such help from the ECB in May 2010.

A haircut for the ECB will certainly help Greece lower its debt mountain. It’s important to remember that with every tranche of aid, the Greek debt shifts more and more from the private sector to the public sector.

The PSI program, which originally stood on 21% and reached 50% is only for the private sector. So, a 50% haircut on private debt certainly doesn’t reduce Greece’s debt mountain by 50%.

If the ECB takes a haircut, as suggested here, that’s a totally different story already.

EUR/USD is riding on some calm communicated by Draghi – calm regarding the success of the LTRO operation. Also short covering is helping the euro.

For more on the euro, see the euro/dollar forecast.