ECB announced on July 20 that “due to the expiration on July 25 of the buy-back scheme for marketable debt instruments issued or fully guaranteed by the Hellenic Republic, these instruments will become for the time being ineligible for use as collateral in Eurosystem monetary policy operations”. ECB also said that “in line with established procedures, it will assess their potential eligibility following the conclusion of the currently ongoing review by the troika of the progress made by Greece under the second adjustment programme” adding that liquidity needs of Greek banks may be addressed by the BoG ELA mechanism.

Although legally correct, due to the expiration of GGB guarantees on July 25, ECB decision could be perceived as another pressure to Greece, ahead of the troika review, while Greek banks will suffer higher borrowing spreads (200bps), until they restore access to regular ECB financing.

It is reminded that liquidity provided to Greek banks through ELA climbed by €64.9bn m-o-m to €124.08bn in May and then slipped by €62.1bn to €61.94bn in June. The jump in May is courtesy of the banks’ freeze from ECB operations in the second half of May, ahead of the disbursement of €18bn from HFSF for their recapitalisation. We anticipate similar (to May) developments in the coming weeks.