February 26, 2018 / 10:23 AM / 21 days ago

Greece needs post-bailout safety net, central banker says

ATHENS (Reuters) - Greece will need a financial “safety net” after its bailout ends in August and should consider a precautionary support programme, the central bank governor said on Monday.

Bank of Greece Governor Yannis Stournaras (C) attends the annual meeting of the bank's shareholders in Athens, Greece February 26, 2018. REUTERS/Costas Baltas

Greece has received 260 billion euros (228.29 billion pounds) in financial aid since 2010, and its third bailout expires in August. Athens is eager to show it can stand on its own feet in accessing new money and this month raised 3 billion euros from a seven-year bond issue.

But some European Union policymakers believe Greece cannot go it alone without a standby line of credit.

Yannis Stournaras, speaking at an annual meeting of the central bank’s shareholders, said a precautionary support programme would help Greece’s funding process.

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“International experience has shown that a test foray into the markets to create a safety net of liquidity before the end of the programme creates a climate of confidence and paves the way for the country to exit the programme,” Stournaras said.

“However, a precautionary support programme should be considered additionally,” Stournaras added. It would reduce Greece’s borrowing costs and would give the government and the banks access to credit after the bailout ends, he said.

The government is keen to avoid such a precautionary credit line as it would likely come with conditions attached, a difficult pill to swallow after eight years of austerity.

“The possibility of using a preventative support programme... should not be dramatised, Stournaras said, “as European mechanisms were created to be used if there is need”.

Reporting by George Georgiopoulos; Writing by Karolina Tagaris; Editing by Gareth Jones

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