Milestones could be used by the ECB, too

The liquidity to come from the Next Generation EU fund and the European Central Bank will likely continue at the same pace next year, as the prior actions required from Greece for the cash disbursements of the former may be utilized as conditions for extending the purchase of Greek bonds by Frankfurt when its extraordinary program (PEPP) expires.

Linking cash flow from the ECB to the milestones of the Recovery and Resilience Facility (RRF) is one of the parameters under examination as December 16 approaches, when the matter will be discussed in Frankfurt. The objective is to prevent Greece being cut off entirely when PEPP ends and until the country is able to secure investment grade so that it can enter the ECB’s conventional bond-buying program.

Analysts consider it a given that a solution will be found. “I believe the ECB will continue to supply liquidity to us and find a ‘bridge’ for that until we capture investment grade,” says Alex Patelis, the head of Prime Minister Kyriakos Mitsotakis’ economic affairs office.

Another parameter of the bridge solution is the extension of the enhanced surveillance status, which entails close supervision by the European Commission, though this may not be continued beyond 2022.

The latest information indicated that one of the plans being considered provides for the utilization of the buy-back period of the bonds to expire with the introduction of certain elements of flexibility so as to serve the issue needs of the Greek state, in time terms. However it is not certain that wold suffice to offer the necessary flow of funding.

Greece still has to get €8.5 billion from the ECB, after collecting another €30 billion. Should PEPP get extended beyond March – a possibility that is increasingly likely due to the new wave of the pandemic – then support will continue.

The bridge solution of Greece meeting the prior actions of the enhanced surveillance and the RRF may be the one Athens prefers at the moment, but it also has difficulties and challenges, being quite demanding: Greece has pledged to meet 27 milestones by mid-2022 to collect the second installment from the Next Generation EU fund, amounting to €1.7 billion. They cover a broad range of actions that demand significant work by the administration.