Draghi rules out QE for now

European Central Bank chief Mario Draghi took the wind out of the government’s sails on Monday, telling the European Parliament that the ECB will not consider including Greece in its quantitative easing program (QE) before the conclusion of its bailout review and its debt is made sustainable.

“First, let’s have an agreement, a full agreement, and let’s find measures that will make the debt sustainable through time,” Draghi told European lawmakers in Brussels, adding that he regretted that “a clear definition of the debt measures was not reached in the last Eurogroup.”

Draghi also said that after creditors agree on what sort of debt relief measures Greece will get, the Governing Council of the ECB will carry out its own “fully independent” analysis to see if the debt would also be sustainable in adverse scenarios.

His comments came as Prime Minister Alexis Tsipras said that Greece was hoping that there will be an initiative in June for “a definitive settlement of the crisis through a clear solution of reducing the debt.”

“Let there be a solution and let it come when it comes,” he said after his meeting in Athens with Estonian Prime Minister Juri Ratas, adding that the sooner the matter is solved the better. The tough road ahead for Greece was reflected in remarks yesterday by Finance Minister Euclid Tsakalotos, who said the country’s inclusion in QE is indeed “a difficult issue.” “The ECB, like our Lord, works in mysterious ways,” he told reporters.

Draghi’s remarks were seen as another another blow, if not the killer, to the government’s narrative regarding the time frame it had laid out for the country to get on the road to economic recovery.

More specifically, Prime Minister Alexis Tsipras’s roadmap stipulated that after the second review of the country’s third bailout is wrapped up, creditors and the International Monetary Fund would agree on how to make the country’s debt sustainable, and this would in turn allow Greece join the QE program, which would pave the way for the country’s return to international markets.

But with the review all but concluded, and no definitive statements from the creditors on what sort of debt relief measures it can expect – or when – the best the government can hope for now is that the sequence of events outlined in the Tsipras roadmap will take place in the fall at the earliest, and definitely after the German national elections in September.

The way things stand now, the most the government can expect from the June 15 Eurogroup is the release of the bailout tranche of more than 7 billion euros, but not the reassurance it wants in order to join the QE program.