Greece Has Best Auction In Over Two Years, Buying Time And Cash To Pay Off ECB Bonds Next Week

The funds raised through the auction will retire bonds coming due on August 20 that are held by the ECB. This will enable Greece to avert default and continue borrowing from the ECB, which is currently serving as the country’s lifeline.
The maturing bonds will require €3.1 billion to retire. The balance of the funds will go into the Greek general budget and will keep the country running through the end of September.
The ECB created a special line of credit for Greek banks called the Emergency Liquidity Assistance (ELA) and the banks have been utilizing it heavily since the ECB decided to no longer accept Greek bonds as collateral.
The ELA requires special consent from the ECB and also has steeper penalties than regular ECB interest rates. Analysts are skeptical the auction will do much more than buy Greece time, which it desperately needs, but the ability to raise money through the credit markets is a definite step forward, regardless of how small.


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