ECB gets behind rescue plan by suspending credit rules

EUROPE’S central bank yesterday threw its support behind debt-stricken Greece, bolstering the record €110bn (£95.1bn) bailout deal offered to the country by moving to underpin liquidity in the government’s bonds.

The ECB said it would suspend the minimum credit rating required for Greek assets to be used as collateral for loans until further notice, giving the country breathing space even if the other ratings agencies follow Standard & Poor’s lead in downgrading its debt to below investment grade.

The central bank praised the austerity measures to which Greece has agreed in principle as a condition of the bailout, including cutting civil servants’ pay and pensions, slapping additional levies on alcohol, tobacco and fuel, and upping the rate of VAT.

“The strong commitment of the Greek government to fully implement the programme are the basis, also from a risk management perspective, for the suspension,” the ECB said in a statement.

ECB officials have lashed out at the S&P credit ratings agency for the timing of a critical downgrade for Greece’s bonds, which it dropped to “junk” status last week. The ratings agency also downgraded Portugal to A– and Spain to AA, prompting widespread fears of contagion.