Greek bonds face a 5pc penalty when used as security at ECB

GREEK government bonds will attract an extra five per cent penalty when banks use them as security for European Central Bank funds, an ECB spokesman said yesterday after Moody’s cut the country's debt to junk status.

The extra “haircut” means commercial banks will receive less money in exchange for Greek bonds than they would if they used government bonds from any other Eurozone nation. The ECB has a sliding scale for assessing the riskiness of assets, with sovereign bonds at one end and asset-backed securities at the other.

The Moody’s downgrade to Ba1 late on Monday means all three ratings agencies now assign Greek debt a credit rating in or below BBB.

● 14 January 2010
Greece says it will cut its Budget gap to 2.8 per cent of GDP in 2012.

● February 2010
Government extends public sector wage freeze to those on below €2,000 a month.

● 5 March 2010
Package of public sector pay cuts and tax increases is passed to save an extra €4.8bn.

● 25 March 2010
Eurozone finance ministers agree to create joint financial safety net, with IMF.

● 11 April 2010
Eurozone finance ministers approve €30bn emergency aid mechanism for Greece.

● 21 April 2010
Yield on the benchmark Greek 10-year government bond rises to 8.4 per cent.

● 22 April 2010
Eurostat says Greece’s 2009 budget deficit was 13.6 per cent of GDP, not 12.7 per cent as reported earlier.

● 23 April 2010
Prime Minister George Papandreou asks for activation of EU/IMF aid package.

● 27 April 2010
Standard & Poor’s downgrades Greece’s credit rating to junk status.

● 2 May 2010
Greece seals deal with EU and IMF for €110bn aid package over three years – the biggest bailout of any country.

● 18 May 2010
Greece receives a €14.5bn loan from the EU and can now repay its immediate debt.

● 20 May 2010
25,000 people march to parliament in protest against austerity measures.

● 14 June 2010
Moody's cuts Greece’s credit rating four notches to Ba1, or junk status.