ECB’s Draghi confirms Greek deal, refuses to show hand on bonds

ECB President Mario Draghi on Thursday confirmed a deal between Greece’s political parties on bailout conditions had been reached but said he could not say anything about how his central bank’s holdings of Greek bonds would be treated.

”On Greece, I’m sorry to say I cannot say anything about how our holdings of Greek bonds both under the SMP (bond buying) program and national central bank holdings will be treated,” Draghi told a news conference.

”What I can say, however, is…that a few minutes ago I got a call from the prime minister of Greece saying that an agreement has been reached and has been endorsed by the major parties. This afternoon we will be having a euro group meeting with the ministers, and we will be having a full report of this, the agreement, and also a discussion of the further steps.” Sources have told Reuters the ECB is divided about whether it should forgo profits on its Greek bond holdings when private investors are pushed to accept a cut of about 70 percent in value.

Athens has urged the ECB to hand back profits on its Greek bond holdings, a move which could raise 12 billion euros or more. The ECB’s 23-member Governing Council has yet to agree a position.

Some ECB policymakers are reluctant for the bank to show a willingness to share in the restructuring burden for fear of easing the pressure on Athens to agree spending cuts. The ECB is also captive to the Maastricht Treaty, which forbids the central bank from financing governments. [Reuters]