By Ralph Atkins in Athens, FT.com
(FT) -- Greece has been given an unprecedented lifeline by the European Central Bank that will boost the attractiveness of its crisis-hit government bond market.
Buttressing euro zone and International Monetary Fund efforts to save Greece from bankruptcy, the ECB said on Monday that it was suspending the minimum credit rating required for Greek government-backed assets used in ECB liquidity-providing operations.
The move in effect removes the risk of Greek government bonds being excluded if ratings agencies turn against the government's rescue programme.
Last week, Standard & Poor's, the credit rating agency, downgraded Greek bonds to "junk" status. That left the bonds dependent on other agencies for the minimum investment grade status required by the ECB.
Exclusion of Greek bonds would have catastrophic consequences for the country's banking system -- and for banks in France and Germany that also have substantial Greek holdings.
The ECB gives no figures but the value of Greek assets used as collateral in its liquidity-providing operations is thought to be worth several tens of billions of euros.
In a statement, the ECB said its governing council had backed the €110bn ($146bn) official euro zone/IMF rescue programme announced on Sunday.
"This positive assessment and the strong commitment of the Greek government to fully implement the programme are the basis, also from a risk management perspective, for the suspension [of the minimum rating]," the bank said.
The move, which could expose the ECB to accusations that it is favoring one euro zone country, highlights the determination of the ECB to avert the biggest challenge facing Europe's monetary union in its 11-year history.
But it also reflects the ECB's exasperation with private sector ratings agencies.
In the past few days, ECB governing council members have criticized sharply S&P for the timing of last week's move, which added significantly to the financial turmoil facing Greece.
The ECB said the suspension would last "until further notice".
CNN
