ECB's moves to change lending rules could hurt Greece

04/8/2010 | Bloomberg

Jean-Claude Trichet, president of the European Central Bank, extended the bank's collateral rules for emergency lending to help Greece, but the move might actually end up hurting the debt-laden country. The updated framework will increase costs to banks for exchanging Greek bonds for ECB funds because of the country's reduced credit rating. "There's now hardly any chance of Greek debt becoming ineligible at the ECB," said Nick Kounis, chief economist for Europe at Fortis Bank Nederland. "But the new collateral system will certainly be less favourable to countries with lower ratings, especially Greece."

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