The European Central Bank said today that it would accept all Greek government bonds as security for loans, even if their credit rating continues to fall.
This is a further shot in the arm for indebted Greece.
The ECB's move to suspend its minimum threshold for Greek debt means the bonds will remain eligible as collateral for loans even if ratings agencies Moody's and Fitch follow Standard & Poor's and downgrade Greece to junk status.
The decision, the second change to the ECB's borrowing rules in less than two months, will guarantee Greek banks' access to cheap central bank funding, and analysts said it should also help increase Greek bonds' attractiveness to investors.
Eurozone countries and the International Monetary Fund tried to shock and awe financial markets with the weekend agreement of the unprecedented €110bn bailout.
The first installments of bailout funds should begin flowing in time for Athens to honour debts of €9bn coming due on May 19.
But the euro and European stocks fell today on scepticism over the bailout and the huge austerity measures Athens is promising.
Greece's unprecedented bailout should allow the country to shake off its debt addiction without pressure from financial markets, but contagion risks still threaten other countries, economists said.
German chancellor Angela Merkel's cabinet approved Germany's €22bn share of the bailout package today. Germany’s lower and upper houses of parliament are expected to vote on it on Friday.
Today Greece's socialist government rushed to push through spending cuts in the face of public anger.
A day after unveiling plans to cut public sector bonuses, shake up the retirement system and hike sales tax, Prime Minister George Papandreou said the austerity drive would allow ‘changes that the country has needed for years’.
The Greek government is to present the new austerity measures to parliament late Monday or Tuesday and aims to get a vote on Wednesday or Thursday at the latest, an official said.
With the third general strike in as many months called for Wednesday, unions have vowed to battle the latest round of cuts and tax hikes, worth some €30bn over three years.
