Draghi Proposes Buying Junk Bonds of Greece and Cyprus

European Central Bank President Mario Draghi is set to push the ECB to buy junk-rated Greek and Cypriot bank loans, a move that may increase tensions betweenGermany and the bank.

The central bank’s executive board will propose that current requirements on the quality of assets accepted by the bank be relaxed to allow the ECB to buy repackaged debt, or safer slices of Greek and Cypriot asset-backed securities, the FT reported, citing people familiar with the matter.

If the proposal is accepted by a majority of the ECB’s governing council, the central bank will be able to buy investment instruments from all 18 euro zone member states, the newspaper reported.

As part of its stimulus, the ECB plans to buy top tranches of certain asset-backed securities. The central bank said it would also ‎buy riskier tranches if governments guaranteed them, an idea swiftly rejected by France and Germany.

Draghi unk Bonds

 

 

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