Draghi Announced QE but Leaves Greece and Cyprus Outstanding

March 6, 2015

As expected, the European Central Bank Governing Council, meeting in Nicosia, Cyprus, announced the initiation of EU1 trillion worth of quantitative easing. But Greece and Cyprus are forbidden to take part.

ECB President Mario Draghi announced the Public Sector Purchase Program (PSPP), which will begin March 9, when the bank will buy up to EU60 billion of trashy bonds per month until September 2016, in an attempt to save the system. Draghi warned that it might last longer if inflation isn't on a "sustained path" by then.

He also said that he is expecting "growth" in the Eurozone for the year to reach 1.5% as an "optimistic" forecast, and reaching a breathtaking 1.8% by 2017.

Draghi announced that the ECB had decided to continue to not only punish Greece but Cyprus as well. Greece will be left out of the program, since it does not have an agreement, and therefore it will only be allowed more expensive Emergency Liquidity Assistance. Draghi also refused the Greek request to allow the government to increase its issuing of short-term treasury bills through its own banking system.

"Right now the ECB cannot buy Greek bonds," Draghi said. "If certain conditions are in place as far as economic policy is concerned, that would make the Governing Council think that in some time from now bonds would again be eligible," Draghi said.

Cyprus has now, in effect, been put in the same boat as Greece. It is considered not in "compliance" with the demands of the ECB-IMF-EU Commission Troika, because it has yet to approve a mortgage foreclosure law that would allow the banks to throw homeowners into the streets and sell the mortgages to international hedge funds.

The ECB Governing Council, comprising the six Executive Board members and the 19 euro-area central bank heads, were welcomed by thousands of Cypriot protesters outside Nicosia's congress center. According to plans by the protest organizers, including unions and civil organizations, they were expecting 12,000, a large number for a population of less than 1 million. We do not have reports of how many protesters were there.

In Greece, March 4th, Finance Minister Yanis Varoufakis addressed an event organized by the Greek-French Chamber of Commerce and Industry, where he said that there is a Plan B if the country stops receiving financing, but gave no details of what "Plan B" entails.