Falls under ‘will do whatever it takes’
Greece is in the process of trying to secure funding from Greek local banks to payoff 2.6 bb in Greek Government bonds maturing this month (4.10% 8/20/12) that are owned by the ECB and EIB. The Eurozone turned down a request from Greece for a bridge loan to pay off the maturing bonds. For their part, the ECB rejected a proposal from Greece to delay the payoff until September when Greece hopes to receive its next tranche of funding. However, the local banks have apparently been given approval to lend Greece the funds it needs to pay off the bonds and avoid a default. The Greek banks will then be allowed to use the loans as collateral at the Bank of Greece’s ELA program to secure the funds for the loan to Greece.
Again, here is a non-standard measure being considered to fund sovereigns that involves central bank funding, even if it is not directly the ECB’s direct lending.
This is just another example of access to unlimited funding via central banks.