ECB May Have More Leeway on Greece

Central bank's rules on collateral eligibility at issue

European Central Bank officials may have more scope to cope with a Greek restructuring than they are letting on even as policy makers warn that such a move could trigger the beginning of a “horror story.”

While German and French officials say the ECB would no longer accept Greek debt as collateral in its money-market operations should the country be forced to default, the ECB’s rules are less clear and only say that such a step “may be warranted” if officials deem it necessary. The ECB’s rhetoric may be as much about forcing Greece to step up budget cuts as it is about drawing a line in the sand, say Citigroup Inc. and Deutsche Bank AG economists.

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