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

While German and French officials say the ECB would no longeraccept Greek debt as collateral in its money-market operationsshould the country be forced to default, the ECB's rules are lessclear and only say that such a step “may be warranted” if officialsdeem it necessary. The ECB's rhetoric may be as much about forcingGreece to step up budget cuts as it is about drawing a line in thesand, say Citigroup Inc. and Deutsche Bank AG economists.

“Without these ECB warnings, the Greeks wouldn't have come upwith the announcement of additional measures,” said JuergenMichels, chief euro-area economist at Citigroup in London. “The ECBshowed early with the eligibility requirements on collateral rulesthat they can stretch the whole thing pretty far.”