It will be interesting to see what Draghi has to say about Greek banks. In early February, the ECB ruled that Greek banks could no longer use junk-rated Greek government bonds as collateral for cheap ECB funding loans. Instead, that meant Greek banks had to shift those funding needs to a facility known as emergency lending authority, or ELA. Those loans come at a higher cost and the collateral remains on the books of Greece’s national central bank rather than the ECB as a whole. The rationale was that Greece was no longer eligible to use the debt for collateral due to uncertainty about whether Greece would reach an agreement to extend its bailout program. That decision was seen heightening pressure on Greek banks, which saw heavy deposit flight, fueling speculation the Greek government might be forced to institute capital controls in an effort to keep deposits from fleeing the country. In a note, Lena Komileva of G-plus Economics says Greece’s fragile political position, both in terms of its relationship with its eurozone partners and the potential for a revolt by Greek lawmakers against the government’s reform agenda, could make the ECB reluctant to resume accepting Greek debt as collateral. Such a decision, however, has its own ramifications, she says, as it would “effectively reinforce the sense that Greece is only marginally attached to the euro area, which in turn will perpetuate the debate about capital controls in Greece in the absence of domestic political stability.�

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