"Our strong preference is that Greece will continue to stay in the euro area", Mr Draghi said. His remarks come days after Belgian and Irish central bankers signalled that a Greek exit wouldn't be catastrophic for the eurozone, comments that broke a longstanding taboo against ECB officials even acknowledging the possibility that a euro member may leave the bloc.
Mr Draghi said that whether Greece stays or goes isn't for the ECB to decide, because its founding treaty "does not foresee anything on exit". Mr Draghi said the ECB remains focused on its anti-inflation mandate and "preserving the integrity of our balance sheet", suggesting the ECB won't go to extraordinary lengths just to prop up Athens.
The ECB said it has stopped dealing with some undercapitalised Greek banks at its conventional monetary policy operations. That doesn't mean the banks are cut off from central bank funding, but it does mean that the only funds they can access are in the form of more expensive Emergency Lending Assistance, which the Bank of Greece issues at its own risk with the permission of the ECB. Greek banks have been using emergency loans on a large scale for months.
The move suggests that the ECB is increasing pressure on the Greek authorities to carry out a recapitalisation of the banking system after most of its equity was wiped out by the restructuring of Greece's privately held debt earlier this year.
But the ECB, too, has much at stake. It owns roughly €40 billion in Greek government bonds it started acquiring when the debt crisis first flared up two years ago. The ECB has also lent Greek banks tens of billions of euros to keep them afloat. Mr Draghi put the onus on governments to take steps to revamp their economies through structural reforms and fiscal belt-tightening, saying "more work is certainly needed". Still, he praised the efforts to date throughout Europe. "The extent of the progress on this front is insufficiently acknowledged and worth noting", he said.
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