I normally don’t post at the weekend these days but I came across two links that I wanted to comment on today.
The first is from an article in German daily Die Welt about the situation in Greece. While the article’s tone takes a fairly dim view of Greece’s printing money, it states that Greece could in an emergency situation do just that without Germany or any other euro zone state being able to stop them. Here are the key bits I have translated:
This instrument [the ELA] gives a national central bank the authority to give commercial banks loans in euros if necessary and thus ensure the supply of liquidity in their own country. The national central bank alone decides what collateral they accept.
The Greek central bank could print euros and therefore accept Greek bonds as collateral, despite government default. "To prevent the Bank of Greece from arbitrarily printing euros, it would require a two-thirds majority of central banks," said Gerken. Thus, twelve of the 17 euro countries would have to decide to take this tool out of Greek hand.
Because all southern Europeans and the French,would rather see the ECB merrily printing money today rather than tomorrow, a two-thirds majority is not to be expected. Given these obstacles to a Greek exit, Gerkens conclusion is: "We have been sold out."
Gerken in the article refers to German economist Lüder Gerken, head of the Centre for European Politics (CEP). I am not taking a moral tone one way or the other here except to point out that what Gerken says makes sense, that Greece can continue to give its commercial banks liquidity even if the ECB tries to cut them off.
The article also mentions that no formal mechanism exists to kick Greece out of the euro zone, meaning that Greece would have to voluntarily withdraw for them to leave. My sense is that the Germans want to make the situation so onerous for the Greeks that they either capitulate and fall into line with the orthodox German economic model or leave the euro zone voluntarily. The external pressure being put on Greeks in this election to toe the line is a form of vote tampering that is unprecedented and undemocratic in my view. But this is where we are.
Source: Im Notfall könnte Griechenland selbst Euros drucken – Die Welt