The drama of Greek debt is a political drama. The troika was invented during the crisis. Austerity was never a threat before the crisis happened and was imposed because the European Commission wanted it, not because it had to. These were political decisions, and they were not based on macroeconomics textbooks. Expansionary austerity and the confidence fairy where stories invented on the go, without proper theoretical foundations (and not mentioned in macroeconomics textbooks). It is about time to stop T.B.T.F. (too big to fail) and T.I.N.A. (there is no alternative) and rethink the whole episode 2008-2014. Learning from mistakes is hard, but it must happen.econoblog 101
Steinbrück on Greece – it’s politics, not economics!
Dirk Ehnts | Berlin School for Economics and Law
10 comments:
Seems the ECB is aligning with Germany and withdrawing support, not accepting greek bonds as collateral.
I actually think this is good news, if they actually do it, because it will precipitate things instead of a long agony, and the eurojerks can get a good deal of blame if things go badly too (in case this was the strategy).
BTW anyone know more about this story? Seems interesting and I would like to read the comments from the people in the blog:
http://www.zerohedge.com/news/2015-02-04/turkish-lira-plunges-record-low-after-erdogan-lambasts-central-bank-independence
Syriza has zero leverage given leaving the euro is off the table. Of course getting kicked out isn't off the table if Syriza sticks to its guns.
Interesting development
http://www.telegraph.co.uk/finance/economics/11391377/ECB-tightens-the-screw-on-Greece-with-plan-to-cut-funding-earlier.html
Officials at the eurozone central bank has said a waiver that allowed Greece to swap its junk-rated debt for money would now expire on February 11, weeks ahead of schedule
I,
The move does not seem very substantial no?
Seems like the Turkish pol wants the interest rates to be lower? remain low? As this is (to them) perceived to make the export environment easier, or is "better for business..."
As far as the Greek bonds, they look like they have made them "unacceptable collateral" for OMOs but I have a hunch that the CBs in the ESCB can still own them outright and collect the coupons... separate from the OMOs...
rsp,
http://uk.reuters.com/article/2015/02/04/uk-eurozone-greece-idUKKBN0L71NH20150204
It means that the tens of billions of euros of Greek government bonds as well as bank bonds guaranteed by Athens will no longer qualify as security in return for ECB funding to those banks.
Instead, it will now be up to Greece's central bank to provide those banks with Emergency Liquidity Assistance (ELA), a step it takes at its own risk, ringfencing those banks' funding problems from the rest of the euro zone.
Were the central bank to run into difficulties as a result, it would be up to the debt-strapped Greek government, which can ill afford it, to step in.
The unexpected move followed an appeal from Greece's new leftist government to the ECB to keep its banks afloat as it seeks to negotiate debt relief with its euro zone partners.
Central bank independence means that bankers control the central bank. Not to mention it's based on monetarism.
One of the worst ideas ever. It puts a small group of interested technocrats at the head of a command system. It's not only the antithesis of democracy but also "free market" capitalism.
An army of unelected bankers taking down a whole country? I'm sorry, but this madness needs to end right now. Enough!
...and don't think for a minute that the Greek oligarchs aren't ready to swoop in and save the day for the Greek people from Syriza. It's the euro or die mentality. In other words insanity.
"Were the central bank to run into difficulties as a result, it would be up to the debt-strapped Greek government, which can ill afford it, to step in."
The Greek central bank can't run into difficulties. It has an unlimited overdraft at the ECB via the ELA provisions. The ECB has to pull the plug on ELA provisions before the real fireworks start, and all that does is cause Greek Euros to float.
The Greek central bank can always maintain the Greek clearing system. Whether the peg to the other NCBs holds is a matter for the ECB to decide.
All this move does is allow journos to put more scare stories out there, when all that is happening is a balance sheet move within the Euro system.
The real story is an increase in the interest rate. The question then is whether that interest is paid to the ECB on the NCB overdraft, or retained in Greece as central bank profit.
The Greeks should continue to negotiate as before, and then if the ECB does threaten to pull ELA (and the ECB rules over the ELA are not clear), then it comes down to an unelected dictatorship trying to impose conditions on an elected government. That should then be portrayed as a constitutional crisis.
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