Some considerations on the IMF’s Independent Evaluation Office (IEO) latest assessment on the handling of the euro crisis.
Part II
New Economic Perspectives
Is the euro a foreign currency for peripheral Eurozone (EZ) countries? – Part 2
Is the euro a foreign currency for peripheral Eurozone (EZ) countries? – Part 2
Ignacio Ramirez Cisneros, UMKC
1 comment:
I think if you look at the 2015 crisis in Greece, the banking system and ECB funding were clearly used to squeeze the government. The rules and laws stated on the ECB website regarding funding for members was disregarded and the politicians were making up the rules as they went along after the referendum. The functioning and liquidity provisions to the Greek banking system from the ECB was contingent upon adoption of political measures dictated by Europeans. This was different than previous iterations of the greek crisis where the funding to the Greek government was threatened but not so much the banking system, at least not explicitly. I think statements by Schauble and Tusk and others indicated that they understood that Greek Banks could effectively fund the Greek government using the banking system if sovereign bonds had a zero risk weighting and the banks could also be capitalized by government. They knew it and Syriza knew it. So they had to cut off the banks in addition to refusing new government funds in the so called bailout package. The Europeans didn't view the referendum as legitimate, but even so, this went beyond simply not providing IMF loans to government but actually refusing to allow the ecb to function as a central bank as the back stop. I'm only privy to the articles in the financial media at the time, I don't know functionally how the ECB cut off funds to the Greek Banks, whether they squeezed the Greek central bank as a member of the ECB or if the Greek central bank squeezed commercial banks. No matter really, foreigners set the rules and controlled the availability of currency with wanton disregard for the political treaties and legal contracts with the commercial banks. This was essentially an act of war, sanctions were applied to force greece into political compliance. If this Euro is not a foreign currency, then what is?
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