is willing to stand up and say the obvious, that Greece is insolvent and
cannot and will not pay back its debts.
Moreover, in spite of an ECB mandate that prohibits direct financing of
governments, the ECB is doing just that.
Simply put, the ECB is printing euros, to give to the Greece, so that Greece
can make interest payments to the ECB on maturing bonds.
Der Spiegel notes the absurdity of this setup in The European
Central Bank's Discreet Help for Greece.
"There is no time to lose,"
Jean-Claude Juncker warned just a few days ago.
Leaders must use "all means at their disposal" to save the currency
union, the head of the Euro Group said. But one thing is becoming clear:
Politicians are increasingly pushing the dirty work on to the European
Central Bank (ECB).
Take Greece, for example, where liquidity is becoming scarce. The government
in Athens needs to repay a maturing bond worth €3 billion ($3.7
billion) to the ECB by Aug. 20. The solution to that problem seems
paradoxical: The ECB itself is pumping money into Greece, so that the country
can in turn repay the ECB.
It's a controversial plan, because the central bank is prohibited from
financing governments directly. As a result, no one is talking openly about
the absurd flows of money. The ECB has only hinted that it will extend a
helping hand to Greece.
Now, information has leaked regarding how the ECB plans to keep Greece on its
feet until the next tranche of European Union-International Monetary Fund aid
is paid out. The ECB has chosen a detour via the Greek central bank. It will
allow it to issue additional emergency loans to the country's banks. These in
turn are supposed to use the money to buy up Greek bonds with short
maturities. This will scrape together €4 billion, according to the
The Greek central bank will accept the dodgy bonds as collateral, and will
provide the country's equally troubled commercial banks with freshly printed
euros -- which ultimately come from the ECB.
What is particularly absurd is the fact that, for the past two weeks, the ECB
has no longer been accepting Greek government bonds as collateral for its
refinancing operations. But the Greek central bank -- which in reality is
little more than the Athens branch of the ECB -- is still allowed to accept
them. The fact that the euro bankers are willing to go through such
contortions shows just how precarious the situation is. At the moment, a
Greek default is being fought off from week to week -- and politicians are
trying to duck responsibility.