Greece Prints Euros To Stay Afloat, The ECB Approves, The Bundesbank Nods: No One Wants To Get Blamed For Kicking Greece Out

testosteronepit's picture


Wolf Richter

A lot of politicians in Germany, but also in other countries, issue zingers about a Greek exit from the Eurozone and the end of their patience. But those with decision-making power play for time. They want someone else to do the job. Suddenly Greece is out of money again. It would default on everything, from bonds held by central banks to internal obligations. On August 20. The day a €3.2 billion bond that had landed on the balance sheet of the European Central Bank would mature. Europe would be on vacation. It would be mayhem. And somebody would get blamed.

So who the heck had turned off the dang spigot? At first, it was the Troika—the austerity and bailout gang from the ECB, the EU, and the IMF. It was supposed to send Greece €31.2 billion in June. But during the election chaos, Greek politicians threatened to abandon structural reforms, reverse austerity measures already implemented, rehire laid-off workers....

The Troika got cold feet. Instead of sending the payment, it promised to send its inspectors. It would drag its feet and write reports. It would take till September—knowing that Greece wouldn’t make it past August 20. Then it let the firebrand politicians stew in their own juices.

It’s easy to blame the Troika, and it can take the heat. History searches for the person who is responsible. But the Troika doesn’t have one. It was designed that way: a combo of multi-layered, undemocratic structures. And the Troika inspectors, though despised in Greece, are career technocrats, not decision makers.

So Chancellor Angela Merkel became a substitute. Greek tabloids treated her like a Nazi heir, with Hitler mustache and all. But she’s not the decision maker in the Troika, though she is a contributor. And she—though still unwilling to water down the bailout memorandum—consistently stated that Greece should remain in the Eurozone. She doesn’t want to be blamed.

In early July, the inspectors returned to Athens to chat with the new coalition government and check on progress in implementing the agreed-upon structural reforms. Soon it seeped out that their report would paint an “awful picture” [read.... Greece Flails About, Merkel Draws A Line, German Industry & Voters Back Her: It’s Almost Over For Greece].

In late July, the inspectors returned to Athens yet again and left on Sunday. After another visit at the end of August, they’ll release their final report in September. A big faceless document on which people of different nationalities labored for months; a lot of politicians can hide behind it. Even Merkel. And the Bundestag, which gets to have a say each time the EFSF disburses bailout funds.

Alas, August 20 is the out-of-money date. September is irrelevant. Because someone else turned off the spigot. Um, the ECB. Two weeks ago, it stopped accepting Greek government bonds as collateral for its repurchase operations, thus cutting Greek banks off their lifeline. Greece asked for a bridge loan to get through the summer, which the ECB rejected. Greece asked for a delay in repaying the €3.2 billion bond maturing on August 20, which the ECB also rejected though the bond was decomposing on its balance sheet. It would kick Greece into default. And the ECB would be blamed.

But the ECB has a public face, President Mario Draghi. He didn’t want history books pointing at him. So the ECB switched gears. It allowed Greece to sell worthless treasury bills with maturities of three and six months to its own bankrupt and bailed out banks. Under the Emergency Liquidity Assistance (ELA), the banks would hand these T-bills to the Bank of Greece (central bank) as collateral in exchange for real euros, which the banks would then pass to the government. Thus, the Bank of Greece would fund the Greek government.

Precisely what is prohibited under the treaties that govern the ECB and the Eurosystem of central banks. But voila. Out-of-money Greece now prints its own euros! The ECB approved it. The ever so vigilant Bundesbank acquiesced. No one wanted to get blamed for Greece’s default.

If Greece defaults in September, these T-bills in the hands of the Bank of Greece will remain in the Eurosystem, and all remaining Eurozone countries will get to eat the loss. €3.5 billion or more may be printed in this manner. The cost of keeping Greece in the Eurozone a few more weeks. And on Tuesday, Greece “sold” the first batch, €812.5 million of 6-month T-bills with a yield of 4.68%. Hallelujah.

“We don’t have any time to lose,” said Eurogroup President Jean-Claude Juncker. The euro must be saved “by all available means.” And clearly, his strategy is being implemented by hook or crook. Then he gave a stunning interview. At first, he was just jabbering about Greece, whose exit wouldn’t happen “before the end of autumn.” But suddenly the floodgates opened, and deeply chilling existential pessimism not only about the euro but about the future of the continent poured out. Read..... Top Euro Honcho Jean-Claude Juncker: “Europeans are dwarfs”

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Thu, 08/09/2012 - 14:19 | 2691739 dark pools of soros
dark pools of soros's picture

Who will rule these dwarf muppets?

Thu, 08/09/2012 - 12:14 | 2691406 atomicwasted
atomicwasted's picture

It's fascinating to watch, because it's US minus 2-5 years.  I like getting some advance warning of how the end of the end is going to look so that I can ensure I position myself to win.  Burn, baby, burn!

Thu, 08/09/2012 - 11:46 | 2691307 hangemhigh77
hangemhigh77's picture

I am informing the govt crooks that I need money and I'm going to print my own.

Thu, 08/09/2012 - 11:43 | 2691287 hangemhigh77
hangemhigh77's picture

Well, isn't that like giving every municipality that is in danger of going bankrupt the ability of printing their own money?  Which means the only asset a town county or state government needs now is a printing press with paper and ink. Then they just declare that they're printing money.  Inflation anyone?  Soon they'll be throwing money out of windows just for fun. And of course gold and silver will still be flatlining.

Thu, 08/09/2012 - 10:39 | 2691024 SafelyGraze
SafelyGraze's picture

this article is written in a manner that even an msm journalist can understand

Thu, 08/09/2012 - 09:40 | 2690732 dpr10
dpr10's picture

as if us is not bankrupt;;))we are still dealing globally...poor piece of sh..Geithner..

Thu, 08/09/2012 - 08:19 | 2690419 Zero Govt
Zero Govt's picture

"History searches for the person who is responsible.."

14 years of socialist politicians in Govt usually does the trick... suicide socialism finance ...anyone in jail yet for wrecking Greece?

Oh, ex-President Papacockupalot is doing the chat show circuit, forgive me for thinking he, his entire rotten Party and Goldman Sucks banksters should be in jail for cooking the books, fraud and misappropriation of funds 

Thu, 08/09/2012 - 11:45 | 2691296 Eddy Vluggen
Eddy Vluggen's picture

Another one of those "all goverment is bad"-believers? Educate me, how does socialism cause the behaviour as seen on Wall Street? How did "14 years of socialism" aggregate all money within the 1%?

Thu, 08/09/2012 - 06:49 | 2690310 magpie
magpie's picture

I wonder if the Irish print was also under the ELA program.

Thu, 08/09/2012 - 08:19 | 2690425 covert
Thu, 08/09/2012 - 06:40 | 2690306 Eddy Vluggen
Eddy Vluggen's picture

No external confirmation yet, all we have is the word of the testosterone-pit. I cannot imagine Greece being allowed to print; Spain would print next, and the Germans too- the Germans would have to print, just to keep their wealth at the same level; if they do not print, they'd be getting poorer compared to the Greeks, as they'd be diluting the Euro.

No, our politicians can't be that retarded, can they?

Thu, 08/09/2012 - 11:17 | 2691190 GeezerGeek
GeezerGeek's picture

Yes, I believe that politicians can be that retarded. The only other plausible explanation I can come up with is that the world really is about to end on December 21, and they only want to keep kicking the can for another four months.

Thu, 08/09/2012 - 05:50 | 2690275 Joe A
Joe A's picture

I think I will also start printing them, I am short on them. Everybody better check their Euro bills and coins for markings which designate them as 'printed in Greece'. You don't want to be stuck with them when they take them out of circulation after a Greek default.

Thu, 08/09/2012 - 07:23 | 2690348 TPTB_r_TBTF
TPTB_r_TBTF's picture

I print Euro-Bonds several times a month.  Every time I go to the store, I issue myself a bond for the purchase amount.  At the end of the month, my bank account is empty, but I have a whole drawer full of fresh Euro-Bonds (assets!). 

I am offering these bonds to my neighbours for 20-cents/Euro, but they donT understand what a good deal they are getting. :-(  

Guess I'll have to bundle my bonds and take them downtown and peddle them to a banker.

Thu, 08/09/2012 - 07:20 | 2690344 Eddy Vluggen
Eddy Vluggen's picture

If they say "printing money", then they mean "virtual money", not physical coins or paper. The latter would be too obvious, and costs a lot more then the first option.

That's also the reason why we are moving to a cash-less society; in the future, only virtual money will exist. On a fixed value, of course, it will not have a relation with goods, or the value at which these goods trade - one simply exchanges the goods for a predefined amount of virtual credits.

Thu, 08/09/2012 - 11:25 | 2691211 GeezerGeek
GeezerGeek's picture

Electronic money is, of course, unreliable and should never be allowed to replace physical money or even currency. Think what hackers could accomplish, to begin with. Then think what would happen if the power goes out for a few days, as happened recently in parts of the Northeast US. My part of Florida was powerless for nearly two weeks after a hurricane. Then, there's always the problem of an EMP attack.

All the more reason to keep some real money handy and hope someone will still accept it.

Thu, 08/09/2012 - 09:58 | 2690829 Jack Sheet
Jack Sheet's picture

not quite, I think .. check this out

When inflation really gets going, you will not be able to buy anything with electronic currency because by the time the vendor has it cleared, prices will have doubled.





Thu, 08/09/2012 - 11:51 | 2691322 Eddy Vluggen
Eddy Vluggen's picture

I wasn't talking about the Euro or the Dollar; rather the fiat-shit that they'll be shoving down our throats after the Euro and the Dollar have fallen.

..and yes, they could make it a stable currency, simply by fixing the value of the non-existing currency.

Thu, 08/09/2012 - 03:32 | 2690219 fredquimby
fredquimby's picture

It allowed Greece to sell worthless treasury bills with maturities of three and six months to its own bankrupt and bailed out banks.

Errrrrrr isn't this what every country is doing?



Thu, 08/09/2012 - 03:11 | 2690202 Jack Sheet
Jack Sheet's picture

Wolf, good of you to pick this up, but they just took a leaf out of Ireland's book

It's my guess that this is going on all the time. How else did Sicily and other Eyetalian privinces recently get bailed out, or the Spanish regions kept from the brink? Coming next to a EU region near you.

Thu, 08/09/2012 - 07:22 | 2690345 Eddy Vluggen
Eddy Vluggen's picture

"How else"?

By giving them the money of the tax-payer; Spain and Greece have been receiving a lot of that :)

Thu, 08/09/2012 - 09:52 | 2690796 Jack Sheet
Jack Sheet's picture

mais, mais... "les caisses sont vides"

Thu, 08/09/2012 - 01:56 | 2690162 vinu02
vinu02's picture

Greece has already defaulted in December but its needs certificate of default to officialy declare it. From 2009 lows, $DJIA is up 99%, $SPX is up 105%, and $COMPQ is up 132%.  

Thu, 08/09/2012 - 01:56 | 2690161 vinu02
vinu02's picture

Greece has already defaulted in December but its needs certificate of default to officialy declare it. From 2009 lows, $DJIA is up 99%, $SPX is up 105%, and $COMPQ is up 132%.  

Thu, 08/09/2012 - 01:47 | 2690155 Nussi34
Nussi34's picture

When are they finally going to bomb he ClubMed?

Get your "Euro? Nein Danke" sticker now!

Thu, 08/09/2012 - 00:47 | 2690103 Bicycle Repairman
Bicycle Repairman's picture

You knew this was coming.  Let the printing begin!!

Thu, 08/09/2012 - 00:14 | 2690058 Centurion9.41
Centurion9.41's picture

"Jean-Claude Juncker. The euro must be saved “by all available means.”"

By all available means = there are no ethical or moral bounds to what I will do to remain in my position and maintain the current power and financial structure.

Good thing those European's don't have a 2nd Ammendment, is what the cabal is thinking.

Amazing how European's look at the US and scoff.   

Thu, 08/09/2012 - 05:46 | 2690272 Joe A
Joe A's picture

"Amazing how European's look at the US and scoff."

As in "the US by all available means wants to keep the dollar the world's reserve currency even if that means cheating allied and friendly countries by selling them toxic MBS, causing a world financial crisis, and then buying the MBS up later at reduced rates"? Something like that?

Thu, 08/09/2012 - 01:58 | 2690166 Freddie
Freddie's picture

The EU-SSR scum Van Rompuy and Baraoso are the devil incarnate but still better than our islamic.

Thu, 08/09/2012 - 00:03 | 2690035 Dareconomics
Dareconomics's picture

I follow the Eurocrisis in the NYT, WSJ, FT and Reuters among others every day. This is the best analysis that I have read about Greece's current position. Greece is insolvent, but the governments and their sundry bureaucracies are papering this fact over.


Thu, 08/09/2012 - 01:56 | 2690160 Freddie
Freddie's picture

The NYT, WSJ, FT, Reurters and Bloomberg are total shit.  Ditto TV and Hollywood.   Only sheep read that shit.  IDB is decent, the UK Telegraph, ZH and RT (Russia Today).   Yeah Russian TV News in English is the closest to reality.  Who knew.  

Wed, 08/08/2012 - 23:58 | 2690025 nathan1234
nathan1234's picture

In for a penny, in for a pound

I guess this is the unofficial permission for Greece, Italy, Spain etc to print up the Euro's. And keep going for a while longer

My guess is that Germany will shortly leave the Euro.

As usual one needs a diversion for the coming financial collapse and this may come in the form of an attack on Syria and or Iran during the same time.


Thu, 08/09/2012 - 11:31 | 2691243 GeezerGeek
GeezerGeek's picture

In for a penny, in for a pound. Do you realize how culturally biased you sound (read with sarcastic intent)?

While doing IT work at the Miami Airport back in the 1980s I used that phrase in the presence of a Cuban lady, and the look on her face indicated she had no clue what I meant. "What does money have to do with weight?," she asked.

Thu, 08/09/2012 - 06:00 | 2690277 MillionDollarBoner_
MillionDollarBoner_'s picture

When - and only when - the printing begins in earnest (best guess December 2012) Germany will return to the DM.

Its great living next to a hyper-inflationary economy so long as you have a solid currency of your own. You simply pop across the border and snap up assets for cents-on-the-dollar from people who are desperate for any currency but their own. After all, your own government can't ass-rape you so bad if you are holding "real" money, right? Check out "When Money Dies" by Adam Fergusson for the details.

Germany has every incentive to keep the ponzi going until maximum stress is reached - that way the pickings will be so much juicier. It also has the added benefit of keeping German exports competitive through the ongoing weakness of the failing Euro.

When the time is right she can neatly step aside into the safety of the new DM and reap the rewards.

Weimar? It's payback time !;o)

Thu, 08/09/2012 - 10:34 | 2691003 LawsofPhysics
LawsofPhysics's picture

Riiiiiggggght.  Because their customers (and neighbors) will be doing so well right?  Will they also be accepting Yaun, they better.  What's that old saying again? location location location.

Wed, 08/08/2012 - 23:39 | 2689987 chipworley
chipworley's picture

Greece, Spain, Italy, can you spell T O A S T ?  

Lot of falling dominoe's thereafter...

Wed, 08/08/2012 - 23:31 | 2689964 andrewp111
andrewp111's picture

I'd love to see Greece mint 2 Euro coins by the railcar load, and send money trains to Germany. (EU national central banks still mint the coins) 10 million tons of coins will just about pay off their debt.

Thu, 08/09/2012 - 00:05 | 2690042 mjcOH1
mjcOH1's picture

I'm thinking the supply of slag for the tokens and diesel to ship them would be cut off before the first train left the station.  

Thu, 08/09/2012 - 00:19 | 2690070 StychoKiller
StychoKiller's picture

I don't think "slag" means what you think it does...

Thu, 08/09/2012 - 01:46 | 2690154 mjcOH1
mjcOH1's picture

I can believe that.

Wed, 08/08/2012 - 22:30 | 2689810 q99x2
q99x2's picture

So is Greece going to default and leave the Eurozone or is all this hissyfittin for nothing? And, what happened to the IceLand model? Tried and true. Guess they don't want to take any chances at this point.

Wed, 08/08/2012 - 23:32 | 2689973 andrewp111
andrewp111's picture

They can't do nuttin' to put Z. German banks at risk, now can they?

Wed, 08/08/2012 - 21:46 | 2689687 shovelhead
shovelhead's picture

I used to close my eyes and hide beneath the covers until the Boogeymans went away too.

Apparently, Greeks are more persistant than Boogeymans.

Wed, 08/08/2012 - 23:41 | 2689991 chipworley
chipworley's picture

Spain and Italy are the boogeymans, not Greece...

Wed, 08/08/2012 - 21:40 | 2689669 El Gordo
El Gordo's picture

Peeing in the bed to keep warm?

Wed, 08/08/2012 - 23:32 | 2689972 Buck Johnson
Buck Johnson's picture

Thats exactly what is going on, they are peeing in the bed to stay warm.  When Greece goes, it will take the EU with them.

Wed, 08/08/2012 - 21:40 | 2689667 El Gordo
El Gordo's picture

A rolling loan gathers no loss.

Wed, 08/08/2012 - 21:32 | 2689648 El
El's picture

I don't even know what to say anymore.

Thu, 08/09/2012 - 00:17 | 2690065 StychoKiller
StychoKiller's picture

Who needs principles when principals are at stake?

Wed, 08/08/2012 - 21:30 | 2689645 Peter Pan
Peter Pan's picture

I just wish that all these additional euros being printed were in fact printed as one continuous ream of  paper perforated at 6 inch intervals. No explanation required.

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