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Greece Prints Euros To Stay Afloat, The ECB Approves, The Bundesbank Nods: No One Wants To Get Blamed For Kicking Greece Out
Wolf Richter www.testosteronepit.com
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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I'd like mine to be three-ply, please, so my fingers don't go through ;o)
So there is a solution for California. Yippeee.
Who would have thought that all those rich Hollywood liberals, the kind Obama says feel they should pay more taxes, haven't stepped up to the plate and contributed their excess wealth to the state?
Watch Will Smith's reaction to the proposed French tax rates. http://www.washingtonpost.com/blogs/ezra-klein/post/will-smith-is-not-mo... Go to about the 1:15 point in the video.
As Phil Ochs said, liberals are 10 degrees to the left of center in good time, 10 degrees to the right of center when it affects them personally.
CA does not have a central bank. The Fed would have to buy its debt.
Mexifornia can print IOUs and they have done that before. I think pre-Obama they were. All the TARP money and Obama's stash have been going to CA and IL to keep them afloat.
Maybe they can put Moonbeam's picture on the IOUs.
They used to have the Bank of Italy until it went national. Maybe something can be worked out with BofA.
What the Greeks in conjunction with the ECB are doing is the equivalent of a drowning man pulling himself up by the hair. Let them do it. It is the only way to fast track the eventual demise of a rotten system conjured up and run by delusional imbeciles.
They could have done this 4 months ago and the Dow would be at 18,000
Dumbasses
And... would that be a good thing?
And... would that be a good thing?
> Greece Prints Euros To Stay Afloat
The Ben Bernank is proud and perhaps informally advising them to do so ;)
Tim Geithner's recent travels to Europe involve his offering to have the US take over the Greek bailout, according to John Ward's 'The Slog' who says there is a tug of war right now between Germany/euro-zone and the USA, over who will own Greece ...
The Slog says Geithner has offered the US as Greece's economic 'saviour' after exiting the euro, for several reasons:
- preventing Greek default and euro-exit contagion to US banks
- using Greece for not only its mineral wealth, plus Greek oil that can be drilled in the sea offshore ...
- using Greece as a new American central base for the Middle East ... in conjunction with Israel and with Greece being much bigger and better ...
So Ward says the US is actually now competing to bribe or buy the Greek politicians, who are greatly tempted by the US offers which look more generous to them.
And Merkel and the EU are realising they do not want to lose the Greek oil and minerals to the Americans, nor have the Americans carving up Europe ... so that is why the Troika is now getting softer on Greece
Fascinating stuff, and Ward seems to have a lot of sources.
http://hat4uk.wordpress.com/2012/07/30/greece-the-washington-v-berlin-po...
http://hat4uk.wordpress.com/2012/07/31/greek-crisis-geithner-interventio...
@BGIB good one, thanks for the links.
Good perspectives, but of course all unverifiable just like Tarpley, A Jones and Engdahl.
That are few of several reasons not to get rid of greece. But they're still continuing to crack that walnut for the tasty things it contain.
IMHO, The Slog is one of the best financial blogs out there. It's often very UK centric, but his scoop on EU politics / economic policy is usually right on the money and weeks before the rest of the pack.
Here's a Seeking Alpha article that says plans are in the works with US involvement for a Grexit by Aug. 20 dependent on a multi-national deal to develop large offshore oil fields near Greece and elsewhere in the Mediterranean. Slick Willy is involved as lobbyist for Noble Energy (NBL), the prospective developer, so it'll likely go thru like grease thru a goose. ;-)
http://seekingalpha.com/article/782961-the-u-s-looks-to-exploit-the-greek-re-default
"And Merkel and the EU are realising they do not want to lose the Greek oil and minerals to the Americans, nor have the Americans carving up Europe ... so that is why the Troika is now getting softer on Greece"
Or maybe they just want to kick the can down the road a couple of weeks until the deal is sealed between Greece and the US.
whoa
Greek oil is from olive trees, not offshore.
US bases are where they are strategically useful, in Turkey and the Balkans.
The Troika is soft on Greece because no one wants to kick Greece out. See the post by Wolf Richter in ZH "Greece prints..."
I said this a couple of years ago. Bernanke could buy a bunch of Greek Islands for a few hundred billion in keystroke money, and the US Navy would get some nice basing sites to replace their German ones. Greece is closer to the middle east action.
What a load of ....! You really should consider going into the fertilizer business.
My guess is ever since the UN upheld the ban on dwarf tossing "the carnies finally got to the Americans" hence:
http://www.youtube.com/watch?v=bd-sfqzFdmk
will soon become a way to fill the Olympic Venue "in the interegnum" while Civilization reconstitutes itself.
The EU IS an analogy/simile (????) of the USA.
"Give me the money"~!!!
No austerity, no responsibility....
Actually Ben is doing the printing on a commission basis then Goldman creates swaps against Greek assets and Gold?
What letter code will Greece be using on their Euros?
I and O are not used. U is France.
X is Germany.
And guess B is reserved for Ben, perhaps?
N for Greece, it is the first letter on the denomination number on Euro notes. Might see a lot of them soon.
Oh, legal counterfeiting of over printed fiat faux money.
Now that's destined for the Dictionary of Economic Babble's case in point of diminishing marginal utility.