ECB President Draghi just admitted that while the ECB Governing Council would like Greece to stay, they will not take any further extraordinary measures to save it and will do everything they can to preserve their 'pristine' balance sheet - which sounds a lot to us like - 'we are not lending/printing/supporting your financial system anymore as you are far too big a risk (and are asset-stripped) and to be honest, it might be better if you just left - since we have encumbered all your assets anyway'.
Bloomberg: Draghi Signals ECB Won’t Keep Greece in Euro Area at Any Cost
European Central Bank President Mario Draghi indicated that while his “strong preference” is that Greece stays in the euro area, the bank won’t compromise on its principles to prevent an exit.
“The ECB will continue to comply with the mandate of keeping price stability over the medium term in line with treaty provisions and preserving the integrity of our balance sheet,” Draghi said in a speech in Frankfurt today. Since the euro’s founding treaty does not envisage a member state leaving the monetary union, “this is not a matter for the Governing Council to decide,” Draghi said.
The comments are the closest Draghi has come to conceding Greece could leave the euro region. Greece faces a fresh election on June 17 that may boost parties opposed to the conditions of its international bailouts, raising the specter of its exit.
“The Governing Council’s strong preference is that Greece will continue to stay in the euro area,” Draghi said.
As a reminder [4], when thinking of Europe, the shorthand rule is: assets. And specifically, the lack thereof. Why is the ECB scrambling to collateralize every imaginable piece of trash that European banks can procure at only some valuation it knows about? Simple - quality, encumbrance and scarcity. When one understands that the heart of Europe's problem is the rapid "vaporization" of all money good assets, everything falls into place: from the ECB's response, to Europe's propensity for infinite rehypothecation, to the rapidly deteriorating financial system. It also explains why America will be increasingly on the hook, either via the Fed indirectly (via FX swaps <http://www.zerohedge.com/news/european-fx-swap-line-usage-ny-fed-rises-f... [5]), or indirectly via the IMF (such as two days ago when US taxpayers for the first time funded the first bailout check <http://www.zerohedge.com/news/us-taxpayers-commence-bailing-out-ecb-gree... [6] the ECB using Greece as an intermediary).