According to Der Spiegel have French banks, the largest holders of Greek, been dumping their Greek bonds at the ECB, while the German banks have agreed with the finance ministry to hang on to their bonds until 2013. The tension among the euro countries are growing.
“A perfume of divorce float between the Germans and the ECB.”
The article in Der Spiegel are quoting anonymous central bankers in Germany, and says the Bundesbank wonders why the ECB was still buying Greek paper at a time when the financial shield is already in place. The answer is that they suspect a French conspiracy.
The presumption is that French banks are using the ECB purchase programme to clean their balance sheet.
The article then takes to the conclusion, and calls the ECB a “bad bank.”
The article goes on to ask, whether and how the ECB can get out of this, because stopping the purchase programme would lead to a collapse in prices – as the ESCB is the only buyer. And if Greece were to restructure (which is what everybody who has looked into the numbers in some detail) knows, then the ECB itself would need to be bailed by the German taxpayer.
“We assume that this article is unlikely to win a Franco-German friendship prize,” eurointelligence.com writes,
French newspapers have already picked up the story.
Le Monde wrote yesterday that “a perfume of divorce float between the Germans and the ECB.”
I guess one should note that the source of Der Spiegel’s information do not hail from France. They are German central bankers, who voice their suspicions. So do not treat it as fact that French banks are selling, and German banks are not selling.
But the article raises an interesting question: how to prevent moral hazard arising in this situation?
And if the ECB were to reveal what it bought in its open market operation, we would know a lot more.
At present, the only information ordinary Germans have is the Spiegel report.
This is what happens when policy lacks transparency.
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