And just as in 2008, when Lehman fell, no one really knows what will happen now that the European Central Bank has declared Greek banks, en bloc, to be insolvent.
No, by refusing to increase the ELA the ECB has declared the Greek banks illiquid if withdrawals continue. Insolvency will follow if the withdrawals do.
There will be counter-parties to Greek banks in other countries who will lose as a result of what is happening. No one yet knows who they are.
We do, trivial amounts in various banks (essentially speculations on Greek Treasuries, of which there aren’t all that many) and €110 billion in ELA and TARGET2. Which are backstopped by the ECB. Or as we might put it, the taxpayers of other eurozone nations.
It was time for the EU, IMF and ECB to say debt write down had to be on the agenda.
The debt has already been written down. Time value of money and all that stuff. 50 year maturities, 1 and 2% interest rates, 10 year payment holidays. The NPV of that debt is nothing like the headline number. Meaning that a debt writedown has already occurred. It’s just that it’s occurred in a manner in which the governments of the other eurozone nations can deny causes a loss to their own taxpayers. Which is why they did it that way.
In that context the argument about ever closer union is meaningless.
And the argument about monetary union is just nonsense.
Well, yes, OK, give you that. But then where’s the congratulations for those of us who have been saying this since 1997?
There is just power. Ugly, brutal, financial power apparently exercise by homo economicus without compassion, as the breed demands.
Homo economicus are the ones who have been saying that it won’t work since 1997. And saying, since 1997, don’t do it. Don’t blame us for this shit.