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The ECB has to maintain ELA to Greek banks

Despite the shamelessly dishonest press barrage from the conservative owners of the highly concentrated Greek media (the ‘oligarchs’) to vote YES; despite many articles popping up in world newspapers about how the Greeks are to blame for their own problems because they overspend and undertaxed; despite the lies coming from other European leaders about what the vote was about (it was not about leaving the Euro but rather about whether the Greek people wanted further failed austerity); despite the ridiculous claims of the German SDP about “bridges being burned” (that party should change its name because it is a disgrace to the social democratic tradition) – despite all of that and heaps more, the Greek people voted overwhelmingly NO to reject austerity as a viable policy model for their country. This is a case of democracy coming head to head with the dominant political-economic ideology within which the Greek nation is situated – the Eurozone. It also demonstrates the flaws of the democratic process – the people have voted for an end to austerity but also consistently tell opinion polls they want to remain in the Eurozone, a monetary system that is built on austerity. They voted yesterday to reject the very basis of the monetary system they want to stay in – which tells us they don’t really understand the nature of the system and therefore how informed is the NO vote.

On the seeming inconsistency of the Greek vote, Please read my blog – The incommensurate aims of the Greek people – for more discussion on this point.

But given all of that, I do not agree with the interpretations which say that Greece has chosen between “catastrophe or absolute catastrophe”.

That is the line taken in the UK Guardian article (June 5, 2015) – Our Greek referendum offers catastrophe or absolute catastrophe. Some choice.

I also do not agree that the Greeks have lost the ‘wrestling’ match with its Eurozone partners (the latter term used very loosely to describe powerbrokers in the Eurozone).

If one reads the latest edition of Der Spiegel, the article (July 3, 2015) – Angela’s Ashes: How Merkel Failed Greece and Europe – gives some pause to accepting the catastrophe interpretations.

The decision to call a referendum really challenged the bullies in the Eurozone – pushed them off the script that they have been following for some years now as they dealt with nations suffering from a severe shortage of overall spending and rising unemployment.

The call for the referendum blew the idea that the bullies could just threaten these nations with bankruptcy – which was an idle threat anyway given that they blow up their own system if enforced, out of the water.

The script demanded that nations buckle under and cut public spending and savage safety nets and all the rest of the aspects of social development that the likes of the IMF has hated since it was overtaken by neo-liberal economists some time in the 1970s.

The decision to allow the people to actually make an explicit statement about that has altered power relations significantly in my view.

And I don’t accept the narratives that the referendum was poorly worded, too long, was referring to a non-existent package given the last document was withdrawn on June 28, 2015, and all the rest of the claims made by those who fought to keep the Greek government and its people on ‘script’.

It is obvious what they were voting for. They were saying NO to the cruel, senseless and failed economic policies that have killed jobs, undermined retirement incomes, and created a vacuum for the youth of the nation to develop skills, work experience and transit into adulthood with good prospected. And all the rest of the ravages of austerity.

One might have a different view if the austerity was ‘working’ (whatever that means). But the Great Greek Depression continues and all the forward estimates from the IMF and the EU indicated that unemployment will be above 20 per cent for years to come.

The policy framework was unambiguously not working. The vote of NO is to reject that and demand a policy framework that will help restore growth and cut unemployment.

I consider the question of ‘debt relief’ also to be somewhat overstated given that it will do nothing in the short-run to allow the economy to resume sufficient growth to quickly reduce unemployment. Wiping off the mostly long-term, low interest rate debt will do little to restore demand.

The Greek government up until about now has already been running fiscal surpluses net of the interest payments. Providing some interest relief won’t alter much in the short- to medium-term. I realise that it might change psychology considerably and for that reason alone the ECB should announce immediately that it will wipe off all the Greek government debt it holds.

As as my Tweet the other day says:

Tweet_Greece_July_1_2015

The IMF has a particular criminality in all of this. They should be paying out massive damages rather than bullying nations into creating more poverty and taking any revenue that nation can raise to pay back so-called ‘debts’.

The fact that after the negotiations were called off, the IMF released under pressure from the US (who are the biggest funders of the IMF) to publish the – Greece: Preliminary Draft Debt Sustainability Analysis – (July 2, 2015), shows how political all this has been.

The analysis should have formed a core part of the negotiations given it showed how bleak the debt situation was for Greece in the long-term. I also note that the IMF was explicitly lobbied by the European Commission not to release this Report.

Groupthink hates information. Groupthink hates anything that contests or undermines the prevailing ideological viewpoint. Groupthink, though a bullying mob rule is, in fact, a highly insecure organisational state.

Information is power. The European Commission hated the idea that the IMF would come clean on what they thought was the reality of the Greek situation. That may not be the actual reality, given the IMF is prone to massive errors itself.

But the point is that the European Commission knew the information would highlight their bastardry in the negotiations process leading up to the referendum and weaken their claims that a YES vote was essential for future Greek prosperity.

So while the Eurofin ministers were lying about what the demands they were making on the Greeks were about (Dijsselbloem had the temerity and gall to actually claim they were not asking for pension cuts), the IMF was revealing why they were refusing to talk about debt relief for the Greeks.

Why? Because even the IMF realises that it has to be written off or delayed for the next two decades or so.

But despite all of that, the real issue which is a Eurozone-wide issue is a lack of aggregate spending (demand) which is causing output gaps (actual output relative to potential) to remain at excessively large levels.

In turn, the persistence of the output gaps has undermined private investment in capital formation and fiscal austerity has undermined public investment, which together have caused potential output levels to decline.

That has the effect of reducing future growth rates and means that to wipe out the excessively high unemployment, lower productivity activities are required.

In their own way, the Greek people know that and want policies to change to start addressing the central economic problem. What they do not seem to realise is that the problem is the Euro itself, given the way it was introduced and the system that supports its.

The NO vote will not alter the austerity bias. Even the Greek government was prepared to accept continued austerity late last week as long as there was some debt relief.

Syriza’s claims to be anti-austerity were shown to be somewhat at odds with the reality of the approach its leader made just before the referendum to the Eurogroup.

Greece needs to be running large fiscal deficits – debt relief or not. Running primary surpluses will continue the suffering. I know they want the fiscal stimulus to come from outside the nation – via the Euro investment fund etc. But that is not going to happen anytime soon, in quantities that one might deem stimulative.

So with the external reality set, the Greeks have to be able to run deficits (primary and overall). Otherwise, it will continue to fester.

The other interesting narrative (I noted the Greek Finance Minister has just announced his resignation!) is the “all eyes are now on the ECB” line.

Now that Greece has rejected austerity – so what? The banks are still about to become insolvent unless the ECB announces it will continue to ensure they have sufficient liquidity in euros to meet their day to day demands.

Here is my view on that.

The ECB has to maintain liquidity in the Greek banking system. If it refuses then Greece would have to immediately issue its own currency and recapitalise the banks accordingly. That is, the ECB would take the political act to force the nation from the Eurozone without any rules in any European treaty suggesting that is part of its mandate.

More particularly, what would the decision to end the Emergency Liquidity Assistance (ELA) for Greek banks indicate? It would indicate that the ECB has failed in its primary role to maintain financial stability in the Eurozone, of which Greece remains one of 19 Member States.

I remind everyone that the – Tasks – (the Charter) of the ECB within the Euro system is well-defined by the Treaty of the Functioning of the European Union.

The Statute of the European System of Central Banks and of the European Central Bank is one of the protocols attached to the Treaty.

There are nuances because some of the central banks did not join the euro but they are not at point here.

It is very clearly specified in Article 127(1) of the Treaty that:

The primary objective of the European System of Central Banks … shall be to maintain price stability”.

Clear enough?

They will do this, according to Article 127(2) through:

– the definition and implementation of monetary policy for the euro area;
– the conduct of foreign exchange operations;
– the holding and management of the official foreign reserves of the euro area countries (portfolio management);
– the promotion of the smooth operation of payment systems.

Additionally the ECB is responsible for “the prudential supervision of credit institutions established in participating Member States” and “has the exclusive right to authorise the issuance of banknotes within the euro area”.

That is about it.

It is not responsible for enforcing European Commission dictates with respect to the Member States about fiscal policy, labour market policy, product market policy or anything else like that.

The fact the ECB joined the Troika demonstrated that the neo-liberal concept of independent central banks is another one of those myths that allow policy makers to deflect responsibility for poor decisions that damage the prospects of people.

But the legal responsibilities of the ECB make it impossible for it to allow the Greek banking system to go broke. That is one of its core legal responsibilities.

If it does take the extraordinary political decision to stop ELA funding to the Greek banks then it demonstrates how badly designed the Euro monetary system is. To allow the central bank to flagrantly ignore its basic legal charge and to pursue politicial aims that are outside its remit would signal a catastrophic failure of the common currency.

There are those who claim the ECB faces massive losses if it continues to provide ELA. The same arguments apply to its bond buying schemes under the various titles since 2010.

Please read my blog – The ECB cannot go broke – get over it – for more discussion on this point.

Any suggestions that a state of ‘negative capital’ would alter the operational capacity of the ECB as a lender of last resort (as the currency issuer) are lies.

It always has to ensure the banking system is liquid – by providing necessary reserves to maintain the payments system and allow for deposit withdrawals – whether it has negative capital or otherwise.

The other side of that logic is the old – cutting off the nose to spite the face – trick.

If the ELA is terminated, Greece exits. Simple as that. They would have no choice. Then all Greek government euro-denominated debts would be either restructured into the new currency or simply wiped off by the debtor. It therefore makes no sense to fear default and then follow an action that guarantees that very state.

In that sense, I do not believe the NO vote will see the ELA withdrawn. There will be threats, fear mongering and all the rest of the bullying tactics that have been witnessed over the last several years.

Germany will be making noises. Jens Weidemann will rave on about hyperinflation and printing money. Others will try to say the bridges are burned.

But the ECB will have to continue to act as a central bank according to its legal charter or place itself in a position of legal threat – for malpractice – and plunge the very system its is charged with safeguarding into a terminal crisis.

As an aside, given the discussions about clientelism in the Greek media, where the politicians maintain policies that expand the interests of the oligarchs as a quid pro quo for funding and headline support, I thought I should learn a bit more about the state of the newspaper industry in Greece before and after the crisis hit.

You can get very comprehensive data from the – Athens Daily Newspaper Publishers Association.

The 1990, there were 19 daily newspapers (excluding niche finance and sport) with an average daily circulation of 834,415. The top 4 publishing groups (Lambrakis Press, Kathimerini Publishing, Ch. K. Tegopoulos Editions and Pegasus Publishing) accounted for 59 per cent of the circulation.

By 2006, there were 26 dailies with an average daily circulation of 404,715. The top 4 publishing groups accounted for 69 per cent of the circulation.

The number of titles shrank dramatically over the next few years as the crisis hit and by 2015 there are now only 13 daily newspapers, which might seem like a lot for 11 million people but it is all relative. The average daily circulation is now down to 95,644 and the concentration of the industry has declined somewhat sharply as circulation has dropped and bankruptcy has followed.

The following graph shows the decline in average circulation since 1990.

Greece_Newspaper_circulation_1990_2015

Conclusion

I was very heartened by the NO vote success. I am not so about the resignation of the Finance Minister. I am also suspect of the motivations of the Greek government but will wait and see.

The letter the Prime Minister sent to the Eurogroup just after calling the referendum where he said he would accept the demands as long as debt relief was provided was a bad augur.

We will see.

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That is enough for today!

(c) Copyright 2015 William Mitchell. All Rights Reserved.

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    This Post Has 32 Comments
    1. > By 2006, there were 26 dailies with an average daily circulation of 120,022,292.

      But the population of Greece is only 10.8 M!

    2. BTW, what do you think about the argument that Greece will be forced to capitulate, because they simply don’t have enough competent people on board to function outside the Eurozone (or at least to make the transition in a reasonable time), and now everybody knows it?

    3. Actually, according to its very own rules, the ECB must not continue the ELA for Greek banks. Indeed the ECB would be forced to call it off. Of course, that would trigger a banking crisis and eventually force the return to the Drachma. Varoufakis’s remarks in an interview to ABC last week indicate that he had been gambling that the ECB would not let it come that far. He had been gambling that the ECB would violate its rules in his favour. But such a violation would not be without consequences itself:

      1. It would mean that Greece would be able to solve its solvency problem through the European printing press. This would create a moral hazard as Portugal, Spain, Ireland and Italy would try for the same.

      2. It would instantly send the Euro’s value plummeting and prices rising in the Eurozone, hurting savers and everyone dependent on a fixed income.

      3. Interest rates for the Euro would jump upwards, hurting all Eurozone governments as well as businesses that depend on investments.

      I find it therefore by no means certain that the “Varoufakis bet” is going to work out. But the Greek voters knew the stakes when they voted “no”, didn’t they?

    4. Depending on what eventuates the Greek government might undertake to pay the loan interest accumulated to this day, and any capital repayments already made added in as well.
      I say this because the loans themselves would have been fiat money, conjured from thin air, electronic entries in the customer’s account. No real assets involved. Repayments though would have been made selling real assets, which on entering the banking system have been converted to electronic entries lowering, and eventually cancelling the debt. The banks don’t get to use this “money” so why make a fuss over it? The banks only can use the interest received and if Greece can repay it then at the end the banks will have lost almost nothing.

    5. dmm

      I would guess that’s a typo because if you look at the graph it shows the circulation in 2006 was 400,000. I would also point out that there is a very good reason for the decline in (print) newspaper circulation throughout the world – the internet. I used to advertise in the local daily newspaper and noticed a serious decline in response. I then did my research and found that their circulation had halved since 2005. Answer? Google Adwords which instantly restored my response rate and had the added advantage of getting my website onto page 1 in the Google search engine.

      I also have a theory that less than half the population ever read a newspaper or watch TV news (except for the sport). So they derive their current affairs views from soundbites that come from other sources. How can you have a meaningful referendum when 50% of people have no idea about the issues involved?

    6. @Nigel Hargreaves

      I’m sure the figure of 120,022,292 was a typo. I was just curious because it was a very definite number, that couldn’t possibly be right.

      With regard to newspaper circulation etc., I think in this case the Greek population has a pretty good idea what the issues are, although in this case their comprehension will not have been enhanced by most of the output of the main print/TV media channels. Of course the ballot itself was something of a Rorschach test, given that the offer under discussion was withdrawn by the “institutions” as soon as the referendum was announced. Fortunately, the vote was pretty decisive, and can only be seen as a rejection of the status quo, whatever else it implies.

    7. Dear Joseph Stern (at 2015/07/06 at 19:29)

      I do not know what Articles of the Statute of the European System of Central Banks and of the European Central Bank you have been consulting or are referring to when you say that “according to its very own rules, the ECB must not continue the ELA for Greek banks”.

      The rules governing the ELA are laid out in this document – ELA procedures.

      The provision of liquidity is allowed to fund solvent institutions “facing temporary liquidity problems”

      The “Responsibility for the provision of ELA lies with the NCB(s) concerned” but Article 14.4 of the Statute of the European System of Central Banks and of the European Central Bank “assigns … ECB responsibility for restricting ELA operations if it considers that these operations interfere with the objectives and tasks of the Eurosystem.”

      There is nothing in the current ELA for the Greek banks run through the Bank of Greece that could be seen as interfering “with the objectives and tasks of the Eurosystem”. Indeed, if the temporary liqudity is not provided then the objectives and tasks of the Eurosystem are severely impacted.

      best wishes
      bill

    8. Dear DNM (at 2015/07/06 at 18:43)

      Yes, the figure was the total sales for 2006. The average daily circulation was 404,715.

      A typo.

      Thanks.

      best wishes
      bill

    9. I agree with your analysis of the situation Bill. You have wisely refrained from speculating about the real reasons and forces at work behind the resignation of finance minister Yanis Varoufakis. I suspect that published accounts containing the truth about this matter will not appear for several years.

    10. Bill, your suspicions about the Greek government regarding the motives behind Varoufakis’s resignation seem to me to be “on the money”. We should all be suspicious about what is actually going on. I noted somewhere that certain officials have made it known to the Greek government that a No vote, which would lead to further negotiations, would go better without V’s presence. And the letter Tsipras wrote before the referendum after he had announced it, which suggested to you that all was not as it seemed in the Greek camp, indicates to me that he may have been gotten to and that the Troika will be better able to manipulate him without V’s input. How much of a backbone will Tsipras possess without Varoufakis?

    11. Bill, great summary of the situation.

      The resignation of Varoufakis has also got me perplexed. I initially thought maybe the game strategy is if the ECB tries to screw Greece over after the vote then V could come back into government and help coordinate the drachma rollout. Keep surprising them? But now I’m wondering if he wants grexit as the solution but the party doesn’t? It’s all a bit worrisome. I hope they have some wise heads on board like V from here on?

    12. “Actually, according to its very own rules, the ECB must not continue the ELA for Greek banks.”

      The ECB is also the Single Supervisor under the Single Supervisory mechanism. And that half of the ECB has determined that the four main Greek banks are solvent.

      So either the banks are solvent and the ECB is being incompetent by failing to provide liquidity to solvent institutions (particularly as the liquidity is at the risk of the NCB, not the ECB). Or the banks are not solvent and the ECB is being incompetent by failing to resolve insolvent banks and trigger the deposit protection mechanisms.

      Either way the ECB is on the hook.

    13. Luckily Greece has huge military spending. In few weeks those tanks are really needed in the streets of Athens.

    14. A few thoughts from this side of the pond….

      President Obama/Council of Economic Advisers:

      THE JULY JOBS REPORT

      If one believes that “the market can provide anybody wanting a job, with a job”—then the case can be made to “jump start” the market, and this will, in turn, fix unemployment—and this was the mind-set when HR 2847 [The Hire Act] became law.

      At the time, however, we had 10.2% unemployment [hereafter UE] and the adverse consequences of UE has been left to wait as the economy inched towards recovery.

      And it has taken us 6 years to shave 4.9 points off of our UE rate, and we are still left with 8.3 million Americans looking for work, who are unable to find work.

      This having been said, however, it is little wonder why we Democrats celebrate that we are moving in a positive direction—given the vitriolic climate in Washington—and it would be a fool’s errand to expect the current crop of Republicans to actually look for a solution to our unemployment crisis—but that is all the more reason to chart a different path.

      The operative phrase here is “the adverse consequences of unemployment” and left out of the discussion is that UE is a “social” problem, with adverse social consequences—i.e., we, the larger society have the absolute responsibility to address….

      And our indifference has become a breeding ground for ISIS sympathizers in America [and throughout the OECD]—even disregarding that this mind-set has resulted in 60% minority UE in our inner-cities, with a drug culture, and an epidemic of homicides.

      The job creation mind-set that “the market can provide anybody wanting a job, with a job” [which the Republicans fraudulently report as “fact”]—has never been true, and only ONCE since WW II has it resulted in a UE rate below 3%–in 1953—leaving millions jobless in its wake, and created the inner-cities, above.

      86% of Americans believe that “anybody wanting to work, should be able to find a job”—i.e,, there is solid political support for the “legal authorization” in Public Law 15 USC § 3101 to limit our unemployment to “3%” [essentially full employment], and reiterated in HR 1000, currently in Committee.

      In short, at no time should our UE rate in America exceed 3%, as provided by law.

      Ref: WHY DO WE AMERICANS ACCEPT BEING AN “INDEX” IN OUR ECONOMIC SYSTEM, Amazon

      Jim Green, Democrat opponent to Lamar Smith, Congress, 2000

    15. The Euro is ultimately a political project, the great game is the creation of the United States of Europe

      The people behind the Euro aren’t stupid……they always knew that a monetary union with a currency issuer with no power to make transfers was doomed to fail

      This manufactured crisis is all about justifying the next stage of reforms which will result in more centralization and the signing away of more sovereignty.

      Everything is going to plan

    16. Euclid Tsakalotos, Varoufakis’s successor as Finance Minister, went to St Paul’s where Osborne studied. But their intellectual economic beliefs could not be more different, even though he went on to “read” PPE at Oxford (like Cameron). Tsakalotos has been characterized as a Marxist economist and not much different in outlook from Varoufakis except that Tsakalotos may not be as pro-European as Varoufakis. He has written a paper that, as I understand it (I have been unable to obtain a copy), contends that the Euro will not bring convergence in the economies of the Eurozone. Perhaps the Troika have jumped from the frying pan into the fire.

    17. “It would instantly send the Euro’s value plummeting and prices rising in the Eurozone, hurting savers and everyone dependent on a fixed income.”
      It would? How?

    18. Bill: If Greece begins to use its own currency again and given the fact that they import some 90% of their essentials, like food, medicine, and energy, will the steelers of those imports accept the new drachma? What if the sellers demand to be paid in a “hard currency” like dollars or euros? How would Greece handle that issue?

    19. Whilst I totally agree with Bill’s critique of Syriza’s strategy which is based
      on a fundamental misunderstanding of the modern monetary system you
      cannot fail to appreciate their democratic credentials.This stands out in contrast
      to most governments.
      They are wrong to support continuation of the euro but they ran for government and
      ran a no vote on the basis of support for the euro.The resignation of the finance
      minister is consistent with their pledge to use the referendum to strengthen their
      negotiating position .The tragedy is their heroic stand is for a phantom victory even
      if they secure it.As Bill said debt relief will have little effect on an economic recovery.
      Yet still the blind faith of the groupthink may prevent even debt relief.
      The complete disconnect between monetary reality and 99% of the discourse is
      quit maddening!

    20. Bill and Neil Wilson. As far as I am aware, Greek debt is mainly owed to currency “issuing” institutions, not private sector currency “users”.

      Would it be correct to say, that if the Greeks were going to pay back anyone, then it should be private sector households and private sector non-financials, before, or to the exclusion of, anyone else? Am I correct in thinking that any fiscal assets leant by currency “issuing” entities, will eventually be recovered and cancelled via taxation systems of those currency issuers, over the next decade or so? The “fiat money” they leant is out there somewhere, some acting as fiscal stimulus and some is being saved somewhere; all will eventually get spent and taxed numerous times and recovered by the “issuers”.

      See you all in Greece, for a giant piss-up, where we will spend lots and get them Greeks back into paying jobs!

    21. Hi John,

      Won’t happen there are thousands of exporters who would be happy to hold drachmas. Anybody who asks for another currency won’t get the business.

    22. There was a very good interview by the BBC News channel with Steve Keen yesterday who said that the former finance minister told him that they did not think they could leave the euro because of the high level of imports for basic necessities and if this was not the case they would have exited already. Keen himself thought Exit was still possibly the best option if the debt was written off (or presumably defaulted on )

    23. Bill: I am only guessing of course, but i took the PM’s letter to the eurogroup that he would “accept their demands as long as their was debt relief” as a game theory move designed to help much the Greek population in to voting “no.” I took Angela Merkel’s statement that there would be “no negotiations until after the referendum” as a game theory move. I think the new finance minister is far more likely to push for a Grexit. He never has believed in the euro and publicly tried to prevent Greece from joining. He is far less in love with Europe than Varoufakis. Varoufakis was afraid Greece did not have the technical expertise to exit the euro but he was searching for possible outside technical help for this in London. If this event was not so terrible for the greek people, it would be a fascinating game to watch. People will be talking and writing about this “game” for years.

    24. The polls before the referendum showed a toss-up, but, the no vote won in a landslide. If the polls about leaving the Euro for the Drachma are just as, or even more, inaccurate, then it might be that the majority of the Greek people do not want to stay in the Euro at all costs.

    25. andy,

      you comments raise an interesting point.

      whilst i agree with bills analysis of the situation, no one has given me a clear explaination of the mechanics of going back to dracmas.

      your point raises an issue as to how liquid the new currency will be. will it be tradable in the short term despite the government decreeing the payments system will use only dracmas. i can see some short term problems.

      and again what about the software that runs the greek banking system. i dont see how they can switch over to dracmas overnight, and then if a devaluation is to take place , do they let it float immediately or do they set a peg first and then do a managed float later.

      lots of questions.

      anyone feel free to comment. it would be appreciated

    26. Mahaish, If you want a detailed discussion about what is involved in going back to the Drachma that you can access online, you can read the posts on the Greek situation by Yves Smith on Naked Capitalism that have been put up over the past few weeks and months. I cannot comment on whether everything she says is right, but the detail you want is there.

    27. Dear Mahaish

      I devoted a whole chapter to how a nation might leave the Eurozone and reestablish its own currency in my latest book – Eurozone Dystopia. If you don’t want to get the book just scan back through the draft posts under the category Eurozone Book. These blogs formed the working draft of the book.

      best wishes
      bill

    28. Mahaish, i have pieced this together:

      Chapter 23 Abandon the Euro ­ Costs, threats and opportunities
      draft version
      Options for Europe – Part 75 to 80

      The path to a disorderly exit http://bilbo.economicoutlook.net/blog/?p=27686

      Does EMU exit mean EU expulsion? http://bilbo.economicoutlook.net/blog/?p=27693

      Issuing the new currency http://bilbo.economicoutlook.net/blog/?p=27715

      The exit process / Transaction costs http://bilbo.economicoutlook.net/blog/?p=27725

      Why the need for secrecy? / Lex Monetae – Re-denomination / Re-denomination rather than default? / Inflation threat from depreciation / Would the nation need to impose capital controls? http://bilbo.economicoutlook.net/blog/?p=27735

    29. Larry, mahaish, c: I agree that Naked Capitalism has a great deal of detail on everything about the Greek situation now, probably the best source of info on the web. But on some absolutely fundamental points its strongly held positions are uniquely, completely-off-the-spectrum wrong: international law, the sovereignty of the EU members, primacy of treaties. And many unwitting commenters there blithely accept astonishing statements made there.

      On the other hands, Bill’s legal statements in the blogs that c collected are broadly correct, undisputed, consistent with references. NC is extremely anti-Grexit & exaggerates the central EU authority – to the point of saying that Greece is not a sovereign state, that EU treaties & law override fundamental international law, even the UN Charter! (The UN Charter has a supremacy clause, like the US Constitution’s and every post-1945 multilateral treaty out there – like the EU treaties – has a clause about respecting the Charter.) So read NC, but with a grain of salt!

    30. A interesting piece from tuesday at “Ökonomenstimme” by Martin Hellwig, Prof at Max-Planck-Institut in Bonn, a verry well noted research institution in Germany.

      He claims that the cuts in ELA-credits are highly illegal, a damage to european law and blackmail:

      >>Jetzt hat die EZB die Notkredite für griechische Banken eingefroren. Anlass war das Scheitern der Verhandlungen zwischen der griechischen Regierung und der Euro-Gruppe über Sparpolitik und Schulden. Die Banken in Griechenland wurden geschlossen, der Zahlungsverkehr und der Zugang zu Bargeld drastisch eingeschränkt.

      Nach dem europäischen Vertrag ist die EZB für die Geldversorgung zuständig und für die Funktionsfähigkeit der Zahlungssysteme, auch in Griechenland. Damit ist das Einfrieren der Notkredite nicht zu vereinbaren, auch nicht die damalige Drohung gegenüber der irischen Regierung.<<

      http://www.oekonomenstimme.org/artikel/2015/07/die-ezb-und-die-deutschen-in-der-griechenlandkrise/

    31. The whole problem is in ECB policy – how it creates money. Right now it actually, supports (private banks ( investors) that already have created a mess. ECB should support regularly every member country based on a fear rules, rules that is easy to be observed and will be respected , because there will be stimulus to be respected.
      Every society should be able to print money to fuel its economy. Real money, not debt from some central bank. These money should be spend from the government. it is a matter of calculation how much should be “fueled” , suppose 3-5% of the GDP. Regularly and in small portions instead of big portions and when some bank have created a mess.
      Member EU governments should get this money only in case they do not make other debt. These 3-5% of GDP will look also like a bonus not to create debt. For a government that have budget 40% of GDP , these 3-5% will look like 9-12% increase of the budget.
      let’s take Greece for example: from 2000 to 2010 Greece has created about 2.2 trillions of GDP. I calculate that around 110 billion cumulative refueling was needed during that period. So if this monetary policy was working during that time -> there will be no debt crisis in Greece now – Greece would have had now 50-60% of it’s GDP of debt, or may be even nothing .

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