ECB and Inflation

[Monoriu]

I don't think it is just about Greece anymore.  If Greek voters elect a radical left party and then are allowed off the hook

I don't get this narrative, how is Greece being "allowed off the hook"?

If Greece were a normal country their present problems while severe would not provoke an immediate crisis because they could just issue debt.  They are running a primary surplus, no question it could be done in theory.

It can't be done in practice though because Greece is not a normal country, it is a Eurozone country.  They can't sell their own domestic debt, because the ECB won't let them -  the ECB forbid Greek bank members of the EZ to use Greek debt as collateral, and it has instructed Greek banks not to increase their stock of Greek government bonds.  I.e. the ECB is artificially cutting off any financial options for the Greek government other than getting money from EU creditors or the IMF. 

The sryiza government is a train wreck, no doubt - it is amateurish and full of suspiciously Marxist ideologues.  But the main problem here is an always has been a boneheaded EU policy that has discredited all other political forces and reinforced the crisis.  The current policy is the most idiotic of all - it seeks to force the country into a settlement that settles nothing and keeps the underlying problem- an unmanageable stock of debt - intact and festering.

At this point, hard to see a better option for Greece than outright default.

If Greece is allowed to issue debt, isn't that like printing Euros?  Sounds reasonable for ECB to prohibit Greece from doing so, otherwise they'll just print Euros endlessly until their debt disappears. 

[Admiral Yi]

If Greece is allowed to issue debt, isn't that like printing Euros?

No.  The opposite, if anything.

[Monoriu]

If Greece is allowed to issue debt, isn't that like printing Euros?

No.  The opposite, if anything.

What is the rationale for ECB to not let Greece sell their own debt? 

[MadImmortalMan]

What is the rationale for ECB to not let Greece sell their own debt? 

I don't think they can really stop them, can they?

But I guess because the ECB is trying to get inflation up.

[Admiral Yi]

What is the rationale for ECB to not let Greece sell their own debt? 

I imagine it's that the original rationale of this entire deal was to get Greek deficits down to a level where the debt burden was sustainable.

[citizen k]

http://www.zerohedge.com/news/2015-04-15/meet-mario-draghis-attacker-her-own-words

[Sheilbh]

What is the rationale for ECB to not let Greece sell their own debt? 

I don't think they can really stop them, can they?

Of course. The ECB limits the amount of T-Bills they can sell.

This would be the way Europe would get around the problem of not disbursing money to Greece until the end of the program and Greece having a number of short-term payments to make in the meantime - like to the IMF. And there is precedent for it. It's what the ECB did in 2012 when the Samaras government was newly elected and negotiating over the second bailout. But they didn't.

The ECB wanted to keep the pressure on the Greeks to make concessions to get a deal so, yet again the ECB became a political actor rather than behaving like a central bank.

[Tonitrus]

No comments about Draghi being doused with confetti by a Femen activist today? 

No boobs, no comments.

[MadImmortalMan]

No boobs, no comments.

There is obvious g-string.

Some people are never satisfied. 

[Monoriu]

No boobs, no comments.

There is obvious g-string.

Some people are never satisfied. 

For a moment I thought it was absolutely amazing that she jumped onto the desk while wearing high heels.  The photograph seemed to show that her right foot was wearing high feels.  But then I looked at the other foot and realised that she was wearing flat shoes.  That was probably a microphone that appeared to be under her right foot. 

[Zanza]

The ECB wanted to keep the pressure on the Greeks to make concessions to get a deal so, yet again the ECB became a political actor rather than behaving like a central bank.

It acted like a creditor.

[Admiral Yi]

I think it acted like a central bank. 

[The Minsky Moment]

What is the rationale for ECB to not let Greece sell their own debt? 

I don't think they can really stop them, can they?

But I guess because the ECB is trying to get inflation up.

Unrelated.
Greece is not significant enough to have a material impact on EZ wide inflation.

[Sheilbh]

I'll come back to this thread with more. But just read this fascinating piece from October 1992, so a month or so after we'd been forced out of ERM. On Maastricht and the structure of EMU:
http://www.lrb.co.uk/v14/n19/wynne-godley/maastricht-and-all-that

[Sheilbh]

In general the risk of contagion is no longer seen with a default, but rather with giving in to the demands and brinkmanship of the Greek government. So there is a certain willingness not to bail out Greece in the last minute this time.

Default within the Eurozone could be okay - interesting S&P have confirmed that according to the way rating agencies work if Greece stopped paying the ECB it wouldn't count as a selective default.

I think there's a lot of overconfidence about Grexit. Arguably what's driving this crisis is that the negotiations are between one side who don't believe Grexit will or can happen and another who think they can contain it if it does.

Edit: Also interesting piece on IMF involvement in the Eurozone crisis which makes you very thankful Mario Draghi's at the ECB now:
https://www.cigionline.org/sites/default/files/cigi_paper_no.61web.pdf