Again, this is the power of framing effects. They haven't ended ELA funding but they have reduced it which will make it even harder for that cash starved country to get hold of euros.
Bill Mitchell has argued that by their own charter, the ECB simply can't cut off funding to Greece.
"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 political aims that are outside its remit would signal a catastrophic failure of the common currency."
http://bilbo.economicoutlook.net/blog/?p=31294
True but the ECB didn't take this extraordinary position-they cut funds to the Greeks but they didn't cut them off. This is what I mean by framing effects. I could have said in the title 'ECB Decides not to Cut Off ELA Funding to Greece' and that would also have been accurate though more misleading without qualification.
"The European Central Bank on Monday decided to maintain the emergency liquidity assistance (ELA) lifeline to Greek banks, but made it harder for them to access the funds."
"The Governing Council of the European Central Bank decided today to maintain the provision of emergency liquidity assistance (ELA) to Greek banks at the level decided on 26 June 2015 after discussing a proposal from the Bank of Greece," the Frankfurt-based bank said in a statement.
"At the same time, the eurozone central bank also noted that ELA can only be provided against sufficient collateral, putting more pressure on the debt-wracked country by tightening collateral terms."
"The ECB will review its decision on Wednesday, the official told Bloomberg, the day after an emergency summit of eurozone leaders on the Greek crisis in Brussels.
http://news.yahoo.com/ecb-maintains-emergency-liquidity-assistance-greek-banks-statement-181200734.html
So they are aware of Mitchell's point about their charter and for that reason they didn't cut them off but it's still even harder for the Greek banks to get funding now than it was before-pushing things a little more in the direction of Grexit.
Bill Mitchell has argued that by their own charter, the ECB simply can't cut off funding to Greece.
"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 political aims that are outside its remit would signal a catastrophic failure of the common currency."
http://bilbo.economicoutlook.net/blog/?p=31294
True but the ECB didn't take this extraordinary position-they cut funds to the Greeks but they didn't cut them off. This is what I mean by framing effects. I could have said in the title 'ECB Decides not to Cut Off ELA Funding to Greece' and that would also have been accurate though more misleading without qualification.
"The European Central Bank on Monday decided to maintain the emergency liquidity assistance (ELA) lifeline to Greek banks, but made it harder for them to access the funds."
"The Governing Council of the European Central Bank decided today to maintain the provision of emergency liquidity assistance (ELA) to Greek banks at the level decided on 26 June 2015 after discussing a proposal from the Bank of Greece," the Frankfurt-based bank said in a statement.
"At the same time, the eurozone central bank also noted that ELA can only be provided against sufficient collateral, putting more pressure on the debt-wracked country by tightening collateral terms."
"The ECB will review its decision on Wednesday, the official told Bloomberg, the day after an emergency summit of eurozone leaders on the Greek crisis in Brussels.
http://news.yahoo.com/ecb-maintains-emergency-liquidity-assistance-greek-banks-statement-181200734.html
So they are aware of Mitchell's point about their charter and for that reason they didn't cut them off but it's still even harder for the Greek banks to get funding now than it was before-pushing things a little more in the direction of Grexit.
No comments:
Post a Comment