“There’s no solution possible” for Greece other than its austerity program, Noyer, Bank of France governor, told reporters in Paris today. “Restructuring is not a solution, it’s a horror story.” If the country fails to meet the terms of its bailout, Greek government debt will be “ineligible as collateral” at the ECB, he said.
Right. All those institutions that bought this paper believing they were “too big to fail” would have to face the fact that they’re not, that they can fail, that the government will let them fail.
This is not a bad thing, it’s a good thing. It’s called “market discipline” and is really important.
“The lengthening of maturities raises very difficult questions,” Noyer said. “There’s a strong chance it will be the equivalent of a default.”
That’s because it is a default.
The ECB last year suspended the minimum credit-rating threshold for Greek bonds after the country’s banks were shut out of credit markets for funding. Banks can borrow as much money as they need for up to three months against collateral.
So the ECB made a decision to take crap. Now they’re whining that it tastes like, well, crap.
Who’s responsibility is this again?
“The markets are getting impatient, they don’t see a real sort of light at the end of the tunnel,”
There’s a light.
It’s a train.
For Greece ‘to reduce the stock of debt, the only solution is ambitious privatization,” Noyer said. “It is necessary to have the equivalent of an internal devaluation. Cut production costs. There is no other solution.”
Yes there is. Greece can tell the ECB this:
And they should.