Germany Criticizes the ECB

Andamento del mercato - 15/05/2015

German politicians are particularly known for their hawkish tone, especially when it comes to firebrand Finance Minister Wolfgang Schaeuble. He chose to level his latest criticisms at the European Central Bank surprisingly leaving critiques Greece out of his fiery rhetoric. His latest miff comes as an accusation that the European Central Bank violated the very covenants and treaties that hold the European Monetary Union together. Schaueble accused the ECB of aiding Greece directly through the Emergency Liquidity Assistance program enlisted to help the Greek banking system stay solvent at a time when deposits are exiting domestic banks at near record pace. This direct monetization runs in direct conflict to the tenants of the Euro system, as the aid enabled the banks to assist the Greek government in rolling over and refinancing outstanding debt, something expressly prohibited by the existing treaties.

Schaeuble’s assessment comes at a time when Greece is desperately trying to cobble together an agreement with creditors in spite of lack of willingness. The IMF has already stepped back, with a refusal to grant Greece any further bailouts after the latest drawdown of SDR reserves with which Greece repaid most of the latest IMF payment. Even though it will probably mean substantial balance sheet losses, the IMF knows that any further aid will disappear down the black hole of the Greek economy. Germany is likely to vote on extending any further bailout assistance to Greece, but it seems as though they too will be unlikely to grant the Greek’s wishes to remain in the Euro Area. The continued foot-dragging promises to only hurt the Greek citizens as the country faces rising unemployment, poverty, and diminished future growth prospects. Although Greece may last the rest of the month, the worsening cash situation means that defaulting on outstanding obligations is almost a certainty unless a knight on a white horse comes riding in to save the day.


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