Draghi’s dilemma

BY SEBASTIAN JOST

BERLIN, JULY 6 – The ECB tightened the credit conditions for Greece’s banks. But the step is much too late. The European Central Bank has its credibility long ago damaged

This move came as a surprise – because he was so far overdue from what anyone expecting. The European Central Bank (ECB) has changed the rules for emergency loans to Greek banks by tightening. The collateral that must be pledged on these loans, the banks will have higher risk premiums due.  

This decision Monday evening increases the pressure on the Greek banks initially not markedly. The Governing Council adjusted the rules only so gently that the financial institutions can continue to offer emergency loans in a volume of 89 billion euros.

Yet the decision is an important signal: The central bankers show that they do not close their eyes to the growing risk of a Greek sovereign default.

But to deploy and have real effect, the ECB would have to have send this signal much earlier.F or months the Greek Government maneuvered their country on the brink of insolvency along for months, -The euro zone countries were at a tricky time having management game from Athens.

Always in confidence that the ECB will keep the increasingly wobbling Greek banks already afloat.

© Translation / Die Welt

This reliance on backup from Frankfurt does not just happen. Again and again, the Central Bank of Europe during the crisis sees the politicians held back free.

It began in 2010 with the purchase of Greek government bonds, on which the ECB is sitting today.

This was followed by, among others, always more generous rules for bank financing in Spain, Italy or Portugal and abstruse special solution for the legacy of Irish banks that had yet to be distinguished from a prohibited state funding with the printing presses at best with a magnifying glass.

The principle was always the same: If it came down to it, stretched and bent the ECB their rules so that more money could flow.

Likewise, one was in the case of Greece.Although emergency loans should only be a temporary help and also exclusively solvent banks may be granted, the ECB admitted that so ailing institutions were daueralimentiert months.

Now the situation is completely method: The Greek government plays poker with confidence in the Fed funds for their banks further, the Euro countries struggle to find a common line, and also rely on it, that it is still enough time.

It is understandable for ECB President Mario Draghi does not want to  be the one in that situation, the Greek pushes over the edge that triggers a state bankruptcy and perhaps a euro exit. This decision should be left to elected governments and parliaments –   with a technocrat like the Fed Chairman who is by democratic design legitimately weakened. 

But now Mario Draghi is now once again pretty much alone in the rain – while they consult, the central bank has to make tricky decisions every few days.

Central bankers stand as politically influenced

Draghi is to blame, that he can maneuver at all in this situation. The ECB has missed an opportunity to signal in time that the red lines of its mandate are not bargaining chips.

An earlier increase in risk premiums or a cap on ELA loans have made it clear that Fed aids can be no substitute for a political solution to the Greek crisis.

Maybe the dispute between Athens and its creditors would nevertheless escalates – or at least, the ECB would have had 20 or 30 billion euros less in the fire. And they would have less credibility damaged. But if central bankers are once more as a politically influenced.

On top of that suffering also the reputation of just eight-month-old European Banking Supervisors, which is located also under the auspices of the ECB: You must be wondering how they can remain largely idle if Greek banks such stagger on the edge.

The concern that a combination of monetary policy and banking supervision leads to serious conflicts of interest are clearly corroborated by the Greek mess.

Since the Greek Government had announced their referendum, Mario Draghi is in a dilemma from which there is no easy way out. He bankrolled the Greek banks continue suffering his credibility. He pulled the emergency brake, he stands as one who carries the idea of ​​an irreversible monetary union to the grave.

© Translation / Die Welt

Draghi hat sich selbst in ein Dilemma manövriert

PHOTO: dpa