Did emergency liquidity assistance (ELA) of the ECB delay the bankruptcy of Greek banks?

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  1. Blissex commented on Sep 22

    Many thanks for mentioning this paper, it will also be useful to me in some discussions with other bloggers.

    I sort of agree with the conclusion, but I think that the argument could have been stronger: rather than simply the ECB not pre-emptying the political fiscal negotiations, it was legitimate for them to continue lending to insolvent banks backed by an insolvent government (as the greek government’s minister of finance officially repeated several times) because they were also backed by the solvent governments negotiating the further bailout.

    The other bloggers, almost always anglo-american, usually argue that the ECB should have opened an unlimited overdraft for the greek banks and the greek government, regardless of their insolvency, regardless of the treaties forbidding that. I often think that is part of a campaign to destroy the eurozone and undermine the EU, because of course the eurozone and the EU would collapse if one government were given the ability to withdraw any amounts they wanted from the ECB, to be refunded by the other governments, without full political union enabling fiscal union and allowing all members to vote on how the funds be spent.

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