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Greek banks would no longer have access to refinancing with the ECB
This is the policy decision that should be highlighted.
There is no law of nature, or of economics, or of the European Union that states that the ECB can not rediscount new Greek bonds that are used to recapitalise the "good bank" part of the Greek banks, after the bondholders, management, interbank loans and deposits above the guarantee limit have been destroyed. Those new bonds will be if not pristine then at least much lower risk by any rational analysis than the old Greek bonds. Refusing to rediscount the new bonds while being prepared to rediscount the old bonds is an explicit admission that at least one of the following is true:
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