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Especially because we're now told that neither Greece nor Ireland are being allowed to borrow from the EFSF to buy back their bonds. And also, because the EFSF is supposed to lend at penalty rates of interest.

There is some debate as to whether the EFSF violates the "no-bailout clause" of the Eurozone. These rules are an attempt to make it possible to argue that it doesn't. But by not violating the "no-bailout clause" the EFSF also solves nothing.

Economics is politics by other means

by Migeru (migeru at eurotrib dot com) on Mon Apr 11th, 2011 at 08:51:00 AM EST
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Effectively, the only legitimate use of ESF funds to a recipient country is to pay the interest on bonds, which are mostly from EMU banks, at rates that cause these countries to increase their debt and under conditions that cause these countries to be ever less able to make the payments. So the "no bailout clause" combined with the "no repurchase of bonds at a discount clause" do one useful thing: the clearly show that the whole process shows that the mechanism is a means of laundering the transfer of money from various central banks to private banks sufficiently that it slips past most EPP and PES members.

Why not just call the ESF and associated rules what it is: Bailout Laundering.

As the Dutch said while fighting the Spanish: "It is not necessary to have hope in order to persevere."

by ARGeezer (ARGeezer a in a circle eurotrib daught com) on Mon Apr 11th, 2011 at 11:41:04 AM EST
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