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European Tribune - Can the Eurozone National Central Banks create fiat Euros by themselves?
I suspect the same is true of other bailout funds created in other EU states in the last 3 years.

Huh. Germany did it through the treasury.

Financing

To provide recapitalisation measures and to assume risk positions, the Federal Ministry of Finance can take out credit totalling up to 70 billion Euros. With the consent of the budget committee of the German Parliament, this credit amount can be extended an additional 10 billion Euros.

In case the Federal Republic of Germany takes out loans for the Fund, its net borrowing and debt level will increase. However, as the Fund can acquire participations in financial sector enterprises and receives fees as consideration for granted guarantees, the negative effects on the public budget are minimized. In addition, the Fund generates administrative costs. These costs are borne by the Federal Republic of Germany.


The fact is that what we're experiencing right now is a top-down disaster. -Paul Krugman
by dvx (dvx.clt št gmail dotcom) on Wed Dec 1st, 2010 at 04:40:13 PM EST
Which cannot borrow from the Bundesbank.

Of all the ways of organizing banking, the worst is the one we have today — Mervyn King, 25 October 2010
by Migeru (migeru at eurotrib dot com) on Thu Dec 2nd, 2010 at 02:47:16 AM EST
[ Parent ]
So, if the national tresuries are bearing the costs (including administrative!) of bank restructuring funds, is the European System of Central Banks jointly and severally in dereliction of duty?

Of all the ways of organizing banking, the worst is the one we have today — Mervyn King, 25 October 2010
by Migeru (migeru at eurotrib dot com) on Thu Dec 2nd, 2010 at 05:41:14 AM EST
[ Parent ]
Hmmm, quite possibly severally, though I'm not sure about jointly.

This is quite possibly an issue that was inconceivable to the people who designed the system and framed the treaties, and if that's the case there is little guidance to be found either in the text of the treaties themselves or the records of the deliberations.

And given that the Eurosystem is, in institutional time, brand new, there is no precedent that can be sited.

So probably what it comes down to is: if an NCB decides it can create euros - and actually does so - then that will establish a precedent.

And if no NCB decides it can do so, that will set a precedent as well.

The fact is that what we're experiencing right now is a top-down disaster. -Paul Krugman

by dvx (dvx.clt št gmail dotcom) on Thu Dec 2nd, 2010 at 04:06:25 PM EST
[ Parent ]
Crises are precedent-setting and the resolution tends to become the new normal.

Unfortunately, we seem to have idiots in charge of resolving the current crisis.

Of all the ways of organizing banking, the worst is the one we have today — Mervyn King, 25 October 2010

by Migeru (migeru at eurotrib dot com) on Fri Dec 3rd, 2010 at 07:08:58 AM EST
[ Parent ]

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