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What force? We are not talking about law on a euroepan level. What other force?

Interesting question. Since ECB has threathened to sink the Greek banking systems if the government did not accept killing of their own economy, we know that there are other forces then law at play. Which exactly, are often hard to figure out in time.

Eurointelligence:

Lorenzo Bini-Smaghi, the most prolific campaigner against default, told il Sole24 ore that the ECB had carried out an analysis on the potential impact of a Greek debt restructuring, and found it would imply the failure of a large part of the Greek banking system, as the Greek banks hold a large portion of the Greek sovereign debt. (Another reason is that Greeks would transfer all their deposit to foreign banks, a process that is already partially under way). At the point the Greek banks would no longer have access to ECB liquidity, and would have to end their support for the corporate sector. He said that since Greece does not have a primary balance, a default at this time would lead to the cessation of pension and other social payments. The Greek economy would collapse, with devastating economic and social consequences. He said the other countries should stop pushing Greece into a catastrophe. In what we would understand to be an indirect reference to Wolfgang Schäuble, he said that talk about restructuring had seriously negative effects on market sentiment.

Original Eurointelligence source appears to have been broken, and the Googlecache of it too. But it was quoted on ET on April 15th so probably written shortly before that.

Sweden's finest (and perhaps only) collaborative, leftist e-newspaper Synapze.se

by A swedish kind of death on Thu Sep 8th, 2011 at 07:18:36 AM EST
[ Parent ]
Since ECB has threathened to sink the Greek banking systems if the government did not accept killing of their own economy, we know that there are other forces th[a]n law at play.

And apparently they strongarmed Ireland into accepting a "rescue" within days of the Irish finance minister claimin that the Irish government was funded on a cash-basis for over half a year.

The ECB has also famously sent a letter to Italy's government with a shopping list of legislative reforms that must be enacted or the Italian banking system will be killed. There are contradictory stories about similar demands on Spain.

Trichet, when accepting the Charlemagne Prize for "contributions to European Unity", suggested an EU finance minister without a budget but the power to interfere with member state budgets. This has now been picked up by the Dutch Prime Minister.

This is really looking like rule by Central Banker.

Economics is politics by other means

by Migeru (migeru at eurotrib dot com) on Thu Sep 8th, 2011 at 07:29:14 AM EST
[ Parent ]
And Italy's government has just approved the balanced buget amendment
"Un ok rapido in Parlamento è nell'interesse del Paese", ha detto ancora Tremonti. Aggiungendo che il principio varrà anche per gli enti locali. Per garantire il pareggio di bilancio, saranno modificati tre articoli della Carta: non solo l'articolo 81, che fino ad oggi prevedeva l'obbligo di copertura delle leggi, ma anche l'articolo 53 (sulla contribuzione dei cittadini) e il 119 (sul federalismo fiscale). Il testo del disegno di legge prevede: "Non è consentito ricorrere all'indebitamento, se non nelle fasi avverse del ciclo economico nei limiti degli effetti da esso determinati, o per uno stato di necessità che non può essere sostenuto con le ordinarie decisioni di bilancio".
There's an exception for adverse economic conditions, but no details that I can find.
by gk (gk (gk quattro due due sette @gmail.com)) on Thu Sep 8th, 2011 at 07:33:51 AM EST
[ Parent ]
That's pretty stringent: recourse to debt is not allowed, except in adverse phases of the economic cycle within the bounds of the effects determined by the cycle, or due to a state of necessity that cannot be sustained with ordinary balance decisions.

Economics is politics by other means
by Migeru (migeru at eurotrib dot com) on Thu Sep 8th, 2011 at 07:39:00 AM EST
[ Parent ]
An unemployment rate above zero per cent is a state of necessity that cannot be legitimately sustained with ordinary balance decisions.

- Jake

Friends come and go. Enemies accumulate.

by JakeS (JangoSierra 'at' gmail 'dot' com) on Thu Sep 8th, 2011 at 09:01:37 AM EST
[ Parent ]
And it should be noted that the implicit refusal to rediscount new Greek bonds after a default event is pure blackmail that is totally unjustified by any sane economic standard, left, right or centre.

- Jake

Friends come and go. Enemies accumulate.

by JakeS (JangoSierra 'at' gmail 'dot' com) on Thu Sep 8th, 2011 at 08:59:32 AM EST
[ Parent ]

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