These comments from the managing director of International Institute of Finance reveal astonishing ignorance.
The European Central Bank’s exposure to Greek liabilities is more than twice as big as the ECB’s capital, said Dallara, who represented banks in their negotiations with the Greek government on its debt restructuring. As a result, he predicted the bank would be unable to provide liquidity and stabilize the euro-area financial sector.“The ECB will be insolvent” if Greece were to exit the euro, Dallara said. “Europe would have to first and foremost recapitalize its central bank.”
He apparently fails to grasp the elementary fact that the ECB, like any central bank, is empowered to create fiat money at will, and so can NEVER become insolvent!
The European Central Bank’s exposure to Greek liabilities is more than twice as big as the ECB’s capital, said Dallara, who represented banks in their negotiations with the Greek government on its debt restructuring. As a result, he predicted the bank would be unable to provide liquidity and stabilize the euro-area financial sector.“The ECB will be insolvent” if Greece were to exit the euro, Dallara said. “Europe would have to first and foremost recapitalize its central bank.”
He apparently fails to grasp the elementary fact that the ECB, like any central bank, is empowered to create fiat money at will, and so can NEVER become insolvent!
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