Eurozone-statement-on-Greece-s-2nd-bailout
Kicking the can just extended the EFSF entity to providing 30 yr loans to Greece. The EFSF was intended to be a temporary ‘crisis’ entity. It has become the, effective, backdoor issuer of euro area bonds. Something the original creators of the euro fought hard to prevent. Complete fiscal union is close at hand, imo. European people are walking blindly into the gradual accumulation of structures consistent with the creation of a euro super state with massive cross boarder financial commitments.
The EFSF has become a monetary and regulatory monster. She is now able to lend directly to governments, lend and inject capital to banks and even directly (buy) ‘assets’ (or junk) in the secondary debt markets. The EFSF has no democratically elected managers. (Euro ministers, who are elected, are ‘appointed’ to the board of the Luxembourg registered EFSF company at present). With such a growing list of activities how long will it be before this becomes a multi asset & loan business that will need commercial management and staff. Its rapidly becoming a ‘quango’ organisation, another imf or world bank type residence for retired political leaders. She is a monster in terms of scope but she must must grow larger and more powerful still to meet her systemic obligations. As an aside, it will be interesting to see what the ‘guarantees’ do to government balance sheets when the EFSF is called upon over the next few years. Core government debt obligations should mushroom due to the EFSF as well as domestic issuance of debt. I should add that the hope, at present, is (still) that the mere approval of this ‘monster’ will be enough to stabilize capital markets but, imo, for sure the capital markets will want to test her and see the color of her new money.
Q&A on EFSF
FT on the ‘Incredible increasing EFSF’ from march 2011. But note as of yesterday the EFSF’s powers have grown considerably. Its size must also be increased again soon.
http://ftalphaville.ft.com/blog/2011/03/21/519676/the-incredible-increasing-efsf/
zero hedge on the issue..
http://www.zerohedge.com/article/goldmans-complete-summary-european-council-decisions
Rich
(4 votes, average: 5.00 out of 5)
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