2. Separate Bank Accounts: Fire Up the Printing Presses at the Greek Central Bank
In
a
March 19 article on Seeking Alpha, George
Kesarios observed that the Greek central bank has the power to issue more than
just drachmas. The ECB is not an ordinary
central bank:
Rather, it is a confederation of central banks. Each European national central bank can theoretically do the same types of market operations as the ECB and then some. The forefathers of the euro have left many monetary windows open, which, if used correctly, can solve the European debt crisis in a very short period without taxpayer funds.
He
cited article 14.4 of the
Protocol on the Statute of the European System of Central Banks, which
provides:
14.4. National central banks may perform functions other than those specified in this Statute unless the Governing Council finds, by a majority of two thirds of the votes cast, that these interfere with the objectives and tasks of the ESCB. Such functions shall be performed on the responsibility and liability of national central banks and shall not be regarded as being part of the functions of the ESCB.That means the National Center Banks can do whatever the ECB can do--and even things it can't. The Greek central bank could step in and start issuing euros itself. Again, there is precedent for this. It was under Article 14.4 that the Irish Central Bank was able to print 80 billion euros as "emergency liquidity assistance," and the Greek central bank has already printed 44 billion euros itself.
The
Greek government could print euros, refinance its sovereign debt, and pay the
interest to itself, effectively eliminating the interest burden. Among other precedents, there is Canada, which borrowed from
its own central bank from 1939 to 1974 to fund major infrastructure
projects and social programs. It pulled
this off over a 25-year period without hyperinflating the currency, driving up
prices, or increasing the public debt, which remained low and sustainable.
There is the concern that the euro might suffer
by devaluation if other Eurozone members followed suit. But Kesarios points to the Japanese
experience, "where one can print and print and then print some more, without
the value of the currency being marked down (due to positive trade
flows)." The euro might be equally
resilient.
3. Divorce: Just Walk Away
According
to the May 29th New York Times, the 130 billion euro bailout that was supposed to
buy time for Greece is now mainly just servicing the interest on the debt. The "troika"--the
ECB, IMF, and European Commission--which holds three-fourths of the debt, is
sequestering the bailout funds to be paid right back to themselves in interest
payments. This is merely going to
compound the debt to disastrous levels, without a single cent going to the
Greeks or their comatose economy.
Interest
rates on Greek ten-year bonds have gone to nearly 30 percent recently. Under the Rule of 72, at 30% compounded
annually, debt doubles in 2.4 years. If
the Greeks can't even pay the interest on the debt today except by borrowing,
how are they going to repay double the principal in a mere 2.4 years? At 30%, the Greeks could be paying over 100%
of their GDP in interest charges. Legally, a contract that is
impossible to perform is void.
Alexis Tsipras, leader of the radical left-wing
Greek party Syriza, which is now in second place in the Greek parliament, calls
it an "odious debt," a legal term for a national debt incurred by a regime for purposes
that do not serve the best interests of the nation. An odious debt under international law need
not be repaid.
4. Spousal Support: The Public Bank Option
If divorce is too much to contemplate, Greece's crippling interest burden can be relieved by taking advantage of the ECB's very generous 1% rate for bankers. Article 123 of the Maastricht Treaty forbids member governments from borrowing directly from the ECB, but it makes an exception in paragraph 2 for "publicly-owned credit institutions"--something Greece will have plenty of when it nationalizes its banks. They can line up at the ECB's window for its bargain-basement 1% banking rate and use the borrowed funds to buy up the national debt.
Researcher Simon Thorpe wrote to the ECB and asked whether they would object if a publicly-owned credit institution were to borrow from the ECB and use the funds "to supply the money to a government such as the Greek government in order for that government to pay off its debts to financial markets." The ECB replied:
According to the Treaty--as you have just quoted--such publicly owned credit institutions "shall be given the same treatment by national central banks and the ECB as private credit institutions." It is up to the banks to decide how to use the money they have borrowed from the central bank system.
5. The Dowry: Impose a Financial Transaction Tax
Thorpe notes that the ECB has issued and lent nearly one trillion euros to the banks at 1% since December 2011--three times the total Greek debt of 355 billion euros. If Greek public banks borrowed from the ECB at 1% and bought Greece's sovereign debt, the debt could be paid off in 10 years just from the returns on a very modest Financial Transaction Tax (FTT) of 0.3%.
Imposing a tiny FTT on all financial trades would not only be a lucrative source of revenue but would prevent the attacks of speculators, both on the newly-issued drachma and on the sovereign debt of Greece and other Eurozone countries. The FTT has already been implemented in many countries. In 2011, there were 40 countries that had FTT in operation, raising $38 billion. (28bn euros).
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