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ECB life vest does not fit Greece

By Nikos Konstandaras

The European Central Bank’s decision to support eurozone members struggling to borrow from the markets is a significant step toward saving the common currency. Regardless of the questions that are still unanswered as to the functioning and effectiveness of the new loan framework, the very fact that such a decision was taken may turn out to be the greatest help: If ECB President Mario Draghi had not met market expectations, confidence in eurozone members and in the common currency itself would have been undermined even further.

The decision to strengthen the euro, however, also points out how far Greece is from most of its EU partners. The new conditions pertaining to the eurozone do not apply directly to us. Only when Greece returns to the markets will it be able to benefit from the ECB’s interventions. The ECB’s purchase of state bonds will be tied to a program of economic reforms, with the participation of the International Monetary Fund. In other words, this will be something like the Memorandum and the troika supervision that Greece already has to deal with, but with funds coming from EU mechanisms and not directly from the taxpayers of member states (with the bad blood this has caused between lenders and borrowers).

We can say that the new system is designed to help countries facing a “milder” crisis than the one we’re up against. At the same time, Draghi made clear that even as the ECB relaxes its criteria for providing liquidity to member states’ banks, it will still not accept Greek bonds as collateral for providing liquidity to local banks. Greece, in short, has a long way to go before it reaches the point where it will benefit from measures aimed at saving the euro.

It is encouraging that more and more German politicians and analysts recognize that Greece’s possible exit from the eurozone would constitute a defeat with unpredictable consequences. But this is a double-edged sword: what they mean is that if Greece does not fulfill its commitments, if it cannot impose spending cuts and implement reforms that will align spending with revenues, it will only have itself to blame, not its partners.

The shame is that Europe was very slow in dealing with the crisis that first appeared in Greece -- at great cost to Greece and to the eurozone itself. If the measures that the ECB announced on Thursday had applied from the start, if our partners had made clear that no country would be allowed to fall from the eurozone, if we had moved ahead with timely reforms, the crisis would not have been so overwhelming, so threatening.

ekathimerini.com , Thursday September 6, 2012 (23:09)  
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