Bailout? what bailout? Greece need not apply

The European Central Bank has been buying sovereign debt since March. This is effectively the same idea as the USA’s ‘quantitative easing’. In the US, the Federal Reserve Board (the Fed) printed money. The government printed T-bills and sold them to the Fed. Then the government used that money to ease capital restrictions.

The ECB is doing much the same thing. If you google ‘ecb quantitative easing’ you will find pages like this one. Here are a few quotes:

The ECB and national central banks started buying sovereign debt on Monday under the 19-month plan to inject 1.1 trillion euros ($1.2 trillion) into the economy.

“They know it will not be easy to purchase 60 billion a month including covered bonds and ABS, so they have to deal very cautiously,” said Patrick Jacq, a senior fixed-income strategist at BNP Paribas SA in Paris. “The market remains in positive territory but there is no further acceleration, which means that apparently there is no squeeze on any paper.”

National central banks purchased Belgian, French, German, Italian and Spanish debt, according to people with knowledge of the transactions, who asked not to be identified because the information is private.

Euro-area bonds extended a 14-month rally fueled by speculation that buying 60 billion euros of debt a month will create a scarcity of government bonds among buyers of the securities.

Notice that Germany benefits from this ‘deal’, and Greece does not.

Does that seem fair to you? That’s the dumb question.

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