Here's my latest comment in the Guardian where a number of reports imply that the main obstacle to using the European Central Bank to get Greece (and now Italy) off the hook is Germany's refusal to accept any form of Quantitative Easing. Here's a comment I just posted on the Guardian that I hope explains why this refusal is not justified.
A couple of days ago, I made the suggestion
that the ECB should indulge in a spot of Quantitative Easing, and lend
Greece the 329 billion euros needed to pay off all the money it owes to
the financial markets and get them to pay the money back over 10 years
with interest at its key interest rate of 1.25%. That way, they would no
longer be having to pay the banks 17.78% in interest - a rate that is
totally ridiculous.
It's important to realize that this use of
Quantitive Easing is totally unlike the sort of Quantitative Easing
being done by George Osborne and his chums at the Bank of England. That
is a total disaster, because it just puts even more money into the
banks, hedge funds, pension funds, etc with absolutely no requirement
for them to do anything useful with the funds (they may decide to pay
themselves big bonuses, or move it to the Cayman Islands, or buy Credit
Default Swaps - I'm sure they'll find something to do with the 75
billion they have been promised).
No, the sort of Quantitative
Easing that I am proposing is very different, because the money that is
"printed" can only be used to pay off the debts to the banks who are
charging the outrageous 17.78% interest rates. The Greeks would have to
pay the money back, but under controlled conditions.
Importantly,
since a very substantial proportion of the money that was lent to the
Greek government was probably the result of using Fractional Reserve
Banking to generate the money out of thin air, it is highly probable
that the money "printed" by the ECB would just disappear into thin air
too.
Someone should force Angela Merkel to read the positive money website,
which explains very clearly the real reason why the total government
debt for the 27 EU countries currently stands at nearly 10 trillion
euros, of which more than 2 trillion is owed by - guess who? - the
German government. If she did, she, and the other Germans who think that
any use of the ECB to print some extra euros, might realise that the
result will not be the sort of hyperinflation that Germany saw in the
1920s. It appears that this extreme caution is probably the main reason
why this real solution is being ignored.