that policy should not be geared towards preventing
failure, but preparing for it.We should by now have learned
In addition, the EMF could contribute decisively to the
transparency of public finances because its intervention
mechanism in the case of failure would penalise all
derivatives and other transactions that had not been
previously registered with a special registry of public
debt, which the EMF would maintain.
The creation of a European Monetary Fund should be
seen as the best way to protect the interests of the
(relatively) fiscally strong member countries. Without
such an institution, a country like Germany would
always find itself in a ‘lose-lose’ situation if a country
like Greece is on the brink of collapse. If Germany
agrees to a rescue package, it puts its public finances at
risk. If it does not, its financial institutions would bear
the brunt of the considerable losses that would arise
from a disorderly failure and the ensuing contagion.
Given the weak state of the German banking system,
this would destabilize trust.
The excert above was from a study done in Febuary, in Belgium by, Daniel Gros and Thomas Mayer. I have also read on the FT that the new EMF could be up and running by June. Given that the strongest country in the EU is Germany, and given that the banks in Germany are heavily exposed to the bad debt in Greece. Portugal is also showing it is the closest to Greeces poor credit rating.... This will be a summer of scorching waves of sweat, and not just from the sun.
I also imagine that as explained in the policy study that regarding the IMF, due to its Nato member the USA, the IMF wôuld be too soft on Greece, as Greece is a Nato member.
The key here to me, is that things have not even started to heat up. Stock up on MREs and popcorn...this will be some new age Repo action, German style.
Disclosure: no disclosure