Time ECB admitted its mistake in Ireland
Bank-friendly strategy imposed by ECB on State is unique and perhaps even outside its power, writes Colm McCarthy
The slow-motion train-wreck of the eurozone crisis left the station in Brussels on May 2, 2010, when European leaders decided that there should be no sovereign default in Greece, but rather an emergency official lending programme to the Greek government totalling €110bn. They also decided that senior unsecured bondholders in eurozone banks would be paid in full, at the expense of the sovereign states in which bust banks were domiciled.
This policy has been maintained in the case of bank creditors (no senior unsecured bank bondholder has lost) but Greece defaulted in March to the tune of €100bn , all paid by private sector holders of Greek sovereign debt. This was the second Greek bailout and was also inadequate. The preference for bank over sovereign creditors has also failed, since European banks remain under-capitalised and unable to recover the confidence of lenders and investors.