The ECB crisis and Greek debt

The key to problem-solving is determining who has the problem. The EC and many finance ministers in the EU would like to see a reprofiling of Greek debt. A reprofiling would extend maturities of the existing debt which could also be called a soft restructuring or default. The problem arises with whether the ECB will take reprofiled bonds as collateral. This will have major ramifications for any restructuring. In short, reprofiling will not work if the ECB will not take the bonds as collateral. The ECB is saying that the banks and fiscal authorities will have to find the solution that works.

With inflation above target, there are strong reasons for why the ECB does not want to be in the bail-out business. The ECB has also not bought any bonds for the ninth week running. This was part of their "QE program" to help out during the Eu debt crises; however, it seems to sending clear signals that it is not going to be accomodative of monetizing bad debt.