Monday, July 4, 2011

ECB and Trust

The European Wall Street Journal published this on July 4, 2011:

Some of the European Central Bank's (ECB) notable policy shifts.

  • Jan 2010: ECB President Jean Claude Trichet said that the ECB wouldn't change its collateral rules for the sake of any particular country. In May 2010 it suspends these rules for Greek government bonds.

  • Mar 2010: Mr. Trichet said it wouldn't be appropriate for the IMF to supply assistance for Greece. The IMF later became a a major part of the Greek rescue operation.

  • May 2010: Mr. Trichet said the ECB in its monthly meeting did not discuss whether to buy Greek bonds. Four days later the ECB anounced it would purchase Greek bonds.

It is always the same story. The politicians and political institutions that should stabilize a country change their opinion on a whim and worse, they deny and hide truths up to the moment when it explodes. The WSJ picked the ECB in this example. But I also vividly remember when on a given Friday all Irish politicians denied any rumors of any bankruptcy or collapse, claiming everything is fine, just to announce the following day or the Sunday that the banking system has failed and that they already brokered a deal with the ECB and IMF for a bail out package! How can one play the game if the rules keep changing all the time?

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