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Monday, July 18, 2011

Letter to Mr. Jean-Claude Trichet, President of the ECB

Dear Sir:

your comments in today’s FTD can be interpreted to mean that anything other than continued EU-financing for Greece would be unacceptable to the ECB. I hope I misunderstood because, if not, you might as well have said that anything other than continued bail-out’s of banks on the part of the EU would be unacceptable to the ECB.

You threaten to no longer accept Greek bonds as collateral for extending credit to the Greek banking sector. That is something the ECB should have done already 2 years ago in order to trigger timely attention to the real problem. Not having done that is one of the major reasons why the process is now more or less out of control.

The threat now to no longer accept Greek bonds as collateral is a bluff which is almost asking to be called. You know very well that the same day that the ECB does that, it would have to close its doors (or rather: then the governments would indeed be forced to replenish its capital).

I trust you know how Mr. William R. (“Bill”) Rhodes feels about the present actions on the part of EU/ECB-officials and politicians; if not, listen to his interview in The Economist. Having been involved with Bill Rhodes during the Argentine reschedulings during the 1980s, I feel qualified to say that he is the world’s most renowned expert on debt reschedulings.

Any payment difficulty (be the borrower a company or a country) is, at the start, an issue between borrower and lenders. Governments can (and should!) steer that process behind the scenes but officially they only come in at the end of the process and not at its beginning. That way, the lenders remain “on the hook” from the outset and this must be a conditio sine qua non. The fact the EU/ECB have jumped the gun and, thereby, assumed responsibility from the start is a case of irresponsibility versus the public of gigantic proportions!

The Greek debt must not be forgiven and it must not be refinanced by tax payers. Instead, it must be rescheduled in such a way that everyone can as soon as possible devote resources and brain power to the issue which is at the crux of everything: the re-industrialization of the Greek economy. Without that, everything else is like rearranging chairs on the deck of the Titanic!

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