So the ECB exchanges EUR 50 bln in Greek debt bought on the markets to “transmit monetary policy” in exchange for bonds with similar characteristics, but the ECB avoids getting swept up in the PSI.
The ECB “realizes a profit” because it bought the bonds at a discount to face value and it is getting replacement bonds at face value. It then distributes the “profit” on the bonds to the national governments, which are expected to use those funds to support Greece.
But riddle me this: How does the ECB distribute a profit that it has not, in fact, realized? It’s not like they have liquidated the portfolio at face value, they just got more Greek paper.
Perhaps I don’t have this figured out exactly but it looks pretty shady. But that’s the way the game is played in Europe…
