We have Germany and the Netherlands in one corner and the rest of the EU in the other corner. Axel Weber’s little “dummy spit” this week about French banks exchanging their Greek debt in exchange for German debt at the ECB window was a little hard to take.
Sure we all know where Axel is coming from but a bank has to do what a bank has to do. European banks are loaded up on peripheral EU debt which just a short time ago was not that far priced from the German stuff. Well we all know that is no longer the case but banks have to get rid of it somehow otherwise no one will lend to anyone – remember the credit freeze after Lehman’s.
Whilst no one is talking QE yet I for one don’t see any real alternative. It may be a few months away while Axel fights the good fight but lets be realistic here. That debt needs to be removed from banks balance sheets and it is no good Axel bleating about it. …lets get on with it.