EBC Makes Irresponsible Decision to Accept Greek Junk Bonds

The European Central Bank's decision to accept Greek Junk bonds as collateral for loans is imbecilic.  In one stroke they have converted a Greek crisis into a threat to the Eurozone and the credability of European Political and Financial Institutions.

Not even the United States Federal Reserve accepts State junk bonds as collateral for huge loans.  If a State goes bankrupt it does't bankrupt the nation doesn't threaten the dollarzone,and does';t threaten the stability Federal poitical and financial i nstitutions.

OK, in the Europe, Greek bankruptcy would create many  difficulties, but the size of the problems would have been relatrively small.  The European Central Bank's  decision implicitly supports the PIIGS (Portugal, Italy, Ireland, Greece, and Spain) in any profligate irreponsible financial expenditures based on over-extended borrowing.  That is an open-ended comitment that  temporarily gets politicians of the hook at the cost of potentially astronomic loans secured by junk paper.

The FCB decision jeopardises the integrity and future of the Eurozone and the European Union. Suddenly we are gambling with the future of Europe itself instead of dealing with the problems provoked by one small memlber state.

The Eurozone would be injured by Greek bankruptcy, but not fatally.  Serial PIIG bankruptcy after the European Central Bank had accepted thir junk paper as collateral could provoke Europe-wide galloping infaltion, damage the Eurozone and its Institutions, and destroy economic and financial stability.

A responsible householder doesn't use his house as collateral for a loan to pay for a broken window.

Link
http://www.spiegel.de/international/europe/0,1518,692966,00.html