Financial Times
February 19, 2012
Martin Riggs: I should have cut the red wire.
Roger Murtaugh: You did cut the red wire.
Martin Riggs: No, I didn’t, I cut the blue wire.
Roger Murtaugh: That’s what I meant. We should have waited for the bomb squad!
Lethal Weapon, 1987
Usually, it’s considered best to disassemble bombs in a calm, orderly manner, without arguments and exchanges of insults among the Explosive Ordnance Disposal team. The Greek government and its official sector creditors have chosen a different path.
Never mind the disagreements between the Greeks and the “troika” of the euro group, the European Central Bank, and the International Monetary Fund. Those are predictable. Though I was surprised at how annoyed IMF officials became with their counterparts at the ECB over its unwillingness to book any losses on their Greek securities.
Now, though, the finance officials of the euro group members are squabbling among themselves over whether, or how quickly, they could deal with the technical problems of a country’s rapid departure from the single currency.
The German finance ministry has been saying, for example, that a Greek hard default followed by departure and devaluation would create big problems for the Greeks, but could be readily dealt with by the rest of the system. Any minor deposit flight from compliant, approved, countries such as Portugal or Ireland could be offset by some short term, emergency liquidity aid from the ECB. After all, look how small Greece is on the economic map, ist das nicht wahr?
On the other side of the Rhine they worry about which wire on the eurosystem bomb the Germans were thinking of cutting. “This is very, very poorly informed talk,” as one French friend of mine says, “that we can let Greece default and ringfence the other peripheral countries.” French financial officialdom believes a “disorderly” Greek default would lead to the country imposing capital controls, justified with elastic interpretations of the Treaty on European Union.
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