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Role of ECB in Troika

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  • 29-08-2013 9:48pm
    #1
    Stabshauptmann
    Registered Users Posts: 4,885 ✭✭✭


    I've been doing some googling but cannot find the answer, so perhaps someone here would be kind enough to educate me.

    So the Troika is the EU, IMF & ECB. The funding was 85bn, coming from EU in the form of ESFM & EFSF, and from the IMF.

    What is the ECB's role in the Troika?

    People always talk about the ECB lending to the banks. I understand the repo and reverse repo market.
    I understand the ELA and the 30bn promissory notes.

    What I dont get is the ECB role in the programme funded by the ESFM & EFSF (or new programmes funded by ESM).


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    #2
    Geuze
    Registered Users Posts: 13,195 ✭✭✭✭Geuze


    It is illegal for the ECB to lend to Govts.

    I think they have an advisory or supervisory role.


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    #3
    Scofflaw
    Registered Users Posts: 23,283 ✭✭✭✭Scofflaw


    Stabshauptmann wrote: »
    I've been doing some googling but cannot find the answer, so perhaps someone here would be kind enough to educate me.

    So the Troika is the EU, IMF & ECB. The funding was 85bn, coming from EU in the form of ESFM & EFSF, and from the IMF.

    What is the ECB's role in the Troika?

    People always talk about the ECB lending to the banks. I understand the repo and reverse repo market.
    I understand the ELA and the 30bn promissory notes.

    What I dont get is the ECB role in the programme funded by the ESFM & EFSF (or new programmes funded by ESM).

    There are - more or less - three lending partners in troika bailouts:

    1. the EU through the EFSM
    2. the IMF
    3. the states involved in the EFSF or ESM (and bilateral lenders)

    The ECB is not a lending partner in state bailouts - it only lends to banks, and is prohibited from lending to governments.

    What it's doing sitting on the troika table is acting as an agent for the EFSF or ESM funding countries. Neither of those funds have the supervisory or advisory capacity/expertise to sit on the troika, and while it would be possible in theory to put together such capacity from the national civil services of the states involved, it would be hopelessly clumsy and quite probably divisive as well.

    So the EU is on the troika because it manages the EU funds, the IMF manages the IMF funds, and the ECB is there, in one sense, on behalf of the EFSF/ESM funds, and in another sense because it provides very necessary expertise, particularly given the financial nature of the crisis.

    cordially,
    Scofflaw


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