Saturday, 8 September 2012

ECB becomes leader of last resort for €urozone

Via Austrian economist, Detlev Schlichter, comes news that the EU Central Bank has declared itself the lender of last resort for €urozone countries.

Apparently this is allowed under existing treaty provisions and means that if an EU member state is unable to pay its way it will be legally responsible for creating some magic money out of thin air to lend to that member state, just like the Bank of England did to bail out RBS, Lloyds, Northern Rock and the other banks it ended up financing.

On the subject of the Bank of England, it's interesting to note that the BoE provided almost €58.6m of capital to the ECB which represents a 14.5% share in the company.  What I have been unable to discover thus far - but intend to find out - is whether the Bank of England is liable for the debts of the ECB and if it is, whether that liability is limited and to how much.