According to IIF director Charles Dallara in a Bloomberg interview, "ECB will be insolvent if Greece were to exit the euro. Europe would have to first and foremost recapitalize its central bank."
Excuse me for asking but how would they attempt to do that? Print Euros?
Please consider Dallara Says Greek Euro Exit May Exceed 1 Trillion Euros
A small dose of reality has set in for a group of European central bankers: Euro Officials Begin to Weigh Greek Exit as Euro Weakens.
Greece’s possible exit from the euro moved to the center of Europe’s financial-crisis debate, rattling markets as authorities in Athens struggled to form a government.
Inquiring minds will note that the German tour operator Tui is taking measures to protect itself from a Greek exit from the Euro and subsequent currency meltdown.Please consider Tui prepares Greek hoteliers for possible euro exitGerman tour operator Tui has asked hotels in Greece to sign new contracts spelling out how the company will pay its bills if Greece leaves the eurozone and starts using a new currency.
As the days progress, the strategy of George Papandreou has become increasingly clear. He does not like the terms forced on him by Eurozone bureaucrats especially French president Nicolas Sarkozy and German Chancellor Angela Merkel.Not only is he fed up with Eurocrats, he is fed up with Greek protests as well as pressure from political opposition.
Dr. Doom got it wrong.
The parade of economists and investors led by Nouriel Roubini predicting Greece’s ejection by now from the eurozone failed to appreciate the resolve of European policy makers to protect their union and the amount of pain Greeks are willing to stomach.
At long last, everyone is willing to wave the white flag on a Greece exit from the eurozone. Please consider German Vice Chancellor ‘Very Skeptical’ Greece Can Be Rescued.
German Vice Chancellor Philipp Roesler said he’s “very skeptical” that European leaders will be able to rescue Greece and the prospect of the country’s exit from the euro had “lost its terror.”
In the past week, as I expected, the ECB, Troika, German officials and others have all warned Greeks to not vote for Alexis Tsipras and his radical-left party Syriza. The question is will it backfire.
I suggest it already has. The pertinent question is whether it backfire enough to matter.
Please consider Greeks rail against 'crude' German editorial.
A key question on trader's minds is who will win the June 17th Greece election and whether it results in a Greek exit of the eurozone.
Deutsche Bank gives it assessment in a report called Probability weighting EUR views on Greece
In a surprise move the ECB cut rates by 25 basis points. They had plenty of reasons to do so such as German PMI contraction, Eurozone contraction, postponement of the EFSF bond sale, and the surprise referendum in Greece.