Why the ECB will now buy Greece’s rotten debt

The ECB is poised to step in and buy rotten Greek debt off the financial system to stop contagion. We believe that the fairly stable response from markets on Monday (Europe) and Tuesday (Australia) indicate that markets have been too pessimistic regarding Greece. The ECB will unleash the full force of Quantitative Easing (QE) to prevent a Greek default hurting the European financial system. The ECB has the power, and there is precedence from when the US Federal Reserve bought sub-prime debt and securities from banks and other financial participants back in 2008-09. The ECB will probably copy the Fed’s playbook. This action will help calm markets further before the true economic reforms are introduced into the Greece economy or Greece exits the Eurozone. (VIEW LINK)