ECB under pressure to take haircut
"It appears that over the past day or so, the ECB has come under pressure to participate in Greeces PSI (Private Sector Involvement - ed) . Reports that the IMF were pushing for this has quickly been denied. The ECB has also formally rejected participating. Nevertheless, Dallara, representing private sector creditors, is insisting that all creditors, private and public, share in the adjustment.
We have written about the thorny issues raised by the ECBs bond purchases, leaving aside the objections that led to the resignation of both Weber and Stark. The more the ECB buys, while refusing a haircut, the greater the haircut on the private sector is required to voluntarily take to reduce Greeces overall debt burden to what the IMF says is sustainable, which appears to be 120% in 2020."
The ECB reportedly has purchased between 40 and 60bn at something like a 25% discount. The ECB, like the Fed, has loaded up its balance sheet with toxic assets. The ECB insists that its purchase of Greek debt was for monetary purposes, not as an investment. Really.
http://www.creditwritedowns.com/2012/01/will-the-ecb-take-a-haircut.html