Sunday, November 14, 2010

The ECB holds all the cards with Ireland

The FT reports today that “Behind the scenes, the ECB has put pressure on Dublin to take steps within days that would provide an urgently needed boost to confidence in Ireland’s public finances and struggling banking system”.

This means that, despite Dublin’s reluctance to apply for an IMF/EU bailout, Ireland would have no choice if the ECB closed its discount window to Irish banks. Judging from the FT story, it is threatening to do so.

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