Central banks brace for stormy weekend

It is a weekend of danger on the horizon for the international money markets. The reason is Greece, and the election there. It may see a government elected that wants to scrap the bailout, and then l point the pistol of default at the markets over its mammoth debt.

Well, the central banks have guns of their own and they are preparing coordinated action should the eurozone lurch deeper into crisis on Monday.

Five of the world’s biggest central banks, the ECB, Bank of England, Bank of Japan, Bank of Canada, and the US Federal Reserve will act together to stabilise the markets. If Greece should exit the euro, the EU could be facing a trillion euro bill.

“The European Central Bank has the crucial role of providing liquidity to sound bank counterparties in return for adequate collateral. This is what we have done throughout the crisis, faithful to our mandate of maintaining price stability over the medium term. And this is what we will continue to do. The Eurosystem will continue to supply liquidity to solvent banks where needed,” said the ECB boss Mario Draghi.

The Institute of International Finance, which suggested the trillion-euro pricetag for a Greek exit from the euro now says that is an old figure and the cost would likely be higher, and in any case “unmanageable”. It warns anyone contemplating a Greek exit should “think again”.

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