If the ECB or even another country were to “bail out’ Greece or refinance its debt, it would be construed as a default according to German officials.
The default event would trigger credit default swap collateral calls and in turn, make the situation in Greece even worse.
Here’s an interesting (but poorly translated quote from Handelsblatt:
An internal report of a research department of the Bundestag, held by the Handelsblatt, Moreover, it is having regard to current EU law, that Bundesregierug Greece may reach under her arms. The Parliament’s legal experts warn that Berlin before a rescue package. They exclude, in its opinion not only any form of financing by the Greek budget by the ECB and national central banks. “Also, a Member State shall not be liable for the debts of the central government of another State, or advocate,” write the lawyers. Explicitly states that: That’s Germany was also bound.
Sounds a lot like the United States, our banks, and the first attempt to get TARP passed, no?
Sure, the “adults” in the executive branch want to make the crisis going away. But the lowly elected officials in parliament don’t want to give it the rubber stamp.