ECB has come under pressure to participate in Greece’s PSI. Reports that the IMF were pushing for this has quickly been denied. The ECB has also formally rejected participating. Nevertheless, Dallar
On one hand, the ECB sovereign bond purchases provides some liquidity to the private investors who want to get rid of their exposure and improve the transmission mechanism of monetary policy (or so claim ECB officials). On the other hand, their claim to senior status (first to get their money back, not participate in PSI) dilutes other investors. The legal basis of the ECB’s claim for preferential treatment seems elusive and done largely claimed by fiat.
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