Wall Street Journal
February 22, 2012
The European Central Bank appears to be doing its part to help Greece reduce its crushing debt burden by transferring profits from its Greek bond holdings to euro-zone governments. There is just one problem: It remains far from clear that all this money will wind up in Athens.
By handing over its profits to national governments, the ECB is simply adhering to its long-standing rules. But it has no control over how Spain, Italy and others use their share of the billions they stand to gain from the ECB's €50 billion ($66 billion) in Greek bond holdings.
The ECB is expected to make a substantial profit on the bonds because it purchased them at a steep discount on the open market, and now it appears these bonds will be repaid in full.
The ECB was spared from taking any losses as part of a €130 billion rescue deal for Athens despite mounting pressure in recent weeks for the central bank to take a bigger role in writing down Greece's crushing debt load.