Greece Requires Conservatorship

In our assessment, Greece should be placed into conservatorship by the European Commission. Greece’s liquidity issues have morphed into a solvency crisis. Greece’s challenges are fiscal, which requires a political solution. Therefore, Greece’s problems cannot be resolved by the European Central Bank (ECB), although ECB policy can affect the dynamics as this crisis evolves. It is paramount to receive clarity on the political path chosen; closed-door deliberations may avoid the hastened band-aid approach employed by U.S. policy makers at the peak of the financial crisis, but are only good if it leads to substantive results. As we see it, a variety of options are possible to address Greece’s challenges: The European Commission, in conjunction with the International Monetary Fund (IMF) and the finance ministers of eurozone countries, could provide sufficient …