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Once again the clear preference for holding Swiss Francs over Euros was evident today as EURCHF re-collapsed from over 1.02 to under 0.9750 now. Overnight news from Greece suggesting bank runs are under way was then added to as Bloomberg reports, Greece is set to run out of cash by mid-year if it can’t break the deadlock over its rescue program, according to two international officials. Now, in the final "FU" to Greece, following Wolfgang Schaeuble's earlier comments that Greece does not have a debt problem, Der Spiegel reports after the European close that ECB QE will not include Greek bonds due to their low rating... but will see national central banks buying own-country debt.

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Originally posted by SIGNYM:
And here is the reason why ...

Greek Debt Will Not Be Included In Bond-Buying Plan; ECB's Knot Warns QE "Distorts Markets"

DRAGHI PRESENTED QE PLAN TO SCHAEUBLE, MERKEL, SPIEGEL SAYS

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Once again the clear preference for holding Swiss Francs over Euros was evident today as EURCHF re-collapsed from over 1.02 to under 0.9750 now. Overnight news from Greece suggesting bank runs are under way was then added to as Bloomberg reports, Greece is set to run out of cash by mid-year if it can’t break the deadlock over its rescue program, according to two international officials. Now, in the final "FU" to Greece, following Wolfgang Schaeuble's earlier comments that Greece does not have a debt problem, Der Spiegel reports after the European close that ECB QE will not include Greek bonds due to their low rating... but will see national central banks buying own-country debt.

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The ECB is on the horns of a dilemma. Years ago, German, Finnish and Dutch banks loaned money to Greece (also Spain, Ireland, and Portugal, but that's another story). When the financial system collapsed, those loans collapsed with it, and the German, Finnish, and Dutch banks were left holding worthless contracts. So "the troika" - the European Commission (EC), the IMF, and the European Central Bank (ECB) devised a program in which the various nations would be put on the hook for those commercial loans, the ECB would loan money to the nations, and the nations would then have to pay back the ECB out of their populations' money. In other words, it was a transfer of wealth from Greek, Spanish, Irish, and Portuguese pockets thru the ECB into the coffers of German etc. commercial banks. This set off Great-Depression-style economic contraction in the affected countries - one which you don't read much about, but the level of poverty is truly astounding.

Germany in particular wants to punish Greece. Unfortunately, the "punishment" policy is failing from an economic viewpoint, as the collapsed Greek economy has even LESS of a chance of paying back its debt than it did before the loans. (Something about not being able to squeeze blood from turnips?)

As savers, Germany wants to maintain the value of the Euro, so any increase in monetary supply which might devalue the Euro is verboten! as far as the Germans are concerned. ECB's Draghi OTOH sees that the Eurozone economy is sinking into a triple-dip recession, he feels he must do SOMEthing to boost the economy.

To appease Germany, it seems that the ECB will embark on "quantitative easing" for everyone --- except Greece. That means that the ECB will buy up national bonds and other assets to release Euros into the market for everyone- except Greece - in the hopes of stimulating the economy.

Greece, as you know, will be holding elections Jan 25. Syriza is widely expected to win. It was Syriza's intention to renegotiate some terms of their loans, but the ECB has been steadfast that it will not renegotiate. Perhaps this is just pre-election fearmongering in the hopes of knocking Syriza out of the running, but if Syriza wins and renegotiation is impossible, a Grexit will follow.

There is a branch dangling just outside of Greece's reach right now, but that is the Blue Stream Pipeline, currently destined to pass through Turkey and end (maybe) at Greece's border. This would give Greece a tremendous boost in finances due to transit fees. Also, Russia may be ready to welcome Greece into the Customs Union (or Eurasian Common Trading Zone, or one of the many trade agreements which are springing up like mushrooms nowadays) and begin pulling the EU apart, piece by piece. But I believe Dhragi has decided that it's better to lose Greece than lose Germany.

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