THE ECB IS coming in for some heavy criticism from economists today for its statement last night regarding Greece’s government debt.

The bank’s assertion that Greece’s government, led by recently elected anti-austerity party Syriza, can no longer use its junk-rated debt as collateral for loans for its own commercial banks could trigger a run on the Greek banks, according to experts.

With Bloomberg suggesting that the Greeks could run out of cash before the end of February if its debt ceiling isn’t raised, commentators have claimed that the union’s central bank is behaving in an overtly political manner when its sole role should be that of lender of last resort.

(3) central bank that abandons role as lender of last resort is a political actor and not an instrument of financial stability — Richard Field (@tyillc) February 4, 2015 Source: Richard Field /Twitter

(4) central bank abandoning role of lender of last resort calls into question if that central bank should have charter revoked & be replaced — Richard Field (@tyillc) February 4, 2015 Source: Richard Field /Twitter

The ECB statement comes in advance of today’s meeting between the new Greek finance minister Yanis Varoufakis and his German counterpart Wolfgang Schaeuble.

Yanis Varoufakis Source: Press Association

Germany is seen as the greatest stumbling block ahead of Greece’s efforts to reduce its massive debts.

Wolfgang Schaeuble Source: Press Association

In conversation with TheJournal.ie professor of finance at Trinity College Dublin Brian Lucey describes the ECB statement as a ‘very dangerous move indeed’.

“Syriza have a very solid mandate in Greece. Is grinding them into the ground really what the ECB wants to do?” he said.

Quite apart from the political nature of the move, even if they ‘win’ and Syriza is cowed completely into submission, that is hardly a result either.

Syriza would have to resign and point the finger, and if the ECB just ignore the democratic choices of a proud constituent nation, what kind of approach is that?

The ECB’s role should be in encouraging EU states, not crushing them with an obvious bias towards other countries.

Brian Lucey Source: Brian Lucey/Wordpress

Asked how he thought the situation would develop over the coming weeks Lucey said his guess is as good as ours.

But I’m beginning to worry that the ECB are so inept that the worst could actually happen and Greece could be out of the Euro.

When you’ve got a dog on a leash you give them more slack, you don’t tighten the noose and suffocate them entirely but that seems to be news to the ECB.

And if the worst comes to worst, Greece goes to hell in a handbasket and has to leave the Euro, well what’s to stop other troubled countries, including ourselves, from doing the same?

With the way the ECB are playing the game a Mexican standoff situation is a distinct possibility, i.e. nobody wins.

Earlier this morning economist Karl Whelan was softer in his criticism, describing the ECB’s statement as ‘not helpful’.

“It’s not as dramatic as you might think, if there’s no normal loans available the Greek banks have access to Emergency Liquidity Assistance [ELA] from the Greek central bank,” he told RTE.

But these kinds of darkly-worded statements could trigger a run on the banks in Greece and then you’ve got a liquidity crisis.

It’s really just an increasing of the temperature of the situation, but doing that doesn’t necessarily lead to good decisions, and deeming Greece as being only trustworthy in an IMF programme is a very politicised judgement.