Posted by WARREN MOSLER on December 19th, 2011
Reads to me like PSI discussion might come back after a firewall and bank recap is in place?
FT: And the fifth answer is that the idea of introducing private sector involvement (PSI) in eurozone bail-outs was, in retrospect, a mistake?
Mario Draghi: The ideal sequencing would have been to first have a firewall in place, then do the recapitalization of the banks, and only afterwards decide whether you need to have PSI. This would have allowed managing stressed sovereign conditions in an orderly way. This was not done. Neither the EFSF was in place, nor were banks recapitalized, before people started suggesting PSI. It was like letting a bank fail without having a proper mechanism for managing this failure, as it had happened with Lehman.