Find legal arguments to have ECB exempted from the PSI



In response to these, different bodies create liaisons in a bid to address these emergent challenges with ease. One of the most common options for countries and firms has been the creation of alliances. In this respect, countries or corporate bodies with common economic and social interests form groupings and develop viable policies to govern their operations. With the characteristic conditions, they create an environment that is supportive of economic growth and development. For instance, they provide better and mutually benefiting trade terms and conditions amongst others. To a great extent, this has been instrumental in cushioning them against the negative effects that stem from the aforementioned dynamic trends. Recent economic trends ascertain that the entire globe has been affected by incidences of inflation. One of the strategies that most countries, states and corporate entities have assumed to curb this pertains to financial borrowing. In this regard, it is worth appreciating that countries whose economies are directly influenced and controlled by the larger global economy cannot be financially independent. Put differently, their financial decisions are directly informed by the global trends. Fundamentally, nation states share intricate and augmenting relationships and due to the effects of globalization, they cannot operate singly. This can be used to explain why most countries suffer when the global economy is affected in any way. In such instances, economic instruments such as local banks, the International Monetary Fund, the World Bank and so forth offer the financial help accordingly. It is against this background that this paper explores the legal arguments that would enable the European Central Bank (ECB) to be exempted from the Public sector Involvement (PSI) debt. To ensure a harmonic consideration, it begins by presenting the history of the problem, role of PSI and the responsibility of ECB in the relative debt. Historical Underpinning From a general point of view, the Euro zone is currently grappling with sovereign debt crisis. Statistical evidence indicates that various countries including Portugal, Ireland and Greece have been adversely affected this1. In particular, their debts are very high and therefore potentially unsustainable. With particular reference to Greece, the buildup of its debt in the 2000s was influenced by increased investor confidence as well as its easy access to very cheap capital. The subsequent competitiveness presented various financial challenges that made it difficult for the country to maintain a positive economic growth2. This was further compounded by the global financial crisis that occurred between 2008 and 2008. In essence, it increased the borrowing costs of the country to unsustainable levels. Various policy interventions have been undertaken by different stakeholders to address this problem. The European Central Bank, European Union and the International Monetary Fund have all contributed directly to this good. In this respect, they all agreed that Greekā€™s possible default could have lasting negative impacts to the entire global financial market. They proposed the first financial aid package in 2010. Nonetheless, Haldane, Penalver, Saporta and Chin argue that this did not yield any beneficial outcomes3. The financial stability of the