Sovereign rights should refer to the nation rights of citizens, and not to the nation rights of government bureaucrats.

Sir Gideon Rachman, in his very clear-eyed and straight talking “Germany’s conditional surrender”, July 14, mentions: “Much of the comment about the loss of Greek sovereignty, in the outline deal just agreed”

“Greek sovereignty”? As I see it “Inalienable sovereign rights" have lately just become a convenient wording for what government bureaucrats consider to be their rights… or statist ideologues consider to be the rights of ever more powerful governments.

The day sovereign rights refers more to the nation rights of the citizens, than to the nation rights of governments, that’s when sovereignty has a chance to get on a real track.

Meanwhile bank regulations that assign a risk weight of zero to government debt, and 100 percent or more to private sector debt, has absolutely nothing to do with any justifiable sovereign rights… much the contrary it has only to do with government bureaucrats' clientelism.

@PerKurowski

Capital controls imposed by bank regulators caused the problem that threatens to push Greece out of the Eurozone.

Sir, Ferdinando Giugliano writes: “Greek authorities have imposed sweeping capital controls to prevent a collapse of the banking system that threatens to push Athens out of the Eurozone. But with economic activity grinding to a near halt and the country’s banks still bleeding deposits, the price of these extraordinary measures is becoming apparent… The downturn is bound to curtail tax revenues, worsening the Greek government’s dire finances”, “Capital controls squeeze a suffocating economy” July 3.

That, though entirely correct, does not tell the whole story. It was when regulators introduced credit-risk-weighted capital requirements for banks, which distorted the allocation of credit to the real economy, that an inconspicuous and dangerous form of capital controls was introduced. And since the lowest risk-weights were assigned to sovereigns (governments), the greatest beneficiaries of such controls were statist ideologues and government bureaucrats, which was a very inconspicuous form of clientelism too.

For instance, although admittedly it must be hard to believe, between June 2004 and October 2009, European banks were allowed to leverage their capital 62.5 times to 1 when lending to the Greek government. And of course that caused the banks to lend too much to a government that found it too hard to say no to credit.

But now many governments, like Greece, need to build up their tax-base, something that requires allowing ordinary SMEs and entrepreneurs to have fair access to bank credit. And this has created a conflict for those statist ideologues and government bureaucrats who feel they still have room to benefit from these regulatory advantages. How are they supposed to recommend their less lucky-colleagues to give up, what they had all considered to be entitlements gained for their class written in stone?