European Central Bank May Need Life Support

Last night's post talked about the precarious nature of the ECB's balance sheet, based on a paper by a Columbia Business School professor.  I just saw this discussion in today's online Wall Street Journal:

"The reality is that efforts to leverage the European Financial Stability Facility are in disarray – and will remain so until the current political uncertainty over Greece, and maybe now Italy, has passed. And the bank recapitalizations are not due to be completed until June 2012. The only contagion defence available to the euro zone is the European Central Bank which may be reluctant to step into the breach. After all, if Greece is forced into a disorderly default, it would likely repudiate all its debt, including that held by the ECB. That would blow a €50 billion hole in the ECB’s balance sheet and destroy the credibility of its Securities Markets Program."

The balance sheet of a traditional central bank has to be above reproach.  The ECB may have short-term issues, and for it to be a factor in a longer-term working out of the Euro crisis it's balance sheet will have to undergo a wholesale swapping out for multinational, EU guaranteed bonds.  Can we get there from here?