Tag: ECB

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Bank-to-bank Euribor rates extend post-ECB cash drop | Reuters

Key euro zone bank-to-bank lending rates continued to drop on Wednesday, pulled down by the ECB’s recent record injection of almost half a trillion euros of ultra-long and ultra-cheap three-year liquidity. Euro zone banks received 489 billion euros late last month in the first of two opportunities to access the long-term loans — operations the ECB hopes will minimise the chances of them responding to the region’s debt crisis by slashing lending.

via Bank-to-bank Euribor rates extend post-ECB cash drop | Reuters.

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ECB cuts rates to 1.0 pct as debt crisis rages | Reuters

The European Central Bank cut its main interest rate by 25 basis points to 1.0 percent on Thursday as the euro zone’s worsening debt crisis outweighed the concern over persistently high inflation.

The ECB also reduced the interest rate on its deposit facility to 0.25 percent and the rate on the marginal lending facility to 1.75 percent, bringing all rates to match record lows reached in 2009.

via ECB cuts rates to 1.0 pct as debt crisis rages | Reuters.

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Euro Tumbles As JPM Predicts ECB Rate Cut To 0.50%, “Deep Euro Area Recession” | ZeroHedge

In a note just released by JPM’s Greg Fuzesi, the JPM analysts says that “with the Euro area economy entering a potentially deep recession, we now think that the ECB will cut its main policy interest rate to just 0.5% by mid-2012. We expect the interest rate corridor to be narrowed to +/-25bp, so that the deposit facility rate will be 0.25%. We recognise that the ECB did not cut rates below 1% during the 2008/9 recession. It never fully explained why it did not, but we think that the two most likely reasons will be less important this time.”

via Euro Tumbles As JPM Predicts ECB Rate Cut To 0.50%, “Deep Euro Area Recession” | ZeroHedge.

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Europe’s Debt Crisis: ECB Hints at Help Pending Euro-Zone Integration – SPIEGEL ONLINE

[ ECB chief Mario Draghi] seemed to hint at a possible way out of the downward spiral, saying that the ECB could be prepared to take additional steps to halt the crisis. First, however, Europe needed to move quickly toward greater economic integration.

“Other elements might follow,” he said, in reference to the coordinated central banks’ action taken on Wednesday. “But the sequencing matters.” He added that “a new fiscal compact would be the most important signal from euro-area governments for embarking on a path of comprehensive deepening of economic integration.”

via Europe’s Debt Crisis: ECB Hints at Help Pending Euro-Zone Integration – SPIEGEL ONLINE – News – International.

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Quick Overview

Looks like something positive is brewing in Europe, but I don’t want to jump the gun. China looks weak, US probably through its worst, Europe still faces plenty of pain even if fiscal reform and euro-bonds introduced. Game changer would be QE/asset purchases by Fed and ECB.

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ECB Expected to Unleash QE Money Printing after Launching of Euro-Bonds :: The Market Oracle

In return for surrendering fiscal policy to Brussels, – Berlin and Paris, the key paymasters of the Euro-zone, would agree to the creation of a common Eurobond that would pool the credit ratings and collateral of all participating Euro-zone countries into a single fixed income instrument. Chancellor Merkel says that German borrowing costs will jump higher because of the creation of a Eurobond, though she is prepared to consider Eurobonds, if the legal framework is in place to ensure all countries in the zone observe the rules.

…..Once fiscal integration is agreed upon, Berlin is expected to agree to the creation of Eurobonds issued by member states that could be purchased in massive quantities (monetized) by the ECB. Countries would be liable for each others’ debts, but the ECB could make much of their debt disappear with its electronic printing press. Eurobonds would either be financed with higher taxes on the working class, through austerity measures, or through the inflationary effects of the ECB’s money printing machine. With French banks alone holding more of their debts than the entire €440-billion European Financial Stabilization Fund, a default by these countries would likely bankrupt the French financial system. Thus, Paris has been pushing hard for the ECB to monetize debt on a massive scale.

via ECB Expected to Unleash QE Money Printing after Launching of Euro-Bonds :: The Market Oracle :: Financial Markets Analysis & Forecasting Free Website.

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Fiscal union is the only real solution | Credit Writedowns

A fiscal union led by Germany would in effect force debtor nations who want more German and ECB support to surrender more of their fiscal sovereignty, in a binding way, to EU Commissioners, who would have greater authority in shaping national budgets and fiscal policies.

Rather than ECB bond buying or a common bond issuance being a solution to the problems, those activities are only possible once the solution is in place. Needless to say monetary union was a significant surrender of monetary sovereignty. However, by retaining fiscal sovereignty, countries found an escape hatch. A move to fiscal union is to close this loophole.

via Fiscal union is the only real solution | Credit Writedowns.

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Euro Bonds: The Pros and Cons, According to the European Commission – Real Time Brussels – WSJ

A European Commission discussion paper on euro bonds to be released on Wednesday puts forward….three possible approaches for issuing common government bonds in the euro zone.Two would carry “joint and several” guarantees, making euro zone states responsible for repaying the debts of others. Option 1 envisions all national government bond issues in the euro zone being converted to common euro bonds, while option 2 envisages a partial replacement of national bonds with euro bonds. Option 3 would be for the partial replacement of national government bonds with euro bonds carrying ”several” but not joint guarantees, making each state responsible for its own share of euro bonds. The third approach would be easier to implement, in part because it wouldn’t require changes to European Union Treaties, but would carry fewer benefits.

via Euro Bonds: The Pros and Cons, According to the European Commission – Real Time Brussels – WSJ.

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Germany’s economic and political generals are fighting the wrong war – Saul Eslake

The role which the European Central Bank needs to be allowed to play in resolving the European sovereign debt crisis needn’t amount to sustained financing of government deficits. It is perhaps better conceived of as being akin to central bank intervention in the currency markets.

When, in moments of one-sided speculation, or panic, foreign exchange markets push a currency to what by any reasonable yardstick appears to be extremely over- or under-valued levels, it’s not unusual for central banks to sell or buy that currency in sufficient volume to push it back in the opposite direction. If the central bank concerned is perceived as ‘credible’, the volume of purchases or sales required to achieve its objective will often be quite small. And if its judgement as to what constitutes ‘reasonable’ is correct, it will usually end up making a profit.

via Germany’s economic and political generals are fighting the wrong war – On Line Opinion – 24/11/2011.

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The World from Berlin: Will Merkel Change Her Tune on Euro Bonds? – SPIEGEL ONLINE

The left-leaning Berliner Zeitung writes:

“People in the euro crisis have become accustomed to one constant: What Chancellor Angela Merkel categorically rejects today can still be implemented tomorrow. That makes the euro-bond debate … so exciting. A ‘no’ from Berlin doesn’t necessarily mean the last word.”

“There are many indications that Germany will have to finally give in again and accept one of two solutions: Either increased bond purchases by the ECB or euro bonds. But in exchange, Merkel will exact a price. She wants to use the acute urgency to construct a euro zone that corresponds to her vision…. If Europe allows this new currency union with rigid controls for countries that exceed debt limits, then Merkel will open herself up to things she has so adamantly rejected. But she’s begun a dangerous game. It could come to pass that that the currency union she wants to stabilize according to German plans may no longer exist. Then even the best treaty amendments won’t help.”

via The World from Berlin: Will Merkel Change Her Tune on Euro Bonds? – SPIEGEL ONLINE – News – International.

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