Tag: ECB

  • LOTS OF FROTH, by François Leclerc

    Guest post. Translated from the French by Tim Gupwell

    A brand new development in the history of the ECB has occurred: leaks yesterday revealed the broad outlines of its new sovereign debt securities’ purchase programme. One cannot help thinking that it was necessary to prepare the ground in advance, with the ECB decisions falling well short of some of the mounting speculation.

    According to Mario Draghi, there will be no limit to the amount of bond purchases on the secondary market – but the scope of the announcement needs to be put into perspective. They will in fact be decided … Read the rest

  • THE DRAWBRIDGE MENTALITY, by François Leclerc

    Guest post. Translated from the French by Tim Gupwell

    A united front of German banks has opened up, refusing any kind of interference from a supervisory body – in this case the ECB – due to their little idiosyncrasies and their little hidden frailties, but also the risk of being made to contribute via a European fund to the saving of other countries’ establishments. The savings banks, mutuals and regional banks (Landesbanken) which comprise it represent 70% of the deposits held in Germany.

    Talking of deposits, the prospect of a separation of deposit activities from speculative activities has … Read the rest

  • BEHIND THE SCENES, by François Leclerc

    Guest post. Translated from the French by Tim Gupwell

    There are some sinister goings-on behind the scenes of the European financial system, which are hardly being proclaimed from the rooftops! Even Mario Draghi himself is preoccupied by it, drawing attention to vague manifestations of “fragmentation” which are developing at the heart of the Eurozone. What was he alluding to?

    It is occurring in three stages: an ongoing capital flight from countries on the verge of the abyss, leading to their banks becoming increasingly dependent on ECB loans, with the liquidities then supplied by the latter being used to buy state-issued … Read the rest

  • WE ARE EXPECTING THE ECB, BUT WILL WE GET THE FED INSTEAD ?, by François Leclerc

    Guest post. Translated from the French by Tim Gupwell

    The U.S. Federal Reserve’s Open Market Committee is due to meet on Tuesday and Wednesday, in the context of a renewed slow-down in the country’s growth  (+1.5% in the second quarter), which has been apparent since the beginning of the year. What will be decided upon this time?

    Two successive quantitative easing operations, nicknamed QE1 and QE2, have enabled the Fed to inject some 2.3 trillion Dollars into the purchase of Treasury bonds or securities issued by mortgage refinancing organizations. In the light of the mixed results of the two previous … Read the rest

  • SURRENDER, YOU ARE SURROUNDED!, by François Leclerc

    Guest post. Translated from the French by Tim Gupwell

    It is not just Italy and Spain causing problems, after the decisions taken during the last summit suffered a setback, in view of the spectacle of great confusion and nervousness we have witnessed with regard to the joint press release – which wasn’t one – from Spain, Italy and France demanding immediate implementation. Simultaneously, Greece is providing an example of the strategic retreat of the European authorities and of the IMF.

    It is now the ECB and the Eurosystem which hold the vast majority of the Greek debt, a fact which … Read the rest

  • FIRST IT WAS THE AGENCIES, NOW ITS THE FORECASTERS’ FAULT, by François Leclerc

    Guest post. Translated from the French by Tim Gupwell

    “I can’t see any time soon when…the pressure will be off” replied David Cameron, the British Prime-Minister, in an interview with The Daily Telegraph. He continued, “this is a period for all countries, not just in Europe but I think you will see it in America too, where we have to deal with our deficits and we have to have sustainable debts”. In conclusion, his austerity policies are likely to continue beyond 2020, as the situation is “a lot tougher than the forecasters were expecting”. Georges Osborne, the Chancellor of … Read the rest

  • THE RESULT OF UNRAVELLING A BALL OF WOOL… FROM THE WRONG END, by François Leclerc

    Guest post. Translated from the French by Tim Gupwell

    François Hollande has confirmed that the Government is going to propose for adoption an organic law (which a simple law cannot undo) in order to have the balanced budget rule adopted, on the advantageous pretext that it is provisional. There have been many occasions in recent French history when special measures have been adopted for their presumed importance, without ever leaving good memories behind.

    At the same time, the debate in Europe continues to move on, focusing once again on the reduction of the banks’ debts. Thanks to the Wall Street … Read the rest

  • PERPLEXING MATTERS, by François Leclerc

    Guest post. Translated from the French by Tim Gupwell

    Two days ago, Christian Noyer, the Governor of the Bank of France, confidently commented on the decision taken by the BCE to put an end to all remuneration on the liquidities parked in the Eurosystem by the commercial banks. The banks prefer placing their holdings in a sure location, rather than lending it out to their peers. 800 billion Euros have recently taken this route – an unprecedented level. As one can see, there is no lack of liquidity in the market, the problem is the use it is put … Read the rest

  • WHEN WE’RE NOT MOVING FORWARDS WE’RE GOING BACKWARDS…, by François Leclerc

    Guest post. Translated from the French by Tim Gupwell

    The European Finance Ministers managed during the course of the night to finalize a minimal agreement, which needs, as usual, to be examined in detail due to its grey areas. They put together a set of nominations to the ECB and the ESM based upon the provisional re-appointment of Jean-Claude Juncker at its head, in the absence of any other solution. Then they reached a “tentative agreement” (another way of saying a broad outline) with regard to the particular case of Spain which needs to be wrapped up for adoption on … Read the rest

  • GUILTY PARTIES WANTED !, by François Leclerc

    Guest post. Translated from the French by Tim Gupwell

    In accordance with the predictable script, the bond market is under pressure again. The cost of servicing Spanish and Italian debt has continued to increase as their financing plans move forward in little measured steps. The effect of all this is to place an additional burden on the budgets, undermining those measures which are intended to reduce the deficits.

    The statistical institutes INSEE (France), IFO (Germany) and ISTAT (Italy) all agree: Europe is sinking into a recession which they describe as ‘technical” in an attempt to make it sound innocuous, but … Read the rest

  • STICKING TO ONE’S PRINCIPLES…, by François Leclerc

    Guest post. Translated from the French by Tim Gupwell

    What was the plan being drawn up last week in Rome which Merkel refused to sign up to? The other three participants, Mario Monti, Mariano Rajoy and François Hollande advocated using the EFSF, and in the near future the ESM, directly, to bail-out the banks without adding further to the public deficit (thus breaking the link between these two types of debt), as well as using them to purchase sovereign bonds in order to ease market tensions.  Spain and Italy would be the principal beneficiaries of these measures.

    But there is … Read the rest

  • TREASURE HUNT, by François Leclerc

    Guest post. Translated from the French by Tim Gupwell

    Following the clues for the next bail-out of the Spanish banks is proving to be a veritable treasure hunt. To participate, follow the guide!

    Initially, the EFSF (European Financial Stability Facility) is going to borrow funds on the markets, using the member states guarantees, in order to lend them to the Spanish Government, which will subsequently lend them to the banks for the bail-out. The result of this haywire approach will be a transfer of debt from the private sector into the public sector.

    But in the meantime the banks … Read the rest

  • NOTHING TO WORRY ABOUT ! , by François Leclerc

    Guest post. Translated from the French by Tim Gupwell

    The G20 in Los Cabos seemed like a preparatory meeting for the Summit of the Heads of State and European Governments! This seems to highlight the fact that they no longer know what to do, and are running round like headless chicken.

    The same ideas that had previously been abandoned are back on the table, only to be refused once again by Angela Merkel. Thus, Mario Monti proposed, during the G20, that the EFSF/ESM buy sovereign bonds in order to ease market conditions. He was supported in vain by Mariano Rajoy … Read the rest

  • WHEN THE WISE MAN POINTS AT THE MOON… (I), by François Leclerc

    Guest post. Translated from the French by Tim Gupwell.

    The chaotic ups and downs of the deleveraging process continue inexorably, affecting not only the debt of the member states but also a European banking system which is now in the same mess. What it had been concealing has now been revealed: it is in a very sick and feeble state.

    In order to subdue and contain this gradual process, new bail-out instruments have had to be put in place – which are the subject of much debate; their effectiveness is limited since they are part of a debt-reduction strategy which … Read the rest

  • KEEP KICKING THE CAN DOWN THE ROAD…, by François Leclerc

    Guest post. Translated from the French by Tim Gupwell.

    The case has been heard: Barack Obama and David Cameron demanded immediate action from the Euro zone leaders, frightened by the prospect of the Spanish and Greek crises occurring at the same time, and Angela Merkel responded by announcing that no miracles should be expected from the Summit at the end of June. She continues to insist on a gradual long-term evolution towards budgetary and political union (within the next 5 to 10 years according to Mario Draghi) and to dig her heels in with regard to any measures which would … Read the rest

  • DIFFERING DELUSIONS, by François Leclerc

    Guest post. Translated from the French by Tim Gupwell.

    Worried by the sight of the Europeans entrenched in their respective positions, Barack Obama reached for his telephone. The day after the G7 videoconference between the Finance ministers and the central bankers, of which nothing came, he successively called David Cameron, Angela Merkel and Mario Monti. With this latter, the strengthening of the discussions centered on the Euro zone and growth. With David Cameron, who is going to meet Angela Merkel in Berlin, it was about the need for an “immediate plan”. Of the conversation with Angela Merkel no details have … Read the rest

  • A WAIT DESTINED TO LAST, by François Leclerc

    Guest post. Translated from the French by Tim Gupwell.

    The European Commission in Brussels is getting ready to unveil a project aiming to prevent and cure the banking crises, destined to enter into service in 2014, certain procedures being foreseen for 2018. There is a certain sense of timing, but certainly not a sense of urgency.

    The Spanish are now appealing for help, admitting that they have been cut off from the markets, ready to sell off whole swathes of their banking system to save it, calling for direct aid so as not to fall into the clutches of the … Read the rest

  • WHEN FATE INTERVENES…, by François Leclerc

    Guest post. Translated from the French by Tim Gupwell.

    In the blink of an eye, discussions have switched focus. The issue of growth which was at the forefront has rapidly surrendered its place to the elaboration of a plan for the supervision of the banks and the rescue of those in need. Improvisation continues to be a dominating force, with what was denied yesterday becoming a priority today.

    The sheer size of the reported losses in the Spanish banking system and the capital withdrawals out of struggling countries have forcibly imposed this return to a theme which had been set … Read the rest