I’ve long held the view that contagion into Italy and/or Germany
would be the key driver for more definitive action from Europe. Although
we’ll have to wait until Thursday (Frankfurt time) for the ECB’s
executive council meeting to find out the details the rumours are
already swirling.
Last Friday world market’s got very excited by the “whatever it takes” remarks from Mario Draghi, however they were connected with “within our mandate” so it is yet to be seen exactly what the ECB will deliver. Obviously there is the downside risk of disappointment. We also need to remember that German constitutional court is still deliberating over the ESM and isn’t due to make a decision until September 12.
There are a number of ideas circulating ranging from a re-instatement of the SMP, another lowering of rates and collateral rules, through to a banking licenses for the ESM. At this point in time I think that later is a stretch way too far, but adjustments to the EFSF/ESM in order for it to make primary market purchase with support from the SMP may well be in the offing, well at least mentioned anyway.
According to various sources, the French and German governments (although I will note that Schauble’s version appears very muted ) are on-board with re-newed ECB intervention while the Bundesbank is against it. The Bundesbank reaction is expected but it must be noted that Germany only holds 2 seats on the 23 seat council, in other words no matter what their opinion they can be out-voted. The Bundesbank’s influence on the Constitutional court is obviously another matter and far more important in my opinion. There also appears to be some foreign influence with Mr Geithner once again making an appearance on European shores.
Read more: http://www.macrobusiness.com.au/2012/07/europe-pulls-the-wrong-lever/
Last Friday world market’s got very excited by the “whatever it takes” remarks from Mario Draghi, however they were connected with “within our mandate” so it is yet to be seen exactly what the ECB will deliver. Obviously there is the downside risk of disappointment. We also need to remember that German constitutional court is still deliberating over the ESM and isn’t due to make a decision until September 12.
There are a number of ideas circulating ranging from a re-instatement of the SMP, another lowering of rates and collateral rules, through to a banking licenses for the ESM. At this point in time I think that later is a stretch way too far, but adjustments to the EFSF/ESM in order for it to make primary market purchase with support from the SMP may well be in the offing, well at least mentioned anyway.
According to various sources, the French and German governments (although I will note that Schauble’s version appears very muted ) are on-board with re-newed ECB intervention while the Bundesbank is against it. The Bundesbank reaction is expected but it must be noted that Germany only holds 2 seats on the 23 seat council, in other words no matter what their opinion they can be out-voted. The Bundesbank’s influence on the Constitutional court is obviously another matter and far more important in my opinion. There also appears to be some foreign influence with Mr Geithner once again making an appearance on European shores.
Read more: http://www.macrobusiness.com.au/2012/07/europe-pulls-the-wrong-lever/
No comments:
Post a Comment