The eurozone crisis will have to get worse before it gets better – MoneyWeek – bet36在线体育投注_博彩bet356备用网址_bet36投注

The eurozone crisis will have to get worse before it gets better – MoneyWeek – bet36在线体育投注_博彩bet356备用网址_bet36投注

Yettoday,giventheopportunity,hedidnothingatall。

Don’tgetuswrong。

Draghiisn’tatallrelaxedaboutthestateoftheeurozone。

Indeed,“theriskssurroundingtheeconomicoutlookfortheeuroareacontinuetobeonthedownside”。

InhislatestpressconferencefollowingtheECB’sdecisiontokeepinterestratesat0。

75%,henotedthatthegrowthofbroadmoneywasveryweak。

Inotherwords,there’snotmuchlendinggoingonintheeurozone。

Healsonotedthe“exceptionallyhighriskpremia…ingovernmentbondprices”。

Ofcourse,hewasn’tabletoadmitthatthisisbecauseSpainisbust。

Insteaditwasthefaultof“thepriceformationprocessinthebondmarketsofeuroareacountries”–ieevilspeculatorsratherthanincompetentleaders。

AndhedidsignalthattheECBisabouttotakesomeaction。

Hestatedthat,“governmentsmuststandreadytoactivatetheEFSF/ESM[theEuropeanFinancialStabilityFacility/EuropeanStabilityMechanism–Europesbigbail-outfunds]inthebondmarket”。

HealsostatedthattheECB“mayconsiderundertakingfurthernon-standardmonetarypolicymeasuresaccordingtowhatisrequiredtorepairmonetarypolicytransmission”。

Thesearetwobighintsthattheprintingpresseswillbeturnedoninthenearfuture。

Alittlelessconversation,alittlemoreaction

Sowhyhasthemarketreactedsobadly,withItalianandSpanishbondyields?

veeringhigher?

It’sbecausebothmeasurescamewithsomebigcaveats。

Firstly,itwillbeuptonationalgovernmentstospendEFSF/ESMmoneyonbuyingothernations’bonds–somethingthatcountriessuchasFinland(partoftheGermanic‘northern’eurozonecontingent)oppose。

Draghialsostatedthatdebtornationshadtokeeptotheirpartofthe“bargain”。

Thismeansyetmoreunpopularspendingcuts。

HealsoruledoutgivingtheESMabankinglicence,whichwouldallowittouseleveragetoincreasetheamountofmoneyatitsdisposal(effectivelymakingitatoolforfunnellingeurozonequantitativeeasingifnecessary)。

Andasseveralanalystshavepointedout,heonlytalkedaboutdrawingupguidelinesaboutbondbuying。

HedidnotformallycommittheECBtodoingit。

Approvalofthisactionmaybejustaformality,especiallysinceallbutonememberofthecouncilsupportedhisefforts。


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