Going back to the famous Maastricht Treaty.It connected a subset of EU states through a common monetary policy (EMU) and made no treaty provision for fiscal coordination.Well It was prepared the Stability and Growth pact (http://bit.ly/199QLRy), which took its legal authority from the Treaty on the Functioning of the European Union (TFEU).
So when Last July Mario Draghi, president of the European Central Bank, spoke of the ECB’s intent to do “whatever it takes” to hold the euro area together. In the months after his comment, the ECB unveiled its Outright Monetary Transactions programme, in which it pledged to make unlimited purchases of troubled government bonds under certain conditions. No policy has been as important in bringing down government borrowing costs around the periphery. Continue reading “Eurozone Crisis & The ECB”
Many have said that not all is not solved in the Euro-Zone. In fact, despite the ongoing rhetoric from the ECB that they stand ready to “do anything,” in reality they have done little to this point other than just talk the markets higher. While that has worked to a large degree to suppress rising interest rates on debt burdened Euro-Zone countries there has been no progress on the“unification” of the Euro-Zone or a resolution to its mounting debt problems.
Three Problems That Still Exist
There are still three major problems with the Euro-zone that, without fixing, will lead to the next chapter in the ongoing Euro-zone saga. Continue reading “Is The Eurozone Crisis Over”
The FT has recently done a timely article-on the consequences of the EU‘ ban on the naked CDS.
Investors are buying protection on European banks on the basis that banks and sovereigns are so intimately linked that any increased risk of a sovereign default will increase the value of a bank CDS in a similar way to a sovereign CDS.
“The big downside of the ban is that it is likely to increase borrowing costs for financials,” said Michael Hampden-Turner, Citigroup credit strategist. Continue reading “6 Months The Ban on Naked CDS in Europe”
Like Jennifer Lawrence‘s fall at the Oscars, unexpected but a chance to shine ‘comedically,’ Italy’s elections have shocked investors but provided attractive entry points to strong international firms, insulated from domestic woes (as well as offer up some funny one-liners from candidates). The possible loss of eagerly anticipated labour reforms, financial restrictions and market contagion provide shorter term sources of turmoil. Continue reading “From Rome With Love”
Recently Jörg Bibow was interviewed have tried to put the points in English stating that Mario Draghi’s announcement promise of ECB support for government bond markets seems to have calmed fears of an imminent euro breakup, at least for the time being. That does not mean the euro crisis is over though. Not at all, as the underlying problems remain largely unresolved. Liquidity can buy time but it cannot solve the imbalances inside the euro area and related debt overhangs that are the deeper cause behind the euro crisis. It is important in this context that the ECB promise is for conditional support. Continue reading “The Euro Crisis not over”