Tag Archives: European Central Bank

Why the Elites Are Losing Sleep

By Rana Foroohar – Now everyone is fretting about how the Fed, the European Central Bank (until recently), the Bank of Japan and even Chinese authorities have distorted the prices of assets from stocks to bonds to real estate, quite possibly laying the foundation for a market crash or, in the longer term, hyperinflation.

Central bankers can buy time, but they can’t fix the world’s underlying economic problems,” said UBS chairman and former Bundesbank head Axel Weber, who worries that easy money and low interest rates are covering up the fact that most rich countries still need to pay down debt and create a lot more jobs. “We’re buying short-term fixes at the expense of future generations.” more> http://tinyurl.com/caknfwr

ECB saves euro, lets economy hang

By James Saft – Mario Draghi has saved the euro, for the time being, but seems less inclined to help the economies in which it is used.

With central banks in the U.S. and Japan easing aggressively, that leaves the euro liable to continue its recent gains, making countries in the currency area less able to export their way out of their problems. more> http://tinyurl.com/ctlelwz

ECB discusses rate cut, depicts bleak 2013

By Eva Kuehnen – The European Central Bank pondered an interest rate cut on Thursday and predicted the euro zone economy would shrink again in 2013, leaving the door open to a possible reduction in borrowing costs early next year.

The Council also touched on the idea of cutting its deposit rate into negative territory. By effectively charging banks for their deposits rather than paying them interest, the ECB could push banks to put their money to work elsewhere. more> http://tinyurl.com/branh8t

Leave “fairy world” behind, Draghi tells euro zone

By Daniel Flynn and Leigh Thomas – The euro zone‘s crisis is far from over and its members must tighten budgets and forge a banking union to leave behind the “fairy world” that allowed problems to grow, European Central Bank President Mario Draghi said on Friday (Nov 30).

Draghi’s call for reform was echoed by International Monetary Fund chief Christine Lagarde, who said implementing a banking union with powers to supervise all banks in the euro zone should be the currency bloc’s top priority. more> http://tinyurl.com/czsvphq

ECB wants “executioner” to terminate Europe’s weak banks

By John O’Donnell and Paul Carrel – The European Central Bank has proposed that the EU’s powerful antitrust chief be given a permanent role for shutting down weak banks that survive largely on central bank funding.

In the absence of a pan-European scheme for winding up struggling lenders, the task of cleaning up the sector has fallen by default to Joaquin Almunia, the European commissioner for competition issues, who ordered a restructuring of Spanish banks on Wednesday (Nov 28) and wants similar moves in Greece. more> http://tinyurl.com/d3e7ab3

The euro has become Germany’s new Deutschemark

By Jeremy Warner – The eurozone crisis has set Britain and Germany, apparently irreconcilably, on different courses. While Germany and its fellow travellers want more Europe, Britain wants less. If the eurozone is to survive in its present form, it needs much greater integration. And if that’s the way Europe is headed, then Britain would rather not be a part of it at all. more> http://tinyurl.com/d9djgsb

WHY IT MATTERS: Europe’s Economic Crisis

Europe 1999

Europe 1999 (Photo credit: Greg_e)

By Paul Wiseman – The issue: Europe is struggling to control a debt crisis, save the euro currency and stop a repeat of the 2008 financial crisis that sent the world spinning into recession.

Why it matters: Europe buys 22 percent of the goods America exports. U.S. companies have invested heavily in Europe.

Europeans are struggling to repair a system that was flawed from the start. The euro, introduced in 1999, makes it easier to do business across Europe; no more changing francs to deutschemarks when French and German companies do business. But the common currency joined countries with vastly different economies and political cultures — and each got to keep running its own budget. more> http://tinyurl.com/8r5rjfg

German business mood worst since mid-2009

By Alexandra Hudson and Eva Kuehnen – German business sentiment dropped for a fifth straight month in September, raising fears of recession as companies struggled with what they said was the worst economic outlook since mid-2009.

“Today’s Ifo index shows that German companies remain skeptical about the economic impact of (ECB president) Mario Draghi‘s magic,” ING Bank economist Carsten Brzeski said.

“Despite fears of a looming Eurozone break-up clearly fading away, German businesses are downscaling their expectations. The German economy could see a contraction in the third quarter.” more> http://tinyurl.com/8qyjtpp

A QE rally in search of Main Street confirmation

By James Saft – While we may want to enjoy the quantitative easing-fuelled rally while it runs, it is probably best to remember that sometime, perhaps soon, a bull market will depend on improvement in the real economy.

Perhaps the biggest help has been from the ECB, which has said it will buy debt from euro zone countries, a move interpreted as taking a euro breakup off the table, at least temporarily. And the Bank of Japan this week weighed in with another $1 trillion or so in planned asset purchases.

Just by reducing the VIX by calming investors during the height of the crisis, the Fed was able to have a big impact on markets and potentially the real economy. When the Fed took extraordinary measures in 2008 and 09, the VIX was first in the 60s and then in the 40s, exceptionally high levels historically. It stands today at 14, about at the level you might find in a coma ward, so expecting much bang for the Fed’s buck from that quarter is unwise. more> http://tinyurl.com/8gkb635

Doubts plague Europe’s pledge for banking union

By John O’Donnell – Concerns are growing among European investors and lawmakers that plans for a eurozone banking union will end up half-baked, with the financial backstops required to underpin the ambitious scheme unlikely to be in place for years.

“Originally the idea of a banking union was to have deposit guarantees to stop the outflow of money from Spain,” said Sharon Bowles, who chairs the European Parliament‘s influential economic and monetary affairs committee.

“But they are shying away from mutualization and all you are left with is supervision, which if left on its own would have more drawbacks than benefits. It could split the (EU) single market.” more> http://tinyurl.com/9mmttj3