Previous ECB press conferences – ECB
The one
that built the great expectations
Press Conference Webcast – ECB
26-JULY
Morning Briefing: “The night was black was no
use holding back” –
BNY
Mellon
Unfortunately for the 'periphery', Germany and the ECB are still not ready to throw caution to the wind
ECB's Draghi Repeats The Party Line, Forces
Another Brief EUR Squeeze – ZH
Draghi on *that* transmission mechanism – alphaville
/ FT
How can the ECB support rates in Germany, when they have to depress rates in the periphery? It is for this
reason we think that the Bundesbank has been holding back ever more bund supply
at auction — since it must now act semi-independently to ease the squeeze in
the bund market.
European Stocks Rally as Draghi Pledges to
Preserve Euro – BB
Stock Futures Jump on Draghi’s ‘Whatever It Takes’ Comment – MarketBeat / WSJ
Stock Futures Jump on Draghi’s ‘Whatever It Takes’ Comment – MarketBeat / WSJ
First Responses To Draghi's "Deliberately
Ambiguous" Remarks Trickle In – ZH
And Here Is What Draghi CAN Do, In His Own
Words – ZH
Draghi’s
Dec 2011 press conference: government financing a no-no, funding EFSF is just
the same.
Verbatim of the remarks made by Mario Draghi – ECB
Speech by Mario Draghi, President of the
European Central Bank at the Global Investment Conference in London 26 July 2012
Goldman Interprets Draghi – ZH
such measures would probably provide only
short-term relief and a firmer commitment would be needed to have a lasting
effect on peripheral bond markets. Some form of refinancing of the EFSF/ESM
through the ECB would be a lasting solution, although there is some legal
uncertainty about whether this is feasible.
Citi: Expect Nothing From The ECB Before The
ESM Is Active (Sep earliest) – ZH
in our view, such action is only likely to be
taken after governments have taken action first, i.e. by activating the bond
market support facility for Spain and Italy."
Draghi Speaks; Markets Listen – MarketBeat
/ WSJ
Lately, investors have greeted these sort of
comments skeptically, claiming this is more rhetoric that has been repeated
time and again. But this time may be different.
Mario Draghi: ECB will do “whatever it takes to
preserve the euro”
– ASA
We wonder, however, if these are just talks in
hope to get through August without having to hold yet another summit so as to
not ruining everyone’s summer holiday
Draghi sends crowded shorts running for cover – Sober
Look
(includes
video clips) There are not many
"bullets in Draghi's gun", and threatening to do something major was
one of them. He just used it. If there is no follow-through, his credibility is
shot.
Draghi Means Dragon – Marc to
Market
This hints at new policy action and the ECB
meets next week. Second, he suggested that if the premium on government
borrowing damages the monetary policy transmission mechanism, it is within the
ECB's mandate to address it. This suggests the resumption of the sovereign
bond purchases program (SMP), which was the rationale for it in the first place, over German
objections
Analysts Skeptical About Draghi’s Comments – MarketBeat
/ WSJ
Bittles points out the timing of Draghi’s comments are telling. They come ahead of meetings of the ECB, the Fed, and the Bank of England, scheduled for next week. “This suggests that we may see a coordinated effort announced next week by the central banks including China,” Bittles says. “Anything short of that would likely be greeted with disappointment from the markets.”
Bittles points out the timing of Draghi’s comments are telling. They come ahead of meetings of the ECB, the Fed, and the Bank of England, scheduled for next week. “This suggests that we may see a coordinated effort announced next week by the central banks including China,” Bittles says. “Anything short of that would likely be greeted with disappointment from the markets.”
Many German officials, including Angela Merkel,
aren’t thrilled by the idea of the ECB intervening in the debt markets. They’ll
have something to say about this, no doubt. For the time being, then, all we
have are some ambiguous remarks by Mario Draghi, the one man who could, in
theory, put a stop to the euro crisis. That’s cause for some relief. But it’s
very far from a plan.
Draghi Blinks. Maybe. – Tim
Duy’s Fed Watch
Until policymakers fundamentally rethink their
approach to the crisis, expect the optimisim-pessimism cycle to continue.
Right now, the best case scenario I see is that the ECB will act to hold the
Eurozone largely together, but at the cost of protracted recession.
Say hello to my little friend, again – The
Big Picture
A Quick Reminder On The Effectiveness Of The ECB's Bond Buying – ZH
27-JULY
Morning Briefing: New perspective – BNY
Mellon
What should we make of Mr Draghi’s heavy hints
of action?
Sceptics abound as Mario Draghi's ECB bond 'bluff' electrifies global
markets – The
Telegraph
The ECB has opened the door to emergency
support for the Spanish and Italian bond markets, setting off a blistering
rally on bourses across the world.
Goldman Sachs: Broken transmission and non-standard ECB policy – ZH
(instead of SMP) The ECB may therefore look to
support private-sector financing more directly, by further easing of collateral
eligibility, increased liquidity support to the banking sector and outright
purchases of private-sector assets originating in both the bank and corporate sectors.
Premia, there and everywhere – alphaville
/ FT
Who went back and read Mario Draghi’s full,
market-moving remarks in London on Thursday — beyond the “whatever it takes”
and “yields” bits?
JPM’s David Mackie has complied a list of possible actions, in descending
order of likelihood as he sees it
Mr Draghi, are you wearing any clothes? – Capitalists@Work
As Europe Desperately Attempts To Talk Down Bond Yields Further, Bundesbank
Finally Says "Nein" – ZH
"It’s Been A Fun Ride, But Prepare For A
Global Slowdown"
– ZH
Bank of
America’s report looks at the Fed’s and ECB’s choices and gives hints on what
things to look at when measuring the effectiveness of the policies.
28 JULY
The Weekly T Report: From QE to PE – TF
Market Advisors
Don't the Markets NEED QE? - Europe Won't Deliver? - There is no plan?
- Even if the plan is implemented, nothing is fixed? - So Europe is fixed? - Is Draghi Dumb?
29 JULY
ESM armed with a banking license - the ultimate
bailout "bazooka" – Sober
Look
The danger of course is that after this
buildup, the "bazooka" and other expectations from the Eurozone may
not materialize.
Analysis: Draghi raises market hopes ECB may
not want to meet – Reuters
Mario Draghi has set a high bar by declaring
that his European Central Bank will do whatever it takes within its mandate to
preserve the euro.
Bundesbank narrows ECB crisis-fighting options – Reuters
Germany's powerful Bundesbank pushed back on Friday against European Central
Bank President Mario Draghi's pledge to do whatever is necessary to protect the
euro zone from collapse, but markets rallied on a report of imminent policy
action.
Schauble Just Says Nein Again: German FinMin
Denies Rumors Of ECB Bond Buying – ZH
Schäuble is saying the right things. For
starters, ECB backdoor bailouts of Spain are likely against
the German constitution. Even if they weren't, why should German taxpayers
accept the risk of any of these leveraged proposals that have been circulated,
and recirculated?
Winning over Buba – alphaville
/ FT
If Draghi is serious about undoing the
distortions in yields (hence, policy transmission) caused by fear of
“convertibility”, or is considering further rate cuts, surely the ECB needs to
be supporting rates in Germany, being wary of a negative yield trap. And for
that the Bundesbank will be needed.
Bundesbank tries to spoil the party, as usual –
ignore them – The
Big Picture
The Bundesbank and other similar comments by
German politicians was predictable. However, forget the Bundesbank – they only
have 2 out of 23 votes on the ECB and, indeed, will be outvoted.
The decision by the German Constitutional Court remains a far more serious issue.
Having secured the backing of governments in Spain, France and Germany, Draghi is now seeking to win over ECB policy makers for a
multi-pronged approach to reduce bond yields
What Draghi Didn’t Do – Krugman
/ NYT
Europe also needs sufficiently high inflation
over the next few years to make it possible for Spain etc. to regain
competitiveness without devastating deflation. So have market expectations of
inflation risen from their unworkably low levels of recent months? No.
The ECB: Whatever It Takes to Preserve the Euro – EconoMonitor
The concern about moral hazard applies as much
to the current defensive strategy (buying up excess bonds after the event; that
is ‘debt monetisation’) as it does to the proposed preventative strategy (that
is ‘deficit monetisation’). When the debt crisis is brought under control,
monetary and fiscal policy coordination can then be re-assessed.
The policy paradigm discussed above has general application whether or not
individual periphery countries stay inside the Eurozone, or leave it.
Is the ECB Ready and Able to Cross the Rubicon? – naked
capitalism
What does “whatever it takes” really mean? It’s
a paradox. To make his “whatever it takes” pledge credible, Mr. Draghi has to
go well beyond the traditional boundaries of economic and central banking
orthodoxy. But in going well beyond these boundaries, does Mr. Draghi risk
creating another crisis of confidence in the euro?
30 JULY
Dos and Don’ts for the ECB – Project
Syndicate
ECB officials’ recent statements may have
reduced the pressure on governments to do those things, and, by reversing the
decline of the euro’s value, may have blocked the market response that is
needed to shrink current-account imbalances and boost GDP in the eurozone. Sooner or later,
the ECB will have to clarify the limits of its policy.
Last week they spoke comforting words, but I
saw only the frightening aspects of the euro-crisis – Fabius Maximus
Although entertaining as gallows humor, last
week’s statement by ECB President Mario Draghi illustrates important but seldom
discussed aspects of the euro-crisis. Here we read and annotate the text.
Welcome to the ECB – VOXeu.org
Financial market once again pushed Eurozone
leaders to act. European Central Bank President Draghi recently promised to “do
whatever it takes”. This column argues that Draghi made an implicit commitment
to act as lender of last resort to Eurozone governments. This means optimism
may be justified – if only because it suggests that the Eurozone has a great
central banker who is both a serious economist and an astute politician.
The Euromess Continues – Tim
Duy’s Fed Watch
When I read Draghi's remarks, I see a
policymaker in denial, not wanting to understand the root causes of the
crisis. Thus he sees the crisis in terms of simply lack of confidence
rather than one with important fundamental factors. Moreover, he is
trapped by the austerity framework, not seeing that this is a failing
strategy. I don't think he sees the ECB's complicity in supporting the
crisis. And I think Draghi is representative of the average policymaker
in Europe.
Here Bee Draghi – Krugman /
NYT
To keep the thing flying, you’d need something
like a reverse play along the same lines: an inflationary boom in Germany, so that the periphery can regain competitiveness without devastating
deflation…Nothing like that is happening.
Internal Devaluation, Inflation, and the Euro
(Wonkish) – Krugman
/ NYT
The difference between these two strategies demonstrates what a really bad idea it is for the ECB to have a mandate that only takes account of price stability, with no consideration for the real economy.
The difference between these two strategies demonstrates what a really bad idea it is for the ECB to have a mandate that only takes account of price stability, with no consideration for the real economy.
Goldman: We forecast that the ECB will permit NCB purchases of private
sector assets – ZH
What’s Up Doc?
– Fistful of Euros
Buying bonds in the secondary market, on the other
hand, although not actively welcomed by the Bundesbank is simply termed
“problematic” and “not the most sensible way” while using the EFSF to buy in
the primary markets is very straightforwardly “unproblematic”. Now, since the
Bundesbank understands very well that Mr Draghi needs to do something, this
looks very much like a road map to me – a dose of problematic, but not
prohibited, SMP in secondary markets and backing full use of EFSF firepower (such as it
is) in the primary ones.
Draghi'ing the wool over our eyes? Thoughts on
the ECB and euro – Saxo
Bank
…whether the ECB determines that the current
level of Spanish (or indeed any other nation’s) debt is disrupting the
transmission mechanism for monetary policy. If the answer is ‘yes’ then the
opposition of Germany is irrelevant. In reality, however, any ECB purchases of Spanish bonds
will not solve the ills of the eurozone.
Bunds’ Worrying Disbelief Over Euro Rescue – The
Source / WSJ
It’s often said that bond markets are for
professionals while equities are for amateurs. Europe’s equity investors
swallowed the rescue deal hook, line and sinker. Its bond investors remain much
more cautious.
When Draghi isn't everything – Free
exchange / The Economist
He has to know which euro zone he's allowed to save
before he can save it…But this is no longer the ECB's crisis to solve. It might
have been, at one point. Political leaders, by acknowledging the real
possibility of exits, have taken on full responsibility for whether and how the
crisis is brought to an end.
Last week they spoke comforting words, but I saw only the frightening
aspects of the euro-crisis – Fabius Maximus
Although entertaining as gallows humor, last
week’s statement by ECB President Mario Draghi illustrates important but seldom
discussed aspects of the euro-crisis. Here we read and annotate the text.
Was Mario Draghi’s promise to save the euro
unrealistic? – Wonkblog
/ WP
German opposition matters: Germany’s Bundesbank is the largest shareholder in the ECB. It doesn’t have a
direct veto, but criticisms by the Bundesbank might make financial markets
worried that the ECB will eventually scale back its bond purchases. And that
would defeat the whole point of Draghi’s plan, which is to restore market
confidence.
Quantifying “convertibility risk” – alphaville
/ FT
Nomura takes a look at the FX risk premium (=renomination to sovereign currencies): A crude measure is simply the CDS adjusted 5-year spreads of member states to Germany. As of today those spreads are around 50bp and 80bp at the 5-year maturity for Italy and Spain respectively, down from 135bp and 180bp three or four days ago.
Nomura takes a look at the FX risk premium (=renomination to sovereign currencies): A crude measure is simply the CDS adjusted 5-year spreads of member states to Germany. As of today those spreads are around 50bp and 80bp at the 5-year maturity for Italy and Spain respectively, down from 135bp and 180bp three or four days ago.
Draghi may have tried to deliver a fait
accompli to European officials by promising to deliver a game changer, but we
think the market will be disappointed. We anticipate that pressure will return.
Can Spanish 2-year yields really decline another 200 bp or the can the 10-year
decline another 100 bp ? The return of pressure will underscore the urgency and
push European officials to address the more difficult decisions in September.
Moody's: "The ECB Can Do No More Than Buy
Time" – ZH
Its actions alone will not resolve the debt
crisis. Resolution will ultimately rest on achievement of fundamental changes
to member states’ budgetary positions and debt stocks, on structural economic
changes required to stimulate growth, and on institutional reform to the
economic and fiscal governance of the euro area. Each change will take years to
accomplish.
Insight: ECB thinks the unthinkable, action
likely weeks away –
Reuters
The ECB is thinking the unthinkable to save the
euro, including resuming its controversial bond-buying program and possibly
even pursuing quantitative easing - in effect printing money.
Mario Draghi Shows the Power of Expectations – Macro
and Other Market Musings
We are on the cusp of another global economic
crisis and Mario Draghi is the one individual who could prevent it. All he needs to do is don his Jedi or Chuck
Norris outfit. Putting those outfits on
would be a lot easier if the ECB adopted a nominal GDP level target.
The Reality Of The Rest Of Draghi's
'Believe-Me' Speech
– ZH
UBS: Put another way, it seems to us
that he was simply stating that elevated sovereign risk premia impair the
transmission of monetary policy as they raise the cost of bank borrowing… More
broadly, it seems evident that the ECB does not have a mandate to create the
informal fiscal transfer union that a cap on peripheral yields would ultimately
imply.
31 JULY
Did Draghi act on his own? – Sober Look
Now the ECB has been painted into a corner.
They can either follow Draghi's lead without fully agreeing with him or they
pause to deliberate on this matter and disappoint the markets. Both outcomes
seem rather unsettling.
Quick Euro Update – Tim
Duy’s Fed Watch
Seems like a lot of uncertainty heading into
this ECB meeting, despite financial market participant's understandably
crystal-clear interpretation of Draghi's now famous remarks.
ECB (excluding Draghi) seems to have no idea
what Draghi is talking about – ASA
There are good reasons to believe that this could turn into major disappointment. High expectation aside, the comments made by Draghi seems to be made on his own without any discussion, let alone agreement, with his fellow colleagues of the ECB Governing Council.
There are good reasons to believe that this could turn into major disappointment. High expectation aside, the comments made by Draghi seems to be made on his own without any discussion, let alone agreement, with his fellow colleagues of the ECB Governing Council.
More on Draghi’s “The ECB is All In” Bluff – naked
capitalism
Markets expect the ECB to announce something
concrete after their meeting this Thursday, but given that Draghi ambushed its
Governing Council, and the northern country members remain opposed to bond
buying, it’s probable that if any commitments is made this week, it will be
underwhelming. And tellingly, Draghi is looking like a leader whose command of
the situation is faltering.
Heat Rises on Central Banks – WSJ
Fed, ECB Officials Convene This Week as Markets
Look for New Growth Measures
Mirabile Dictu! ECB Chief Draghi Being
Investigated for Membership in the Group of Thirty – naked
capitalism
And the charge certainly looks valid. Draghi
should not be involved with the G30 while he is active at the ECB. And if the
EU Obudsman does find Draghi’s membership to be a conflict of interest, that
has to be just as true for the other EU central bankers that are current
participants.
Can Super Mario save the euro? – Hugo
Dixon / Reuters
Super Mario is now warming to the idea of
lending to the ESM, according to Bloomberg, even though that’s not part of his
immediate plan. If Draghi does this, he’ll have to find a way to eat his words
without losing credibility. If not, he will have to rely on second-best options
with all their drawbacks. Mind you, it’s the job of super heroes to get out of
tight spots.
All Hands on Deck or Abandon Ship for the EU – TF
Market Advisors
Negative rates as a precursor to the death of
banking – alphaville
/ FT
Morgan
Stanley: The potential impact of negative
rates on banks’ willingness to lend and on European rates curves is a key risk…we
see a risk of greater Balkanisation of European banking markets from funding
pressures.
Charting Europe's Broken Transmission Channels – ZH
JP Morgan: as obvious as the normative argument seems, it isn’t so helpful in thinking through the range of factors in play as the ECB moves into uncharted territory.
1 AUGUST
ECB Preview: Show us the "full Monti" – Danske Bank (pdf)
JP Morgan: as obvious as the normative argument seems, it isn’t so helpful in thinking through the range of factors in play as the ECB moves into uncharted territory.
1 AUGUST
ECB Preview: Show us the "full Monti" – Danske Bank (pdf)
ECB might not be able to deliver anything
specific already on Thursday though, as it needs more time to coordinate with
EFSF, Italy and Spain. Draghi’s comments have apparently been a surprise to many of his
central bank colleagues, which suggests he did not secure backing for new
initiatives ahead of his speech. We therefore see a risk that markets will be
disappointed on Thursday.
Draghi Reshapes ECB Crisis Pragmatism as
Trichet’s Dogma Fades
– BB
The ECB May Get Much Bolder – Euro
Crisis / BB
Draghi is set to disappoint – MacroBusiness
Given the constraints it is quite possible that
Draghi is about to under deliver on the
expectations he has created.
Mario Draghi’s Guns of August – Project
Syndicate
If these three steps – an ECB bond-buying
program to hold down sovereign interest rates, concrete progress on
establishing a real economic union, and realistic revision of current
adjustment programs – could be achieved as a package, the resources that the
ECB would need to use for its bond purchases would drop, because credibility
would be restored.
Despite being backed into a corner, the
Bundesbank turned down Europe in order not to deviate from their course of monetary policy. With
German policy makers holding the keys to the Euro and their historically hard
stance against loose monetary policy, we are in for some very interesting
years. The battle between ECB and the Bundesbank is far from over and it could
be prolonged.
Nothing’s gonna stop the ECB now – alphaville
/ FT
David Mackie over at JP Morgan has been looking
at the ECB’s options this week. What he concludes is that further ECB balance
sheet expansion may now be inevitable, and much of the expansion will take
place via the ECB funding the ESM, by buying its debt directly.
All roads lead to easing...unfortunately – Saxo
Bank
We have to remember a few key rules for these
markets: There are no "real markets" left… All major macro changes
comes from policy mistakes
Evidence on Clogged Transmission Channel of
Monetary Policy in the Euro Area – EconoMonitor
If the ECB means business on improving the
monetary transmission channel, they’ll need to attack the price of corporate
loans in the Periphery markets.
2 AUGUST
2 AUGUST
ECB Will Build a Bridge…But to Where? – Economist
Meg
EZ policymakers have practically made an
Olympic sport out of under-delivering throughout this crisis. Still, I think
the ECB will succeed in sustaining the current market rally. The big question
is whether EZ policymakers use the time lent to them by the ECB wisely, and on
this I am highly skeptical.
Goldman's investor survey of ECB's decision
tomorrow – Sober
Look
Possible policy actions by the ECB – Sober Look
Possible policy actions by the ECB – Sober Look
A synopsis of ECB officials' views – BNY
Mellon
ECB
officials' views ... continued – BNY
Mellon
BANG!
Press release Monetary policy decisions – ECB
Press conference Mario Draghi: Introductory
statement to the press conference – ECB
The ECB brought at Water Balloon to a Bazooka
Fight – TF
Market Advisors
Central Banks Do Nothing, Promise More – Marc
to Market
ECB hints intervention – details to follow – Nordea
ECB Doubleheader Game 1: Unchanged. – MarketBeat
/ WSJ
Draghi talks tough, but Euro hits airpocket on
lack of specifics –
Saxo
Bank
ECB Doubleheader Game 2: ‘May’ Buy Bonds – MarketBeat
/ WSJ
ECB’s Draghi Doesn’t Back Up Talk With Action,
Markets Slide – MarketBeat
/ WSJ
new upates 20:00 GMT
This Isn't The Draghi You're Looking For – Krugman
/ NYT
European leaders have once again failed to rise to the occasion
European leaders have once again failed to rise to the occasion
Market Reaction - Gravity Bites As Draghi
Serves Cold Plate Of Epic Disappointment – ZH
Spain and Italy have given back the immediate euphoria with Italy now 50bps wider from
pre-Draghi and Spain +25bps (having retraced over 60% of the post-'believe' rally).
Hope On. Hope Off – ZH
European equities and bond prices
European equities and bond prices
While absolute yields are back over 7% for 10Y Spain (and over 6% for Italy), the spread has
retraced over 60% of the gains post 'believe' speech.
Today the ECB met and did little but give more
comforting words.
ECB gearing up to buy euro zone bonds – Reuters
The ECB will gear up to buy Italian and Spanish
bonds on the open market but would only act after euro zone governments have
activated bailout funds to do the same, ECB President Mario Draghi said on
Thursday.
Draghi Says ECB Working on Bond Plan Amid
Bundesbank Concern –
BB
Draghi delivers – The
Telegraph
Markets have tanked because they don’t get
instant gratification, but I rather suspect that they have missed the point. All
this can only happen when the EFSF/ESM bail-out funds are activated by
governments, because only they have the power to force supplicant states to
sign a Memorandum and give up fiscal sovereignty.
Audio: SocGen’s Juckes Says ECB Said Nothing,
Euro Will Fall – BB (mp3)
Fallout from Draghi: Do What is Necessary but
Not Yet – Marc
to Market
European officials do not seem to appreciate
the significance of disappointing the market to the extent it has don so today…Draghi's
promise to "design appropriate modalities for such policy measures"
should have been done since the June 28 summit…No doubt Draghi's hands were
tied.
it "may" intervene on the markets to
buy bonds to help Spain and Italy lower their borrowing
costs, but only if governments first sign reform pledges with the eurozone's
bailout fund - a German demand.
Draghi Hints at Bond Buying But Rules Out
Banking License and Warns Governments Must Use EFSF/ESM, ECB Cannot Replace
Governments"; 10-Year Yield Back Over 7% – Mish’s
"Shorter part of the yield curve"? – Sober Look
ECB’s focus
on short end is useless, as Spain’s and Italy’s main problem is the long end of
the curve.
Steen's Chronicle: Draghi did not have a Royal
Flush... – Saxo
Bank
It looks like the ECB and FOMC again
overpromised and underdelivered in terms of new action. We do not doubt Draghi
will want to do something, but the Q&A indicated that the split between
Draghi and Club Med vs. Germany/Finland is as big as ever.
What’s the hold up? Germany, perhaps. During a press conference afterwards, ECB vice-president
VÃtor Constâncio noted that only one member of the ECB was adamantly opposed to
bond purchases. This seems to be a reference to Germany’s Bundesbank
ECB will do whatever it takes… but it will take
a while to figure out what it is – ASA
But even with lowered expectation, we didn’t
quite expect that.
new upates 18:00 GMT
new upates 18:00 GMT
A Hint From Draghi on the Euro? – Bruce Krasting
What is the one thing that Draghi could do that
would cause energy prices within the Euro Zone to rise? The answer is he could
cheapen the Euro versus the dollar
FX Comment: ECB Decision – BNY
Mellon
While the ECB's decisions to keep rates
unchanged was largely expected, the failure to announce further QE measures to
purchase government bonds proved a major disappointment to financial markets.
BNP Furious That Draghi "Jumped The Gun" – ZH
The lack of detail on all the above is a major problem. There were a few more details here and there in the press conference, including the ECB buying in short maturities, but it would have been far better for Mr Draghi to have kept quiet and deliver the "big splash" when there was sufficient agreement to allow the details, and the action, to follow in short order. Expectations should have been much better managed and Mr Draghi's credibility is taking a hit accordingly.
The lack of detail on all the above is a major problem. There were a few more details here and there in the press conference, including the ECB buying in short maturities, but it would have been far better for Mr Draghi to have kept quiet and deliver the "big splash" when there was sufficient agreement to allow the details, and the action, to follow in short order. Expectations should have been much better managed and Mr Draghi's credibility is taking a hit accordingly.
There be Draghis – alphaville
/ FT
Given last week’s declaration that Draghi would do “whatever it takes” to restore the transmission mechanism and Europe with it… what could possibly have led to Thursday’s disappointing ECB action?
Given last week’s declaration that Draghi would do “whatever it takes” to restore the transmission mechanism and Europe with it… what could possibly have led to Thursday’s disappointing ECB action?
The ECB gives a tiny glimmer of hope, not more! – re-define
The promise of ECB measures announced today
merely begins to address some of the symptoms of the serious economic and
political dynamics at work in the EU so will only buy EU policy makers some
time. Exactly how much, is hard to tell.
ECB meeting - Draghi opening the door for
politicians – Danske
Bank (pdf)
So that's what he meant – Free
exchange / The Economist
There are a number of potential pitfalls.
First, the German constitutional court is currently considering whether the ESM
is consistent with the German constitution…Second, a small creditor county in
northern Europe…third, Mr Draghi has to reckon with opposition from the German
Bundesbank,
Was Draghi really a disaster? – alphaville
/ FT
It is simply extremely difficult to design asset purchases beyond the SMP that work for the 17 eurozone states as whole. This isn’t the Fed we’re talking about here. How should the ECB get round the fact that super-low German yields are screaming a transmission problem just as much as high periphery rates?
It is simply extremely difficult to design asset purchases beyond the SMP that work for the 17 eurozone states as whole. This isn’t the Fed we’re talking about here. How should the ECB get round the fact that super-low German yields are screaming a transmission problem just as much as high periphery rates?
Second Policy Failure of the Week – Tim
Duy’s Fed Watch
An epic policy failure by the ECB. Not only is the ECB willing to let the
Eurocrisis simmer for another month, but their communication strategy is
abysmal. Draghi very desperately needs
to be more aware of the impact of his comments.
As for the ECB statement, I think it says that the ECB is a second line
of defense, and they will act reluctantly only after the EFSF/ESM fund is
activated. This seems to imply a formal
bailout request as a precondition to ECB action.
3 AUGUST
Whatever it takes... maybe – bruegel
3 AUGUST
Whatever it takes... maybe – bruegel
ECB Judo – Macro Man
So this leaves TMM reluctantly agreeing with the
consensus view that markets will try and force Rajoy to ask for EFSF help. And
while it might seem too obvious, especially given that the Draghi Put lies
below, the framework he laid out yesterday will take some weeks to come to
fruition (notably, the German Constituional
Court ruling on ESM). That
is not to say that the ECB will be unable to act until late-September, however.
More that without substantial pressure on Spain & Italy, that it cannot be
pre-emptive.
ECB Post-Mortem and US Jobs – Marc
to Market
The ECB is prepared to give the politicians
cover to rescue the euro, but there is a quid pro quo involved. Don't expect
immediate action, but this will be the normal back-and-forth of a negotiation
process that will drive the markets crazy.
Draghi'ing his heels: thoughts on the ECB, MPC
& FOMC this week
– Saxo
Bank
I am sympathetic to the argument that until the
measures are firmly put in place, the resultant uncertainty is negative for
sentiment and for the EUR and broader risk assets BUT if all of these
suggestions and commitments eventually pass through into physical measures then
they would potentially amount to the ‘bazooka’ of policy that the markets have
been craving for months (if not years).
The problem is that Draghi has to keep the
markets appeased until September 12, when the German Constitutional Court will
presumably lift the injunction against having the German president sign the
treaty that creates the permanent rescue fund, the ESM (my connected German
buddies believe the judges are just about certain to lift the injuction, even
if it were to take some tortured reasoning to get there). The second obstacle
that has to be overcome is that Spain and Italy have to ask for aid.
Why is that necessary? Because formal aid comes with strings attached.
5 AUGUST
Maybe Draghi’s speech wasn’t a disaster after
all – Wonkblog
/ WP
Jens Weidmann, the German representative on the
ECB board, was the lone dissenter from the new bond-buying proposal. And
Weidmann couldn’t get any of the other members to agree with him.
No left tail for a while – The Tail Chaser
To watch are the same variables: Target2
Claims, Deposit Flights and banks’ equities and credit. These are the
‘convertibility premia’ Super Mario pulled as excuses to get the bond buying
within his mandate.
What’s with the eurozone update? – Marginal
Revolution
He’s daring the Germans to zap him, knowing he
stands some chance of going down in history as the central banker who saved the
eurozone, knowing that he has nowhere else to go, knowing the Germans have
nowhere else to go, and knowing that he has nothing to lose from being fired or
otherwise emasculated. He also knows he
has a lot of other eurozone nations on his side.
The Great Draghi Re-think – alphaville
/ FT
Oppenheimer is very much looking for the sort
of rally we saw post-LTRO, although he accepts it could be volatile. But
Goldman are telling their clients to go long European “high sales growth” and
short the American equivalent, while also targeting a dollar/euro rate of 1.30.
Mario Draghi's rescue plan for the euro – Free
exchange / The Economist
Backing up words with more words is always a
problem, particularly when there are so many moving parts, as in the euro area.
In an ominous sign, Spanish 10-year bond yields climbed back above 7%. Now they
know what Mario really meant, the markets may remain unconvinced until his plan
actually takes off.
Hedge-Fund Investor Jen, a Euro Bear, Gives
Draghi Thumbs Up – MarketBeat
/ WSJ
Stephen Jen is a pronounced euro bear, but he gave a ringing endorsement of Mario Draghi’s new game plan for the euro zone’s debt crisis Thursday, even as markets were disappointed
Stephen Jen is a pronounced euro bear, but he gave a ringing endorsement of Mario Draghi’s new game plan for the euro zone’s debt crisis Thursday, even as markets were disappointed
Investors may not have liked what European
Central Bank head Mario Draghi had to say on Thursday, but it was the clearest
indication yet that a plan is finally taking shape to reduce borrowing costs
for Spain and Italy. Germany remains wary, though, and commentators say the outcome could
be disastrous.
Draghi breaks the ultimate euro taboo – Gavyn
Davies / FT
Mr Draghi could simply have repeated the old
line that the operation of the Target 2 system is enough to ensure that the
euro can never fall apart. By admitting the reality that the system is no
longer 100 per cent credible in the eyes of the market, the ECB president has
invited investors to ask whether his proposed interventions are powerful enough
to deal with problem he has raised.
6 AUGUST
6 AUGUST
All roads point to September, once the German constitutional
court has presumably cleared the way for the bloc’s ESM bailout fund to come
into being. At some point after that, Spain could ask for help from the fund to
lower its borrowing costs rather than seek a sovereign bailout and, from what
Draghi has said, the ECB could pile in behind. If that joint action turned the
tide in Madrid’s favour it’s possible that Italy, which after all is
running a primary surplus, would be taken out of the firing line.
Watching the ECB play chess – mainly
macro
What I cannot help reflecting on is the
intellectual weakness of the position adopted by Draghi’s opponents. These
opponents appear obsessed with a particular form of moral hazard
Ambrose
Evans-Pritchard: So we enter the
treacherous market month of August with Europe in limbo. The actors wait upon each
other. World finance held hostage to a fiendishly complicated game of
diplomatic chess.
Draghi breaks the ultimate euro taboo – Gavyn
Davies / FT
Mr Draghi could simply have repeated the old
line that the operation of the Target 2 system is enough to ensure that the
euro can never fall apart. By admitting the reality that the system is no
longer 100 per cent credible in the eyes of the market, the ECB president has
invited investors to ask whether his proposed interventions are powerful enough
to deal with problem he has raised.
Investors may not have liked what European
Central Bank head Mario Draghi had to say on Thursday, but it was the clearest
indication yet that a plan is finally taking shape to reduce borrowing costs
for Spain and Italy. Germany remains wary, though, and commentators say the outcome could
be disastrous.
Mario Draghi Cannot Save the Euro – View
/ BB
A broader question is what, if anything, Draghi might achieve with a looser monetary policy. The euro area has many problems, including a lack of competitiveness in the periphery, chronically poor growth in countries such as Portugal and Italy, deeply damaged public finances in Greece and Spain, and a labor force that’s not mobile enough to go where the jobs are. Which of these could be resolved by reducing interest rates across the board?
A broader question is what, if anything, Draghi might achieve with a looser monetary policy. The euro area has many problems, including a lack of competitiveness in the periphery, chronically poor growth in countries such as Portugal and Italy, deeply damaged public finances in Greece and Spain, and a labor force that’s not mobile enough to go where the jobs are. Which of these could be resolved by reducing interest rates across the board?
Is ECB’s Refusal to Go Beyond its Mandate a
Policy Failure? – EconoMonitor
In our opinion, unconditional debt monetization
cannot be a “third way” or “middle of the road” scenario for the Eurozone as it
would certainly result in disintegration and chaos. ECB’s refusal to embrace
this option is not a policy failure.
Analysis of the recent ECB press conference – Kiron
Sarkar / The Big Picture
The above measures if implemented (likely), as
proposed by Draghi, are bullish. Yes, there are risks, but…Indeed, I could
argue that Draghi’s plan is even more important that his previous LTRO
programme on behalf of European banks.
Weidmann, the last major independent voice
among Eurozone's central bankers – Sober
Look
Weidmann must be asking how much more will be
needed. How much periphery exposure is to be transferred from private hands to
the ECB? And more importantly, should it even be a central bank's
responsibility to rescue its government? Weidmann continues to argue that it
should not. As an independent central banker he clearly wants no part of this.
But as Handelsblatt asked, "how much longer" before Weidmann, as a
member of the ECB's Governing Council, succumbs to the pressure?
7 AUGUST
7 AUGUST
Buying Bonds against the Crisis: How the ECB
Plans to Use Its Bazooka – Spiegel
The ECB has come up with a new plan to buy the
bonds of debt-ridden countries in a bid to fight the euro crisis. Under the new
approach, the ECB would only intervene if governments commit to reforms. But
experts criticize the plan as dangerous and undemocratic.
Is Draghi’s EuroRescue Plan Coming Unglued? – naked
capitalism
No sooner had some astute Euro commentators
noted that Draghi might have found a path through the Euro mess to keep it
patched up long enough for to impose austerity on the periphery and drive all
of Europe into a lovely depression, various elements of his plan look as if
they were coming unglued.
Chief Economist’s Corner: Super Mario nowhere
near “Game over” – Nordea
Against this backdrop, it seems that Super
Mario’s plan for saving the euro and at the same time avoiding high inflation
is based on large-scale purchasing of government bonds. I think he will be able to fulfil this task
also – with a little help from the political establishment.