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Monday, July 30

30th Jul - Special: ECB WATCH

These are the ECB -related articles that have appeared on my blog posts in the past few days. I will update this post as new material comes along and also follow "after the fact" market reactions, analysis, and comments. Latest additions at the bottom of the post!

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Previous ECB press conferencesECB

Speech by Mario Draghi at the Global Investment Conference in LondonECB
The one that built the great expectations

Press Conference WebcastECB

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 SqueezeZH

Draghi on *that* transmission mechanismalphaville / 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.

Draghi Says ECB to Do Whatever Needed as Yields Threaten EuropeBB
European Stocks Rally as Draghi Pledges to Preserve EuroBB
Stock Futures Jump on Draghi’s ‘Whatever It Takes’ CommentMarketBeat / WSJ

First Responses To Draghi's "Deliberately Ambiguous" Remarks Trickle InZH

And Here Is What Draghi CAN Do, In His Own WordsZH
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 DraghiZH
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 ListenMarketBeat / 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 coverSober 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 DragonMarc 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 CommentsMarketBeat / 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.”

Here comes Mario Draghi to save Europe… right?Wonkblog / WP
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, againThe Big Picture

A Quick Reminder On The Effectiveness Of The ECB's Bond BuyingZH

Morning Briefing: New perspectiveBNY Mellon
What should we make of Mr Draghi’s heavy hints of action?

Sceptics abound as Mario Draghi's ECB bond 'bluff' electrifies global marketsThe 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 policyZH
(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.

Draghi In A BoxZH

Premia, there and everywherealphaville / 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?

What’s the ECB going to do next? alphaville / FT
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.

The Weekly T Report: From QE to PETF 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?

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 meetReuters
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 optionsReuters
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 BuyingZH

Schäuble Rejects ECB Help for Spain; Full Bailout Still ComingMish’s
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 Bubaalphaville / 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 themThe 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.

Draghi Said to Hold Talks With Weidmann on Bond Purchases BB
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 DoKrugman / 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 EuroEconoMonitor
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?

Dos and Don’ts for the ECBProject 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-crisisFabius 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
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 ContinuesTim 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 DraghiKrugman / 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.

Goldman: We forecast that the ECB will permit NCB purchases of private sector assetsZH

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 euroSaxo 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 RescueThe 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 everythingFree 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-crisisFabius 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.

Europe: Urgent or Not?Marc to Market
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 awayReuters
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 ExpectationsMacro 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' SpeechZH
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.

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 UpdateTim 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 aboutASA
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” Bluffnaked 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 Thirtynaked 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 bankingalphaville / 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 ChannelsZH
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.

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 FadesBB

The ECB May Get Much BolderEuro Crisis / BB

Draghi is set to disappointMacroBusiness
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 AugustProject 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. 

Above the noise: Bundesbank has been tough before, will it again?Saxo Bank
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...unfortunatelySaxo 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 AreaEconoMonitor
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.

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 tomorrowSober Look

Possible policy actions by the ECBSober Look

A synopsis of ECB officials' viewsBNY Mellon
ECB officials' views ... continuedBNY Mellon


Press release Monetary policy decisionsECB

Press conference Mario Draghi: Introductory statement to the press conferenceECB

The ECB brought at Water Balloon to a Bazooka FightTF Market Advisors

Central Banks Do Nothing, Promise MoreMarc to Market

ECB hints intervention – details to followNordea

ECB Doubleheader Game 1: Unchanged.MarketBeat / WSJ

Draghi talks tough, but Euro hits airpocket on lack of specificsSaxo Bank

ECB Doubleheader Game 2: ‘May’ Buy BondsMarketBeat / WSJ

ECB’s Draghi Doesn’t Back Up Talk With Action, Markets SlideMarketBeat / WSJ

This Isn't The Draghi You're Looking ForKrugman / NYT
European leaders have once again failed to rise to the occasion

Market Reaction - Gravity Bites As Draghi Serves Cold Plate Of Epic DisappointmentZH
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 OffZH
European equities and bond prices

That Was Fast: Spain Back Over "Critical" 7%, Punk'd By DraghiZH
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.

Update on Europe: Tinker Bell fails to deliverFabius Maximus
Today the ECB met and did little but give more comforting words.

ECB gearing up to buy euro zone bondsReuters
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 ConcernBB

Draghi deliversThe 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 FallBB (mp3)

Fallout from Draghi: Do What is Necessary but Not YetMarc 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.

Germany gets its way on ECB bond-buyingeuobserver
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.

Did Germany just stop Draghi from bailing out Europe?Wonkblog / WP
What’s the hold up? Germany, perhaps. During a press conference afterwards, ECB vice-president Vítor 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 isASA
But even with lowered expectation, we didn’t quite expect that.
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 DecisionBNY 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.

European Bonds Give Up ALL Draghi "Believe" Gains In Worst Day In Over A DecadeZH

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.

There be Draghisalphaville / 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?

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 politiciansDanske Bank (pdf)

new upates 20:00 GMT

So that's what he meantFree 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?

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.

Whatever it takes... maybebruegel

ECB JudoMacro 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 JobsMarc to Market

What did you really expect from the ECB?Humble Student
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 weekSaxo 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).

Draghi Continues Handwaving as EuroCrisis Worsensnaked capitalism
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.

Maybe Draghi’s speech wasn’t a disaster after allWonkblog / 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-thinkalphaville / 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 euroFree 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 UpMarketBeat / 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

The World from Berlin 'Vengeance for ECB Bond-Buying Will Be Bitter'Spiegel
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 tabooGavyn 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.

Euro zone gymnastics MacroScope / Reuters
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 chessmainly 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

Venetian cunning of Draghi-Monti masterplan may save euro for now The Telegraph
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 tabooGavyn 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.

The World from Berlin 'Vengeance for ECB Bond-Buying Will Be Bitter' Spiegel
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 EuroView / 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?

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 conferenceKiron 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 bankersSober 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?

Buying Bonds against the Crisis: How the ECB Plans to Use Its BazookaSpiegel
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.

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