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Tuesday, January 20

20th Jan - ECB Preview Special

This linkfest to previews on the European Central Bank's meeting on Jan-22 will be updated as new material comes along.

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ECB QE guessworkFT
Roundup of sell-side bank views

ECB about to fire its last salvo – hope it strikes homeTradingFloor
Today is the day. While many central bank meetings are key events, this is when the European Central Bank, already in the eighth crisis year, will at long last announce a sovereign bond purchase programme. Is this just a stealth bailout of the banks? If the widely-expected announcement fails to incite inflation expectations, will there be anything left in the toolbox?

Bank of Japan well ahead of ECB in the QE raceTradingFloor
With the Fed now out of the quantitative easing game, the QE race will be reflected in the EURJPY cross. It has declined far enough in recent weeks to find a support level around mid-134 and then bounce - suggesting a rally of some magnitude is in its early stages.

ECB now running on 1.1 trillion euro fuel injectionTradingFloor
The ECB set to deliver a cash injection of 1.1 trillion euros to fend off deflation, by spending 50 billion euros a month from March 2015 to December 2016. However, this proposal still has to be debated at the Governing Council.

Five Questions for Mario Draghi on ECB-Style Quantitative EasingBB
Will you or won’t you? * What will the ECB buy? * Size matters? * What’s the deal with risk sharing? * Will interest rates need to be tweaked?

Tensions build ahead of ECB launch of QEFT

Mario Draghi prepares to unveil easing proposalsFT

If you had one question for Mario Draghi today...FT


What the history of the Bundesbank might teach the ECBFT

5 Things to Look for in Eurozone QEWSJ

The ECB’s bond-purchase dilemmaBruegel
The fact that the ECB did not share losses in the previous round of Greek debt restructuring highlights the problem of sovereign QE, which is not feasible or will be ineffective if fiscal implications are excluded. The design of the programme is therefore crucial.

Paul De Grauwe: The sad consequences of the fear of QEThe Economist
Two reasons why the case for QE is overwhelming: QE is merely a correction for what happened during the last two years. The euro-zone economy is not getting off the ground.

The ECB’s bond-purchase dilemmaBruegel
German opposition to government-bond purchases by the EC is solidifying ahead of the programme’s likely announcement

Central bank prophet fears QE warfare pushing financial system out of control The Telegraph
Former BIS chief economist warns that QE in Europe is doomed to failure and may draw the region into deeper difficulties: “QE is not going to help at all. Europe has far greater reliance than the US on small and medium-sized companies (SMEs) and they get their money from banks, not from the bond market.”

ECB's QE leaked: monthly €50 bn bond monetizationZH

ECB Preview: FAQMarc to Market

How Good Would QE Be for European Equities?WSJ
U.S. and Japanese precedent suggest quite a lot. But there are good reasons to be cautious.

ECB QE. Much too late and not to be counted onTony Yates
The best that is to be said for EZ QE is that will probably do no harm, and is worth a shot. 

Watch Europe Fumble QEView / BB
Perhaps it's worth going through with the QE exercise: Until policymakers see its futility, they won't lift their gaze, as King suggests, to consider deep structural reforms, which are much tougher to carry out than government bond purchases.

As Size of ECB’s Potential Bond Buying Emerges, What Does the Street Think?WSJ

ECB’s QE Plan a Cross Between the Fed’s QE2, QE3 – HilsenrathWSJ

Eurozone QE: ‘Like Penalty Shoot-Outs at a World Cup’ — RBSWSJ

Markets Spring into Action as News Breaks on Potential Size of QEWSJ

Will eurozone QE be too little, too late? The Guardian
Having ramped up expectations, there is now a danger that the long-awaited sovereign bond purchases prove a damp squib

Deflaters gonna reflateFT

How The ECB's QE Is About To Send The Most Deflationary Signal EverZH

Why The ECB's QE Won't Work (In 4 Brief Minutes)ZH

QE is coming, but on German termsThe Economist
Draghi seems determined to adopt QE in some form, but he will have to compromise on the way that the risks are shared among the euro-zone national central banks in order to get the policy through.

QE and central bank solvencyBruegel
The ECB will most likely reveal on Thursday its plans for a program of sovereign bond buying, as it steps up its efforts to stave the eurozone off deflation. In a previous review, we addressed the question of whether the expansion of the money base should be temporary or permanent to have a meaningful impact on inflation. In this review, we provide background on the exacerbated concern of what would happen to the Eurosystem’s capital resources if a country defaults and, in particular, whether this would generate a fiscal transfer between members.

Quantitative easing will come! But how will it look?TradingFloor
ECB very unlikely to disappoint * Key questions concern size and risk sharing * Positive outlook for USD and GBP

On the consequences of Mr Draghi’s impending QE announcement The Economist
The idea of asset purchases by national central banks, rather than by the ECB itself, may be politically convenient but comes at the considerable cost of deepening the perception that the euro zone is refusing to come together, not even in the context of monetary policy.

Summers Sees German Objections to Borrowing as Eurozone HurdleWSJ

5 Asset Classes and European QEWSJ

How Investors Are Positioned for QEWSJ

The ECB’s Coming New Stance on QEPIIE

Tensions simmer over eurozone QE as investors buy up Spanish debtFT

Martin Wolf: Bolder steps from Europe’s central bankersFT
The ECB’s QE programme must now happen — the eurozone economy is at stake

ECB has a favourable wind for QE launchFT
Corporate borrowing for fixed investment is picking up

Not Even Mario Draghi Can Save Europe NowView / BB

QE in the Eurozone: limited economic benefits at a high legal and political costOpen Europe
The European Central Bank looks increasingly likely to launch Quantitative Easing (in the form of sovereign bond purchases) this week. Many around Europe will no doubt celebrate, based off the assumption that such a programme can have the same impact as it did in the US and UK. In a new paper Open Europe deconstructs why the situation is fundamentally different in the Eurozone, highlighting that actually QE could come with limited economic benefits and high legal and political costs.

Markets pricing in substantial QE operation by the ECBSober Look

What European QE Will Look Like, and What Happens if It Doesn’t WorkWSJ

Ireland Warns QE Won’t Work If Risks Not SharedWSJ

ECB May Deliver $635 Billion to Steer Euro Away From DeflationBB

Effective Eurozone QE: Size matters more than risk-sharingvoxeu
The ECB may soon launch QE. Two of Europe’s leading macroeconomists argue that QE is the ECB’s last anti-deflation tool – it must not be sacrificed to political expediency. The risk-sharing debate is secondary to the programme’s size and duration – one example would be €60 billion per month for one year, or until inflation expectations rose to near 2%. The ECB should also explain that no matter how well the monetary part of the programme is designed, an accompanying fiscal expansion is critical to QE’s effectiveness.

The ECJ suggests OMT is compatible with the Treaty, but not with the TroikaBruegel
The OMT introduces explicit conditionality for the bond buying and it links the decision of the Governing Council to continue or suspend the OMT to the assessment of whether such conditionality is fulfilled.

ECB set to bow to German pressure over QEFT
Policy makers in Frankfurt are expected to take the momentous decision to embark on quantitative easing on Thursday, with the most likely option at this stage for the ECB to force the 19 national central banks that make up the eurozone to stand behind their own sovereign bonds.

Deutsche Bank: The ECB Will Fail Given The "History Lessons Of US And Japan"ZH

Wolfgang Münchau: Why the ECB should not water down a QE programmeFT
My plea would be to start with a big figure now. Size matters

Eurozone QE set to arrive at last this week, but with conditionsFT
Market economists would prefer Mr Draghi to compromise on risk sharing than the size of any package. But the ECB’s proposed fix has its critics, who warn that scrapping its commitment to risk sharing sends a dangerous message on the future of the eurozone.

Draghi's Looming "Anti-Integration" QE: It's The Structure (Not Size) That MattersZH

Week AheadNordea
The key event of next week will be the ECB meeting on Thursday.

Weekly FocusDanske Bank
We expect the ECB to announce an aggressive QE programme

Global FX Strategy - Will ECB prompt a USD correction?Nordea
The main story over the past few months has been the continued collapse in the oil price, which has been halved since August. The impact on global growth of the massive drop in oil prices is bound to be positive, with oil importers as the big winners and oil exporters as the losers.

Jan Hurri: Europäättäjien pääkallokeli – kuka liukastuu kumoon? - TalSa
Hermot kiristyvät euroalueella, kun keskuspankki EKP valmistautuu kiistanalaisiin valtionlainaostoihin ja Kreikka vaaleihin ja velkojensa armahdusvaatimuksiin. Päättäjät liukastelevat europolitiikan pääkallokelissä. Kuka kaatuu kumoon, Kreikka, Saksa vai Suomi?

Näin Mario Draghi pelastaa euromaat – seuraavaksi QE ja lopuksi korieuro?Sami Miettinen / US

Quantitative easing in the Eurozone: It's possible without fiscal transfersvoxeu
Paul De Grauwe, Yuemei Ji: The ECB has been struggling to implement a programme of quantitative easing (QE) that would successfully target deflation. The main difficulty is political, stemming from opposition from German institutions. Their argument against is that a government bond buying programme by the ECB would mix fiscal and monetary policy. This column argues the opposite – such a programme can be structured so that it does not mix fiscal and monetary policy. It, therefore, would not impose a risk on German taxpayers.

Politics to trump law in QE decisionReuters

French Megabank: Without QE, “Eurozone Financial Markets Would Collapse”Wolf Street

Veksler: First it was SMP, then OMT, and finally it could be OMGTradingFloor
The ECJ hands down its ruling today on the ECB outright monetary transactions * A negative ECJ ruling may mean the ECB has to rein in its quantitative easing * There will be rethinking and strategy adjustment if the ruling goes the wrong way

McKegg: What happens if the ECB doesn’t deliver?TradingFloor
Energy pushed the headline HICP rate into the red on an annual basis in December * But the ECB seems stuck with the headline 2% inflation rate as its target * To give itself room to move, the ECB may say it's following the lead of other central banks, by concentrating on core HICP rather than the headline rate

ECB moves towards country-thinkingNordea
The new voting rotation scheme and the publishing of accounts from monetary policy discussions will not improve transparency within the ECB. The voting rotation increases the divide between big and small countries and moves ECB closer to other EU organs. Most likely voting will be used sparingly, if at all, in the future and most important discussions will be kept outside official meetings.

Opinion: The winners from Draghi’s QE? America and BritainMarketWatch

The ECB’s (Losing) Battle Against DeflationWSJ

Draghi Says ECB Determined to Fulfill Mandate, Zeit ReportsBB

Whatever it takes or whatever it can get away with?Reuters

  ECJ press release on OMTECJ
ECJ full document – ECJ
ECB's OMT "May Be Legal" But Must Meet Conditions – ZH
ECJ: OMT OK (ish) – FT
EU court adviser paves way for ECB bond-buying – Reuters
Draghi Buoyed as EU Court Aide Supports 2012 Bond-Buy Plan – BB
5 Takeaways From the ECJ’s Thumbs-Up for ‘Whatever It Takes’ – WSJ
Q&A: the ECJ decision and QE – FT
ECJ validates bond buying but puts German Court in tough position – Open Europe
ECJ: ECB bond-buying legal “in principle”, but sets conditions – Open Europe

Jan Hurri: EKP:n setelisingosta on tulossa tussahdusTalSa
Rahoitusmarkkinoiden odotukset EKP:n kaavailemien valtionlainaostojen mitoista ja tehosta ovat jo kasvaneet niin suuriksi, että EKP:n voi olla vaikea vastata odotuksiin kuin pettymyksellä. Setelisingon tehoa heikentää esimerkiksi kiistakysymys, ovatko EKP:n valtionlainaostot edes laillisia. Keskiviikko tuonee tähän kiistakysymykseen lisävalaisua.

ECB Should Address Low Inflation Sooner, Not Later, Nowotny SaysWSJ
ECB May Make Decision on Bond Buying in January — CoeuréWSJ
ECB preview: Whatever can be agreed onNordea
Time has come, in our view, for the ECB to announce sovereign QE at the upcoming policy meeting on 22 January. The Greek election three days later will be no obstacle. We expect the ECB to start buying EUR denominated government bonds in Q1, according to the capital key, along the curve, including inflation linkers. In our baseline scenario of a credible programme, we would expect core yields to rebound higher, following initial volatility.

Sovereign QE and national central banksBruegel
Leaving national central banks to carry the default risk is impossible and dangerous

The deflation naysayersBruegel
As the euro area experiences decreasing prices for the first time since 2009, not all economists are aboard the anti-deflation bandwagon, arguing that the worries expressed about mild deflations are misguided. In this review, we explore the empirical and theoretical arguments put forward by the deflation naysayers.

New capital goals and Santander share sale heap pressure on Europe’s banks FT
The ECB, which took over regulation of the eurozone’s 130 biggest banks from national supervisors in November, has given lenders until the end of this week to appeal against the capital ratios it believes they need.

The ECB and QE: Will It Work?WSJ
Whether the mechanics of Europe’s capital markets will render QE less effective in Europe than in the U.S., and whether QE really has any lasting effect on an economy at all, are still big questions on the Continent.

The ECB exploring QE options Sober Look

5 Questions On Quantitative Easing as the ECB Prepares to ActWSJ

Wolfgang Münchau: Eurozone must act before deflation gripsFT
A helicopter drop would work — but I fear it would be too unconventional for the European mind