Big surprise by ECB - announcements will come tomorrow
05.09.2012
23:07
According to information from Bloomberg, ECB president Mario Draghi is planning for unlimited bond purchases for countries with financial problems. According to what ECB executives leak, the plan will probably be called "totalitarian monetary transactions".
According to information from Bloomberg, ECB president Mario Draghi is planning for unlimited bond purchases for countries with financial problems. According to what ECB executives leak, the plan will probably be called "total monetary transactions." The main idea is unlimited three-year bond purchases for the countries of the South in return for their meeting the commitments in their fiscal adjustment programs. In fact, the Central Bank will be able to sell the bonds if the countries do not meet their deficit and debt commitments.
The leaking of this information, particularly the word "unlimited", was enough to boost the purchases of 3-year bonds with increase in the prices and fall in the yields on Spanish and Italian bonds. This rise was followed by the Greek bonds (and the stock market) with a drop of 21% in performance and 23 to 24% in the decade prices.
Reaction from German central banker Weidmann
Mario Draghi had informed the European parliament of the need for intervention by the ECB in order to protect the common EU rate and control the lending rates of countries facing debt problems.
The ECB president also briefed the 17 central bankers about these plans. The only objector was Weidmman, president of the Bundesbank, who has declared his opposition to unlimited purchases of bonds.
Apparently there is no enmity between the ECB president and the German banker, a point also stressed by the German Finance minister.
The leaking of this information, particularly the word "unlimited", was enough to boost the purchases of 3-year bonds with increase in the prices and fall in the yields on Spanish and Italian bonds. This rise was followed by the Greek bonds (and the stock market) with a drop of 21% in performance and 23 to 24% in the decade prices.
Reaction from German central banker Weidmann
Mario Draghi had informed the European parliament of the need for intervention by the ECB in order to protect the common EU rate and control the lending rates of countries facing debt problems.
The ECB president also briefed the 17 central bankers about these plans. The only objector was Weidmman, president of the Bundesbank, who has declared his opposition to unlimited purchases of bonds.
Apparently there is no enmity between the ECB president and the German banker, a point also stressed by the German Finance minister.
According to certain information, Chancellor Merkel is opposed to unlimited bond purchases, saying that it must be for a specific period of time.
Reports say that in order for the ECB to 'sterilize' transactions, it will have to withdraw the equivalent amount of money from the system to spend on the bond purchases, to ensure that it will have no effect on the money supply. Essentially, it will not print any money, as it will withdraw money from circulation. In the end however, the bond market generates money since it is given either as warranties or gets directed as leverage.
Reports say that in order for the ECB to 'sterilize' transactions, it will have to withdraw the equivalent amount of money from the system to spend on the bond purchases, to ensure that it will have no effect on the money supply. Essentially, it will not print any money, as it will withdraw money from circulation. In the end however, the bond market generates money since it is given either as warranties or gets directed as leverage.
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