ECB President Claude Trichet's attempt to mastermind an escape route for his organization from its responsibility of buying bonds from ailing European Union members was served a major blow, when European chiefs unanimously denied his idea of providing relief to the central bank. According to the agreement terms made between the Euro leaders and ECB, the European Financial Stability Facility will be allowed to purchase bonds from Eurozone members directly; however, it will not be allowed to make purchases from the open market. Trichet also failed to persuade his opposite numbers from allowing ECB extend its financial support to governments' debt buybacks.
The latest incident may worsen the state of increasing differences between Trichet and elected Eurozone representatives over driving the European Union out of economic crisis and decreasing the chances of a reversion. Trichet is also of the view that the existing policies in operation are not adequately equipped to prevent the relapse, and he has actively lobbied for the enforcement of even more stringent policies in the European region.
According to JPMorgan Chase Co.'s chief European economist David Mackie, the European bosses' choice of purchasing bonds in the main markets, is a clear indication that they favor supplying liquidity loans to crisis-stricken countries, instead of completely imitating ECB's role of being the market support for others.
At the March 12 summit, Trichet had told the reporters in Brussels that they are steering the EU ship in the 'right direction'. Earlier, the ECB chief had shot off warnings that he won't allow countries to constantly exploit ECB's cheap supply of credit in an attempt to support the region's fragile economies. Since May 2010, the ECB has purchased government-issued bonds in large quantities worth 77 billion Euros, and it also had to offer emergency liquidity supply at the end of the year.
At his February 14 interview with French tabloid Les Echos daily, Trichet suggested that governments should understand ECB's stance themselves and for that, qualitative and quantitative reforms are needed in EFSF's working mechanism. Explaining that the proposal of adding weight to government bonds in EFSF's repertoire is part of those reforms.
Apart from French representatives' indication to support their countryman's proposal, Austria, Germany and the Netherlands rejected the notion of taking over ECB's hectic responsibility on their own shoulders.
Goldman Sachs Group Inc. expert Francesco Garzarelli commented that investor sentiments may have gotten damaged because the leaders' choice not to back EFSF's push for buying the bonds in open markets, which he suggested is a far better alternative to ECB's constant involvements.
In one of the pre-summit interviews, Trichet said that the ECB's constant buying wasn't a reliable and long lasting solution to the problem. Der Spiegel has quoted him as saying that ECB will not continue playing this role of a last resort purchaser forever, and like all extraordinary moves, it is also temporary.
The latest incident may worsen the state of increasing differences between Trichet and elected Eurozone representatives over driving the European Union out of economic crisis and decreasing the chances of a reversion. Trichet is also of the view that the existing policies in operation are not adequately equipped to prevent the relapse, and he has actively lobbied for the enforcement of even more stringent policies in the European region.
According to JPMorgan Chase Co.'s chief European economist David Mackie, the European bosses' choice of purchasing bonds in the main markets, is a clear indication that they favor supplying liquidity loans to crisis-stricken countries, instead of completely imitating ECB's role of being the market support for others.
At the March 12 summit, Trichet had told the reporters in Brussels that they are steering the EU ship in the 'right direction'. Earlier, the ECB chief had shot off warnings that he won't allow countries to constantly exploit ECB's cheap supply of credit in an attempt to support the region's fragile economies. Since May 2010, the ECB has purchased government-issued bonds in large quantities worth 77 billion Euros, and it also had to offer emergency liquidity supply at the end of the year.
At his February 14 interview with French tabloid Les Echos daily, Trichet suggested that governments should understand ECB's stance themselves and for that, qualitative and quantitative reforms are needed in EFSF's working mechanism. Explaining that the proposal of adding weight to government bonds in EFSF's repertoire is part of those reforms.
Apart from French representatives' indication to support their countryman's proposal, Austria, Germany and the Netherlands rejected the notion of taking over ECB's hectic responsibility on their own shoulders.
Goldman Sachs Group Inc. expert Francesco Garzarelli commented that investor sentiments may have gotten damaged because the leaders' choice not to back EFSF's push for buying the bonds in open markets, which he suggested is a far better alternative to ECB's constant involvements.
In one of the pre-summit interviews, Trichet said that the ECB's constant buying wasn't a reliable and long lasting solution to the problem. Der Spiegel has quoted him as saying that ECB will not continue playing this role of a last resort purchaser forever, and like all extraordinary moves, it is also temporary.
About the Author:
Some prefer large banks for their financial needs, but I always preferr to give my business to a local federal credit union. Personable local institutions like CoastHills FCU are a pleasure to bank with, and will sit down to really understand your needs. Learn how a federal credit union can help you with your banking needs.
No comments:
Post a Comment