Although it is clear that the key will be in Europe’s inflation trajectory, especially after weak economic growth data in 2Q14. Santander analysts think the market could be assigning too high probability to a QE program. However, it would be likely that it would initially focus on the ABS and, according to the Spanish bank analysts, it requires significant technical and regulatory changes to ensure its success.
Regarding Draghi’s new possible fiscal policy, the German finance minister, W. Schäuble, claimed yesterday to know him very well and said that his comments had been “over-interpreted”.
The ECB itself recognized at Davos in January that the primary volume of ABS is currently too low and would have to propel it before the ECB could enter. According to the Association for Financial Markets in Europe, the volume of ABS sold to the market decreased by 6% (€ 19,4 billion) in 2Q14. Regarding the regulatory chapter, already in April the ECB and the BoE published a report requesting substantial changes to unblock this market.