European economy

Sanchez Conte

The European Bonds Proposed As Support For Reconstruction Fund Are Not Coronabonds

The European Commission has been asked to set up a 2 billion euros reconstruction fund to assist the countries and sectors most affected by the Covid-19. The fund would operate, at least partly, on the basis of grants and subsidies rather than loans to avoid excessive leverage by any of the member states. This instrument should be financed by issuing long-term bonds guaranteed by the EU budget. The EC points out that this type of bond is not the same as the “coronabonds” demanded by some countries at the start of the pandemic.

The “R” club is recruiting

Should We Be Concerned About Sustainability Public Debt Euro Area?

Adrià Morrón Salmerón (Caixabank Research) | The measures necessary to combat the COVID-19 outbreak will generate a significant increase in public debt in the world’s major economies, including in the euro area.The sustainability of euro-area debt is not in question, but the environment is demanding and places the ECB in a key position. A swift and sustained recovery in economic activity is also essential, which in turn requires a coordinated economic policy response.

Andrea Enria

Banks Should Keep Every Euro Of Capital To Absorb Losses And Continue To Provide Credit To The Economy, Says ECB’s Enria

Andrea Enria, the President of the European Central Bank (ECB) Supervisory Board, said in an interview that he expects banks to keep back over $27 billion of the $35 billion they planned to distribute in dividends as capital on their balance sheets. In addition to this, Enria said the institutions have also cancelled their current and planned share buy-back programmes

euro digital currency

The ECB Warns That A Digital Currency Would Have Serious Effects For The Financial System

If the European Central Bank (ECB) were to introduce a digital currency for citizens, with the possibility of them being able to open deposit accounts directly with the institution, it would undermine the role of the banking sector as an intermediary. This disintermediation would lead to legal problems and economic inefficiencies, stated Yves Mersch, Luxembourg’s representative on the ECB’s board.

ECB at dusk

The ECB Increases Its Emergency Purchases By 54% In The Week Of Germany’s Constitutional Court Ruling

Just a few weeks before the ECB’s key meeting (4th June), Lagarde has responded to Germany with the biggest weekly purchase since the start of the pandemic: 44 billion euros, 54% higher than the weekly average since April. Furthermore, Olli Rehn affirmed that the German Constitutional Court’s ruling could have an impact on the central banks’s ability to exercise its price stability mandate.

The ratio of NPLs could be close to 3%in Europe in 2020

ESM Credits, No Conditionality Now But What About In The Future?

Intermoney | On Friday, the first support measures within the EU worth €540 Bn were given the final go-ahead, but there are still some clouds around. There is a general requirement for accessing these loans for all countries, linked only to their use for direct or indirect Covid-19 health costs. There is no particular conditionality. In Italy, however, there are concerns about the conditionality of ESM resources in the future. If the recovery allows it, the conditions would already be a reality in 2022 at the latest.

UK 777x400

BoE Chooses To Wait In Face Of Uncertainty

David Page (Head of Macro Research at AXA Investment Managers) | The Bank of England (BoE) today announced its monetary policy decision for May. It left the Bank Rate unchanged at 0.10% as widely expected, by unanimous vote. It also left QE unchanged, leaving the Asset Purchase Facility target unchanged at £645bn. This was in line with the median consensus forecast, but we had expected a £100bn increase in QE today as the current programme is set to expire in early July. This was by split decision, with two members voting for an immediate £100bn increase. The majority of the Committee decided to wait for “more information… that was likely to become available over the coming weeks”, but these members “all” acknowledged prospective weakness in the economy and downside risks to the medium term outlook “might necessitate further monetary policy action to support the economy in the future”. We fully expect the MPC to increase QE, probably by £100bn at its next meeting on 18 June.

Karlsruhe Court

Why Is The German Constitutional Court Now Challenging The ECB’s Purchase Programme And European Justice?

The German Constitutional Court surprised everyone yesterday with a ruling that some of the European Central Bank (ECB)’s actions, carried out as part of its 2015 bond purchase programme (PSPP), are unconstitutional. This decision clashes directly with the judgement of the European Court of Justice (ECJ). The decision does not call into question the entire debt purchase programme, but rather the part relating to the Bundesbank’s intervention.