I said it a short time ago: the institutional campaign against the UK referendum on June 23rd has been embarrassing. From Her Majesty’s government to that of the EU, the Bank of England (clearly overstepping its line of duty), and including the vailed threats that the world was going to end and Great Britain would fall into a chasm in history.
Since it opted for an unconventional expansive monetary policy, the different measures implemented by the ECB, and particularly its latest decisions, are changing the Eurozone’s financial structure. For example, the option of a very long term maturity offered on sovereign bond issues, as well as the increase in companies’ financing via the issue of corporate debt, with the consequent decline in their dependence on the banks.
Francesco Saraceno | Readers of my blog know that I have been skeptical on the ECB quantitative easing program. I said many times that the eurozone economy is in a liquidity trap, and that making credit cheaper and more abundant would not be a game changer.
Yiannis Mouzakis via Macropolis | | Understandably, when the International Monetary Fund published its Debt Sustainability Analysis (DSA) last week, its gloomy projections regarding the unsustainability of Greece’s debt drew all the attention. This meant that many overlooked the fact that the Fund was even gloomier about the Greek economy’s long-term growth prospects.
There is recurrent talk about Helicopter Money, a concept conceived by Friedman to revive the economy. This kind of monetary policy is very often referered to as special, beyond the frontiers of accounting, as if a central bank could actually get into a helicopter every day and drop bills from the sky “ex nihilo,” out of nothing. But as Cullen Roche explains, HM is not special.
UBP | Unsurprisingly, the ECB kept its monetary policy unchanged. Corporate bonds buying are going to start on June 8th and the TLTRO on June 22nd.
Mario Draghi can hardly make a move, while Janet Yellen seems bound to do so, no matter the consequences. This summary offers some hindsight on the dilemma facing those at the helm of global financial stability.
The European banks are having nothing but trouble in the last few months. And if they needed something else to further cloud their outlook – negative interest rates, meagre margins, increasing capital demands…- doubts have begun to emerge lately over whether the sector can continue to pay the high interest on the so-called CoCos (Contingent Convertible Capital Instruments), contingent convertible bonds.
Jens Bastian via Macropolis | The rising volume of non-performing loans (NPLs) across various eurozone countries, in particular in southern and southeastern Europe, has been a constant challenge for policymakers in recent years. Moreover, their high NPL levels on bank balance sheets have impaired the asset quality of domestic lenders and necessitated an increasing amount of provisioning, thus binding up valuable capital that could otherwise be lent to the real economy.
Yiannis Mouzakis via Macropolis | Following an 11-hour Eurogroup that brought back memories of other classic encounters between Greece and its lenders, an agreement was reached to disburse 10.3 billion euros from the programme’s financing in two tranches – next month and in September – as the much-contested debt issue was put on the table.